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The United States occupies a unique position in the global economy as the largest investor and the largest recipient of foreign direct investment (FDI). As a basic premise, the U.S. historical approach to international investment has aimed to establish an open and rules-based system that is consistent across countries and in line with U.S. economic and national security interests. This policy also has fundamentally maintained that FDI has positive net benefits for the United States and foreign investors, except in certain cases in which national security concerns outweigh other considerations. The Trump Administration has not yet offered a formal statement on its foreign investment policy relative to the Administration's "America First" policy. Commerce Secretary Wilbur Ross stated at a June 2017 SelectUSA investment summit that the Administration welcomes foreign investment into the U.S. economy. According to the United Nations, the global outward direct investment position in 2016 was recorded at around $26 trillion. The U.S. direct investment position, or the cumulative amount, was recorded at around $6.4 trillion in 2016, as indicated in Figure 1 . Hong Kong, the United Kingdom, Japan, and Germany rank as the next largest overseas direct investors, with individual outward investment positions about one-fourth or less than that of the United States. For the United States, the Commerce Department publishes data on the U.S. direct investment position (both inward and outward) using three different measures: historical cost, current cost, and market value, which is closest to the values calculated by the United Nations. These measures act in lieu of a price deflator to represent the value of an investment at the time of the investment (historical cost), the current replacement cost of an investment (current cost), and the stock market valuation of an investment (market value). Current estimates indicate that U.S. direct investment abroad (USDIA) in 2016 measured at historical cost, at current cost, and at market value increased by $304 billion, $304 billion, and $433 billion, respectively, to reach cumulative amounts of $5.4 trillion, $5.9 trillion, and $7.4 trillion. The increase in the value of USDIA measured at market value from 2015 to 2016 reflects price increases on equity assets that were partly offset by decreases from foreign exchange changes. As indicated, Figure 2 shows the cumulative position for USDIA and foreign direct investment in the United States (FDIUS) in market value terms. Elsewhere in this report, detailed data on foreign investment are presented on a historical cost basis. On an annual basis, U.S. direct investment abroad, or new spending by U.S. firms on businesses and real estate abroad, rose slightly in 2016 above that invested in 2015 to reach $312 billion, compared with a decline in investment spending in 2013 and 2014, according to balance of payments data by the Department of Commerce. At the same time, foreign direct investment in the United States in 2016 fell by 5.0% to $479 billion from the values recorded in the previous year. From 2006 to 2010, U.S. direct investment abroad was about a third more than the amount foreigners invested in the U.S. economy, based on balance of payments data. In 2016, foreign direct investment in the United States was greater than U.S. direct investment abroad for a second year in a row, something that has not happened since the early 2000s. A sharp drop in USDIA that occurred in 2005 reflects actions by U.S. parent firms to reduce the amount of reinvested earnings going to their foreign affiliates for distribution to the U.S. parent firms in order to take advantage of one-time tax provisions in the American Jobs Creation Act of 2004 ( P.L. 108-357 ). In general, U.S. and global foreign direct investment annual flows have not regained the amounts recorded in 2007, prior to the global financial crisis, but foreign direct investment in the United States in 2015 and 2016 surpassed in nominal terms the amount invested in 2007. Foreign direct investment in the United States fell by a fourth from $287 billion in 2013 to $207 billion in 2014, as indicated in Figure 3 . In part, the drop in FDIUS reflected a $130 billion stock buyback between Verizon and France's Vodafone. Generally, relative rates of growth between U.S. and foreign economies largely determine the direction and magnitude of direct investment flows. These flows also are affected by relative rates of inflation, interest rates, tax rates, and expectations about the performance of national economies, which means the investment flows can be quite erratic at times in response to various economic forces. According to balance of payments data, USDIA in 2016 was comprised 96% of reinvested earnings, 10.0% of equity capital, and -5.8% of intercompany debt, or a net flow of funds from foreign affiliates back to the U.S. parent firms, as indicated in Figure 4 . In comparison, equity capital accounted for 53.0% of foreign direct investment in the United States, with reinvested earnings and intercompany debt accounting for around 20% and 26.6%, respectively. Despite concerns that USDIA occurs at the expense of investment in the United States by firms shifting capital from the U.S. parent company to foreign affiliates, the reliance on reinvested earnings suggests that much of USDIA is financed by the foreign affiliates. This reliance on reinvested earnings may reflect the prominence of U.S. direct investment in the highly developed economies of Europe in which equity-financed investment is not as widely used as it is in the United States. An increase in stock market valuations around the world from 2012 to 2014 increased the overall value of U.S. direct investment abroad by nearly $2 trillion, measured at market value, but then declined in value in both 2014 and 2015. During the same period, the market value of foreign firms operating in the United States experienced a valuation increase of $1.6 trillion from 2012 to 2014, but then experienced annual increases of $500 billion in 2014 and $200 billion in 2015. Some observers argue that U.S. direct investment abroad shifts jobs overseas by reducing U.S. exports, but U.S. data indicate that foreign investment apparently stimulates intrafirm trade. This type of trade is characterized by the sum of (1) trade between U.S. parent companies and their foreign affiliates, and (2) the U.S. affiliates of foreign firms and their foreign parent companies. As indicated in Table 1 , total U.S. trade in 2014 was $1.6 trillion in exports and $2.3 trillion in imports. Of this amount, trade between U.S. parent companies and their foreign affiliates, identified as multinational companies (MNCs), accounted for $315 billion in both exports and imports, while the affiliates of foreign firms operating in the United States accounted for $189 billion in exports and $521 billion in imports. In total, intrafirm trade accounted for 31% of exports and 35% of imports. As indicated in Table 2 , the overseas direct investment position of U.S. firms on a historical-cost basis, or the cumulative amount at book value, reached $5.0 trillion in 2015, the latest year for which such detailed investment position data are available. About 71% of the accumulated U.S. foreign direct investment is concentrated in high-income developed countries that are members of the OECD: investments in Europe alone account for over half of all U.S. direct investment abroad, or $2.9 trillion. Europe has been a prime target of U.S. investment since U.S. firms first invested abroad in the 1860s. American firms began investing heavily in Europe following World War II as European countries rebuilt their economies and later when they formed an intra-European economic union. The tendency for U.S. firms to have placed the largest share of their annual investments in developed countries where consumer tastes are similar to those in the United States increased after the mid-1990s. In the last half of the 1990s, USDIA experienced a dramatic shift from developing countries to the richest developed economies: the share of U.S. direct investment going to developing countries fell from 37% in 1996 to 21% in 2000. By location, in 2015, U.S. firms focused 71% of their direct investments, or their total accumulative position, in developed economies, including 59% of their investments in the highly developed economies of Europe, as indicated in Figure 5 . Another 17% of the U.S. direct investment position abroad is located in Latin America and 15% of investment is located in Asia, including Australia, Japan, New Zealand, and South Korea. Direct investment in Africa accounts for about 1.3% of total U.S. direct investment abroad in 2015, with investments in the Middle East accounting for about 1% of the total. By country, the Netherlands is the largest recipient of USDIA, reflecting a range of factors that make it a favorable place for U.S. firms to invest, as indicated in Figure 6 . Following the Netherlands, the United Kingdom, Luxembourg, Canada, and Ireland are top locations for U.S. overseas investors. Investments in European countries and Canada likely reflect long-standing economic relationships, or close physical proximity to the United States. Patterns in U.S. direct investment abroad often reflect fundamental changes that occur in the U.S. economy during the same period. As investment funds in the U.S. economy shifted from extractive, processing, and manufacturing industries toward high technology services and financial industries, U.S. investment abroad mirrored these changes. As a result, U.S. direct investment abroad focused less on the extractive, processing, and basic manufacturing industries in developing countries and more on high technology, finance, and services industries located in highly developed countries with advanced infrastructure and communications systems. Annual investments in most sectors increased in 2015 over the amount invested in 2014, except for investment in the banking, finance, and insurance sectors, as indicated in Figure 7 . Investments by holding companies generally reflect foreign investment through existing foreign subsidiaries of U.S. parent firms, rather than through the U.S. parent firms. Generally, service-oriented sectors, particularly computer systems design and technical consulting, continued to grow through 2015. Nations once hostile to American direct investment now compete aggressively for U.S. direct investment by offering incentives to U.S. firms. A debate continues within the United States, however, over the relative merits of USDIA. Some Americans believe that USDIA, directly or indirectly, shifts some jobs to low-wage countries. They argue that such shifts reduce employment in the United States and increase imports, thereby negatively affecting U.S. employment, the trade deficit, and economic growth. Economists generally believe that firms invest abroad because those firms possess some special process or product knowledge or because they possess special managerial abilities which give them an advantage over foreign firms. On the whole, data indicate that U.S. firms invest abroad to serve the foreign local market, rather than to produce goods to export back to the United States, although some firms do establish overseas operations to replace U.S. exports or production, or to gain access to raw materials, cheap labor, or other markets. In 2014, the latest year for which detailed USDIA data are available, 10.0% of foreign affiliate sales were to U.S. parent companies, as indicated in Figure 8 . The intrafirm share of U.S. trade is higher than the average for Mexico and Canada (20.0% and 27%, respectively) in part due to formal trade agreements and the close physical proximity of the trading partners. U.S. firms operating in China had 82% of their sales in China and 6% of their sales back to the United States. USDIA is dominated by very large firms (more than 10,000 employees) that accounted for over three-fourths of employment. Investments by holding companies reflect USFDI through a foreign affiliate, rather than through the parent company itself. This ownership by holding companies blurs somewhat the data on investment flows and investment positions by industry and country. U.S. multinational corporations (MNCs) rank among the largest U.S. firms. According to data collected by the Commerce Department's Bureau of Economic Analysis (BEA), when American parent companies and their foreign affiliates are compared by the size structure of employment classes, 40% of the more than 2,000 U.S. parent companies employ more than 2,499 persons. These large U.S. parent companies account for 95% of the total number of people employed by U.S. MNCs. Employment abroad is even more concentrated among the largest foreign affiliates of U.S. parent firms: the largest 2% of the affiliates account for 90% of affiliate employment. While U.S. MNCs used their economic strengths to expand abroad between the 1980s and early 2000s, the U.S.-based parent firms lost market positions at home, in large part due to corporate downsizing efforts to improve profits. In addition, U.S. multinational companies were disproportionately negatively affected in 2008 and 2009 by the global economic recession as a result of the geographic distribution of the multinational firms' activities and the industrial composition of their operations. U.S. MNC parent companies' share of all U.S. business gross domestic product (GDP)—the broadest measure of economic activity—declined from 32% to 25% from 1977 to 1989. In 2007 (the latest year for which estimates are available), U.S. parent companies accounted for about 21% of total U.S. business activity. These MNC parent companies accounted for about 41% of total U.S. manufacturing activity, down from 46% in 2000. As U.S. MNC parent companies were losing their relative market positions at home, their cumulative amount of direct investment abroad doubled. This increase did spur a shift in some economic activity among the U.S. MNCs from the U.S. parent companies to the foreign affiliates. During the period from 2000 to 2007, the foreign affiliates increased their share of the total economic activity within U.S. MNCs—the combined economic output of the U.S. parent and the foreign affiliates—from 22% to 30%. By the end of 2014, there were more than 3,790 U.S. parent companies with more than 32,000 foreign affiliates, as indicated in Table 3 . In comparison, foreign firms had over 6,600 affiliates operating in the United States. U.S. parent companies employed over 26 million workers in the United States, compared with the 13.8 million workers employed abroad by U.S. firms and more than 6.6 million persons employed in the United States by foreign firms. Although the U.S.-based affiliates of foreign firms employ fewer workers than do the foreign affiliates of U.S. firms, they paid nearly 80% more in aggregate employee compensation in the United States than did the foreign affiliates of U.S. parent companies. The data also suggest that U.S. parent companies are more efficient than either the U.S. affiliates of U.S. firms or foreign firms operating in the United States, with higher output per employee. Foreign firms operating in the United States are more capital intensive relative to employment than U.S. parent firms or U.S. affiliates, likely reflecting the newer age of the capital stock of the foreign firms. The U.S. affiliates of foreign companies, however, had one-quarter higher average value of gross output than did the foreign affiliates of U.S. firms operating abroad. The foreign affiliates of U.S. firms, however, had total sales that were about 70% higher than those of the U.S. affiliates of foreign firms. The foreign affiliates of U.S. firms, however, paid about twice as much in taxes to foreign governments than did the affiliates of foreign firms operating in the United States. The overseas affiliates of U.S. parent companies also paid more than twice as much in taxes in relative terms than did U.S. parent companies and foreign-owned affiliates operating in the United States. One of the most commonly expressed concerns about U.S. direct investment abroad is that U.S. parent companies invest abroad in order to send low-wage jobs overseas. Such effects are difficult to measure because they are small compared with much larger changes occurring within the U.S. economy. In addition, no U.S. government agency collects data on U.S. firms in such a way that it is possible to track a plant closing in the United States with a comparable plant opening in a foreign country. As a result, most data on the activity of U.S. firms shifting plants or jobs abroad are anecdotal. A cursory examination of the data seems to indicate that employment losses among parent firms occurred simultaneously with gains in foreign subsidiaries, thereby giving the impression that jobs are being shifted abroad. Employment patterns, however, are determined by a broad range of factors, and shifts in plant locations by U.S. multinational firms likely represent a small part, at best, of the overall pattern of employment in the United States. Employment among U.S. parent companies fell during the early 1980s, but increased in the 1992-2000 period, from 17.5 million to 23.9 million. From 2000 to 2003, however, employment among U.S. parent companies fell by 12% to 21.1 million, reflecting the economic downturn at the time, but then rose after 2003 to reach 22 million in 2007. Employment fell again in 2008 to 21 million as the rate of U.S. economic growth slowed. In 2014, employment among U.S. parent companies expanded by nearly 14% over that in 2013 to reach 26.6 million, as indicated in Figure 9 . During this period, employment among the foreign affiliates of U.S. firms rose to 13.8 million in 2014, accounting for 34.4% of total U.S. multinational company employment, up from 29% in 2000. During economic downturns, U.S. parent firms and their foreign affiliates have gained or lost employment in many of the same industries, reflecting the growing interconnected nature of the global and U.S. economies. Such interconnections also complicate efforts to establish major trends in outsourcing. During recent economic downturns, both U.S. parent firms and their foreign affiliates lost employment in the petroleum and finance sectors, although both gained employment in the services and wholesale trade sectors. Furthermore, employment gains and losses among MNCs more likely reflect fundamental shifts within the U.S. economy than any formal or informal efforts to shift employment abroad. Employment trends among foreign affiliates also reflect growing trade links between the United States and other areas, particularly Asia, as indicated in Figure 10 . Between 2000 and 2014, employment among the foreign affiliates of U.S. parent firms tripled in Latin America, and nearly tripled among affiliates located in Asia, particularly in China. In other geographical regions, employment gains were less robust. Affiliates in Europe, for instance, which had been the largest employer, fell to second place behind affiliates in Asia. In addition, affiliates in Canada and Mexico experienced relatively modest increases in employment. American direct investment abroad has grown sharply since the mid-1990s, raising questions for many observers about the effects of such investment on the U.S. economy. These questions seem pertinent since American multinational corporations lost shares of U.S. GDP over the last decade and their domestic employment had declined until the mid-1990s. Increased economic activity abroad relative to that in the United States increased overseas affiliate employment in some industries, including manufacturing. Most of this affiliate activity, however, is geared toward supplying the local markets. Some observers believe U.S. direct investment abroad is harmful to U.S. workers because it shifts jobs abroad. There is no conclusive evidence in the data collected to date to indicate that current investment trends are substantially different from those of previous periods or that jobs are moving offshore at a rate that is significantly different from previous periods. There are instances when firms shift activities abroad to take advantage of lower labor costs. However, it is clear from the data that the majority of U.S. direct investment abroad is in developed countries where wages, markets, industries, and consumers' tastes are similar to those in the United States. U.S. direct investment in these developed countries is oriented toward serving the markets where the affiliates are located and they tend, in the aggregate, to boost exports from the United States. In addition, foreign firms have been pouring record amounts of money into the United States to acquire existing U.S. firms, to expand existing subsidiaries, or to establish "greenfield" or new investments. In the 114 th and 115 th Congresses, Members of Congress expressed concerns about U.S. direct investment abroad through measures that would offer certain tax advantages to U.S. firms that shifted parts of their operations back to the United States and through measures that are directed at curbing tax havens and tax inversions and other practices that shift taxes from the United States to foreign locations. | The United States is the largest direct investor abroad and the largest recipient of foreign direct investment in the world. For some Americans, the national gains attributed to investing overseas are offset by such perceived losses as offshoring facilities, displacing U.S. workers, and lowering wages. Some observers believe U.S. firms invest abroad to avoid U.S. labor unions or high U.S. wages, but 74% of the accumulated U.S. foreign direct investment is concentrated in high-income developed countries. In recent years, the share of investment going to developing countries has fallen. Most economists argue that there is no conclusive evidence that direct investment abroad as a whole leads to fewer jobs or lower incomes overall for Americans. Instead, they argue that the majority of jobs lost among U.S. manufacturing firms over the past decade reflect a broad restructuring of U.S. manufacturing industries responding primarily to domestic economic forces. In recent Congresses, Members have introduced a number of measures that would affect U.S. multinational companies in their foreign investment activities. In the 115th Congress, H.R. 685 and S. 247 (Bring Jobs Home Act) would provide certain tax exemptions to U.S. multinational firms to induce them to redirect economic activity from a foreign subsidiary to a domestic U.S. operation. In the 114th Congress, Members also introduced similar measures, including H.R. 297, the Stop Tax Haven Abuse Act of 2015, introduced by Representative Lloyd Doggett on January 13, 2015, and companion measure S. 174, introduced by Senator Sheldon Whitehouse; and H.R. 415, the Stop Corporate Inversions Act of 2015, introduced by Representative Sander Levin on January 20, 2015, and companion measure S. 198, introduced by Senator Richard Durbin. While H.R. 415 and S. 198 are directed at tax inversions, H.R. 297 and S. 174 address a number of tax and financial issues relative to U.S. multinational firms, including the use of foreign tax havens to evade U.S. taxes; money laundering; corporate offshore tax avoidance; and corporate tax inversions. |
The Congressional Budget Act of 1974 established the congressional budget process. (1) Under the act, the House andSenate are required to adopt at least one budget resolution each year. (2) The budget resolution, whichtakes the form of a concurrent resolution and is not sent to the President for his approval or veto,serves as a congressional statement in broad terms regarding the appropriate revenue, spending, anddebt-limit policies, as well as a guide to the subsequent consideration of legislation implementingsuch policies at agency and programmatic levels. Budget resolution policies are enforced througha variety of mechanisms, including points of order. (3) The House and Senate Budget Committees, which were createdby the 1974 act, exercise exclusive jurisdiction over budget resolutions and are responsible formonitoring their enforcement. In developing a budget resolution, the House and Senate Budget Committees use varioussources of budgetary information and analysis, including baseline budget projections of revenue,spending, and the deficit or surplus prepared by the Congressional Budget Office (CBO). A budgetresolution typically reflects many different assumptions regarding legislative action expected tooccur during a session that would cause revenue and spending levels to be changed from baselineamounts. Most revenue and direct spending, (4) however, occurs automatically each year under permanent law;therefore, if the committees with jurisdiction over the revenue and direct spending programs do notreport legislation to carry out the budget resolution policies by amending existing law, revenue anddirect spending for these programs likely will continue without change. The budget reconciliation process is an optional procedure that operates as an adjunct to thebudget resolution process. The chief purpose of the reconciliation process is to enhance Congress'sability to change current law in order to bring revenue, spending, and debt-limit levels intoconformity with the policies of the budget resolution. Accordingly, reconciliation can be a potentbudget enforcement tool for a large portion of the budget. Reconciliation is a two-stage process. First, reconciliation instructions are included in thebudget resolution, directing the appropriate committees to develop legislation achieving the desiredbudgetary outcomes. If the budget resolution instructs more than one committee in a chamber, thenthe instructed committees submit their legislative recommendations to their respective BudgetCommittees by the deadline prescribed in the budget resolution; the Budget Committees incorporatethem into an omnibus budget reconciliation bill without making any substantive revisions. (5) The second step involves consideration of the resultant reconciliation legislation by theHouse and Senate under expedited procedures. Among other things, debate in the Senate on anyreconciliation measure is limited to 20 hours (and 10 hours on a conference report) and amendmentsmust be germane and not include extraneous matter. The House Rules Committee typicallyrecommends a special rule for the consideration of a reconciliation measure in the House that placesrestrictions on debate time and the offering of amendments. In cases where only one committee has been instructed, the process allows that committeeto report its reconciliation legislation directly to its parent chamber, thus bypassing the BudgetCommittee. In some years, budget resolutions included reconciliation instructions that afforded theHouse and Senate the option of considering two or more different reconciliation bills. Once thereconciliation legislation called for in the budget resolution has been approved or vetoed by thePresident, the process is concluded; Congress cannot develop another reconciliation bill in the wakeof a veto without first adopting another budget resolution containing reconciliation instructions. As an optional procedure, reconciliation has not been used in every year that thecongressional budget process has been in effect. Beginning with the first use of reconciliation byboth the House and Senate in 1980, however, reconciliation has been used in most years. (In threeyears, 1998 (for FY1999), 2002 (for FY2003), and 2004 (for FY2005), the House and Senate did notagree on a budget resolution.) Congress has sent the President 19 reconciliation acts over the years;16 were signed into law and three were vetoed (and the vetoes not overriden). Table 1 provides alist of these 19 reconciliation acts. Not every reconciliation measure considered by one chamber has been considered by theother chamber, or been regarded as a reconciliation measure when considered by the other chamber. In 2000, for example, the House considered and passed several reconciliation measures, but theywere not considered by the Senate. (6) In 1976, the Senate considered a House-passed revenue bill under reconciliation procedures,although the measure had not been considered as a reconciliation bill in the House; the bill later wasvetoed. (7) Conversely, in1984, the House and Senate agreed to deficit-reduction legislation that had been considered as areconciliation bill by the House but not the Senate; the bill, the Deficit Reduction Act of 1984, wassigned into law by President Ronald Reagan ( P.L. 98-369 ) but was not designated as a reconciliationmeasure. The budget reconciliation process reflects a complex set of rules, procedures, and practicesemployed by the House and Senate. Like other complex processes of the House and Senate, suchas the annual appropriations process, the reconciliation process has been marked by significantchange over time. The House and Senate have adapted reconciliation procedures to fit changingpolitical and budgetary circumstances. Table 1. Reconciliation Resolutions and Resultant ReconciliationActs: FY1981-FY2005 Source : Prepared by the Congressional Research Service. The framers of the Congressional Budget Act of 1974 anticipated that changes might be madefrom time to time in the budget resolution and reconciliation processes that it established. In aneffort to provide limited procedural flexibility, the act contains a provision referred to as the "elasticclause." Originally framed as Section 301(b)(2), the elastic clause authorized the House and Senateto include in a budget resolution, at their discretion, "any other procedure which is consideredappropriate to carry out the purposes of this Act." The clause later was redesignated as Section301(b)(4) and revised to read: The concurrent resolution on the budget may-- ... (4) set forth such other matters, and require such other procedures, relating to the budget, as maybe appropriate to carry out the purposes of this Act. The House and Senate have used authority under the elastic clause to modify reconciliationprocedures over time in many significant ways, including advancing the use of reconciliation to thespring budget resolution and extending the reconciliation time frame from one year to multiple years. While some innovations in reconciliation procedure were dropped, others persisted and eventuallywere incorporated into the 1974 act as required elements of reconciliation procedure. Two of the most significant changes in reconciliation procedure involved advancing its useto the spring budget resolution and extending its time frame from one year to multiple years(paralleling the changes in budget resolution scheduling and time frame). As originally framed, the1974 act required the adoption of two budget resolutions each year. The first budget resolution, tobe adopted in the spring, set advisory budget levels for the upcoming fiscal year. The second budgetresolution, to be adopted on September 15, just before the start of the new fiscal year on October 1,set binding budget levels for the year. Reconciliation was established as an adjunct to the adoptionof the second budget resolution. Congress and the President could use reconciliation procedures toquickly make any adjustments in existing law or pending legislation that were required to achievebudget policies as they changed between the adoption of the spring and fall budget resolutions. Action on any required reconciliation legislation was expected to be completed by September 25. In the early 1980s, the House and Senate abandoned the practice of adopting a second budgetresolution, choosing instead to adopt a single budget resolution in the spring of each year (althoughthe schedule often slipped, sometimes markedly). This change in practice formally was incorporatedinto the 1974 act by the Balanced Budget and Emergency Deficit Control Act of 1985 (Title II of P.L. 99-177 ; December 12, 1985; 99 Stat. 1037-1101). The growing prominence of the spring budget resolution was indicated by the decision in1980 to use it to initiate reconciliation procedures for FY1981. Reconciliation procedures were usedagain the following year as an adjunct to the adoption of the FY1982 budget resolution in the spring,but the budget resolution and reconciliation time frame was extended to three years,FY1982-FY1984 (although figures for the latter two years were considered to be "planning" levels). These changes occurred for several reasons, including the belief that an advancement in thereconciliation schedule was needed to allow committees more time to develop their reconciliationrecommendations, and to allow the House and Senate more time to consider them on the floor andreconcile their differences in conference, and that an extended time frame would promote moreeffective and lasting changes in budgetary policy while discouraging evasions of enforcement. In addition to the changes made with respect to the timing and scheduling of reconciliation,the 1974 act has been amended to bar in the Senate the inclusion of extraneous matter inreconciliation legislation (see later discussion of Section 313 of the act, known as the "Byrd rule"). Although Section 313 operates as a rule of the Senate, it has also dramatically affected thedevelopment of reconciliation legislation in the House and, at times, been a source of frictionbetween the two chambers. Other significant changes in reconciliation practice have derived from the changing politicaland budgetary environment, or changes in precedent, and have not relied upon the elastic clause. Initial actions under reconciliation, for example, focused on deficit-reduction efforts. Consequently,the procedures were employed to achieve spending reductions and revenue increases on a net basis. In the latter part of the 1990s, particularly when large surpluses emerged in the federal budget forthe first time in decades, the focus of reconciliation action was shifted to reducing revenues, whichcontinued into the 2000s. Most recently, for FY2006, reconciliation directives entail reductions inboth revenues and spending. The principal authorities underlying the reconciliation process are set forth in two keysections of Title III ("Congressional Budget Process") of the Congressional Budget Act of 1974. Section 310 (2 U.S.C. 641) establishes the basic reconciliation procedures, and Section 313 (2U.S.C. 644) establishes a Senate rule aimed at preventing the inclusion of extraneous matter inreconciliation legislation. The text of Section 310 and Section 313 is provided in Appendix A and Appendix B , respectively. In addition, other provisions in Title III have a bearing on the reconciliation process. Section300 (2. U.S.C. 631), for example, lays down the timetable of the congressional budget process,indicating that Congress should complete action on any required reconciliation legislation by June15 during a session. Section 301 (2 U.S.C. 632) contains a provision authorizing the inclusion in a budgetresolution of reconciliation directives (in subsection (b)(2)), a deferred enrollment procedure to usedin connection with reconciliation (in subsection (b)(3)), and other appropriate "matters" and"procedures" under the elastic clause (in subsection (b)(4)). Section 305 (2 U.S.C. 636) sets forth, in subsection (b), Senate procedures for theconsideration of budget resolutions, which, by virtue of a reference in Section 310(e), also apply tothe consideration of reconciliation measures (except for the time limit on debate). Points of order pertaining to the enforcement of timing requirements, substantive budgetresolution policies, and the jurisdiction of the House and Senate Budget Committees, that couldapply to the consideration of reconciliation measures, are found in Sections 302, 303, and 311. Additional points of order that could apply to reconciliation measures, dealing with budgetarylegislation not subject to appropriations and unfunded mandates, are set forth in Title IV of the act. Finally, Section 904 (2 U.S.C. 621 note) imposes a three-fifths vote requirement on waivers (andappeals of the ruling of the chair) with respect to certain points of order under the act. Section 310(a) of the 1974 act provides for the inclusion of reconciliation directives in abudget resolution. The directives shall, "to the extent necessary to effectuate the provisions andrequirements of such resolution," specify the total amounts by which spending, revenues, the publicdebt limit, or a combination of these elements are to be changed. The directives take the form ofinstructions to each appropriate committee to make changes in the laws under its jurisdiction toachieve the specified budgetary results. Under Section 310(b), when only one committee in the House or Senate is subject toreconciliation directives, it reports its recommendations directly to its chamber. When two or morecommittees in the House or Senate receive reconciliation instructions, each committee submits itsrecommendations to its respective Budget Committee. The Budget Committee incorporates therecommendations of all of the instructed committees, "without any substantive revision," into anomnibus measure, which it then reports to its chamber. The subsection refers to a reconciliation resolution, which is a concurrent resolution directingthe Clerk of the House or the Secretary of the Senate to make changes in legislation that has not yetbeen enrolled. A reconciliation resolution is intended to be used with a "deferred enrollment"procedure (see discussion below), but the House and Senate instead have always used reconciliationbills. Section 310(c), known informally as the "fungibility rule," grants some flexibility tocommittees subject to reconciliation directives pertaining to both spending and revenues. Thisprovision applies principally to the House Ways and Means Committee and the Senate FinanceCommittee because they exercise jurisdiction in their chambers over tax legislation generally; someother committees exercise jurisdiction over matters, such as certain fees, involving budgetarytransactions that are treated as revenues. In essence, the fungibility rule deems either committee tobe in compliance with its reconciliation directives if its recommended legislation does not causeeither the spending changes or the revenue changes to exceed or fall below its instruction by morethan 20% of the sum of the two types of changes, and the total amount of changes recommended isnot less than the total amount of changes that were directed. Section 310(d) imposes a requirement in the House and Senate that amendments be deficitneutral, but suspends the requirement if a declaration of war is in effect. The subsection providesthat, in the Senate, a motion to strike always is in order, notwithstanding the deficit-neutralityrequirement. Further, the subsection authorizes the House Rules Committee to make in orderamendments to achieve compliance with the reconciliation instructions in the event one or more ofthe instructed committees fail to submit recommendations. Senate procedures for the consideration of budget resolutions are made applicable to theconsideration of reconciliation measures by Section 310(e), except that the 50-hour debate limitapplicable to budget resolutions is reduced to a 20-hour limit for reconciliation bills. Section 310(f) is intended to enforce in the House the June 15 deadline for completing actionon reconciliation legislation (as indicated in the timetable in Section 300). It does so by barring theconsideration in July of an adjournment resolution providing for the traditional August recess if theHouse has not completed action. There is no comparable provision in the act for the Senate. Finally, Section 310(g) prohibits the consideration of any reconciliation measure, includinga special reconciliation measure under Section 258C of the Balanced Budget and Emergency DeficitControl Act of 1985 (see discussion below), that contains recommendations with respect to theSocial Security program. Section 313 of the 1974 act is informally known as the "Byrd rule," after its chief sponsor,Senator Robert C. Byrd. The Byrd rule originated on October 24, 1985, as Amendment No. 878 (asmodified) to S. 1730, the Consolidated Omnibus Budget Reconciliation Act (COBRA) of1985. The Senate adopted the amendment by a vote of 96-0. In this form, the Byrd rule applied toinitial Senate consideration of reconciliation measures, but a short while later its coverage wasextended to conference reports. Senator Byrd explained that the basic purposes of the amendment were to protect theeffectiveness of the reconciliation process (by excluding extraneous matter that often provokedcontroversy without aiding deficit reduction efforts) and to preserve the deliberative character of theSenate (by excluding from consideration under expedited procedures legislative matters not centralto deficit reduction that should be debated under regular procedures). The rule achieves its purposes by defining six categories of extraneous matter inreconciliation legislation, and several exceptions thereto, and providing points of order against anysuch matter. The Byrd rule, and its operation, is discussed in more detail in the section of this reportdealing with "Initial Consideration in the Senate." During the first five years that the Byrd rule was in effect, from late 1985 until late 1990, itconsisted of two separate components: (1) a provision in statute applying to initial Senateconsideration of reconciliation measures; and (2) a Senate resolution extending application ofportions of the statutory provision to conference reports and amendments between the two chambers. Several modifications were made to the Byrd rule in 1986 and 1987, including extending itsexpiration date from January 2, 1987, to January 2, 1988, and then to September 30, 1992, but thetwo separate components of the rule were preserved. In 1990, these components were mergedtogether and made permanent when they were incorporated into the 1974 act as Section 313. Therehave been no further changes in the Byrd rule since 1990. Pursuant to authority granted in Section 301(b) of the 1974 act, including the elastic clause,the House and Senate have, on occasion, included procedural provisions in budget resolutions thataffect the reconciliation process. Several examples are discussed below. In 1980, the second budget resolution for FY1981 contained a bar against House or Senateconsideration of a resolution providing for sine die adjournment of either chamber "unless action hasbeen completed on H.R. 7765, the Omnibus Reconciliation Act of 1980," which had beendeveloped in response to reconciliation directives in the first budget resolution for FY1981. (8) In 1987, a provision in the FY1988 budget resolution declared that any reconciliationrecommendations developed by the House Ways and Means Committee and the Senate FinanceCommittee pertaining to the establishment of a special Deficit Reduction Account would not beconsidered extraneous matter under the Byrd rule. (9) Most recently, the FY2006 budget resolution included a procedural provision applying athree-fifths vote requirement to waivers and appeals of points of order dealing with unfundedmandates and the consideration of certain measures prior to passage of a budget resolution, butprovided that the change not apply in the case of reconciliation legislation. (10) In 1993, the Senate established a "pay-as-you-go" (PAYGO) rule as part of the FY1994budget resolution. The rule, which has been modified several times and extended through September30, 1998, was not part of the statutory PAYGO requirement in effect from FY1992-FY2002 (seediscussion below). The Senate's PAYGO rule generally prohibits the consideration of direct spending andrevenue legislation that is projected to increase (or cause) an on-budget deficit in any one of threetime periods: the first year, the first five years, and the second five years covered by the mostrecently adopted budget resolution. Any increase in direct spending or reduction in revenuesresulting from such legislation must be offset by an equivalent amount of direct spending cuts, taxincreases, or a combination of the two. Without an offset, such legislation would require the approvalof at least 60 Senators to waive the rule and be considered on the Senate floor. An exception is madefor revenue or spending legislation assumed in the budget resolution levels. (11) Prior budget resolutions containing reconciliation directives explicitly exemptedreconciliation legislation from the Senate's PAYGO rule; reconciliation legislation also wasexempted by virtue of being assumed in budget resolution levels. Section 301(b)(3) of the 1974 act authorizes an optional "deferred enrollment" procedure.Under the procedure, if reconciliation is triggered by the budget resolution, all or certain spendingbills (i.e., bills providing new budget authority or new entitlement authority) for the upcoming fiscalyear that have passed the House and Senate may be held at the desk rather than being enrolled. Thisaffords the House and Senate an opportunity, through a reconciliation resolution, to direct the Clerkof the House or the Secretary of the Senate to make changes in the enrollment of pending legislation,rather than having to use a reconciliation bill to make the changes in existing law. Once action hasbeen completed on the reconciliation resolution, and any necessary changes are made in theenrollment of the spending measures held at the desk, they are cleared for the President. Several budget resolutions in the early 1980s contained deferred enrollment provisions, butthe release of the deferred measures was made contingent upon the adoption of the then-requiredsecond budget resolution, not upon the passage of reconciliation legislation. Key elements of the methodology used to prepare budget baselines and score budgetarylegislation are laid out in Section 257 of the Balanced Budget and Emergency Deficit Control Actof 1985. Other scoring practices that underpin the congressional budget process, includingreconciliation procedures, are rooted partly in scorekeeping guidelines that were included in the jointexplanatory statements accompanying two reconciliation acts -- the Omnibus Budget ReconciliationAct of 1990 and the Balanced Budget Act of 1997. (12) One of the guidelines, number 3, specifically refers to the treatment of reconciliationlegislation under certain circumstances. Guideline number 3 requires that changes in direct spending(i.e., entitlement and other mandatory spending, including offsetting receipts), made in annualappropriations acts, be scored against the Appropriations Committees' Section 302(b) allocations ofspending made under the budget resolution. The guideline states, in part, that "direct spendingsavings that are included in both an appropriations bill and a reconciliation bill will be scored to thereconciliation bill and not to the appropriations bill." Section 258C (2 U.S.C. 907d) of the Balanced Budget and Emergency Deficit Control Actof 1985 (Title II of P.L. 99-177 , as amended) established a special reconciliation process in theSenate, but not the House, tied initially to statutory deficit targets, and subsequently, to a statutorypay-as-you-go (PAYGO) requirement. Violations of the deficit targets and PAYGO requirementwere to be enforced by "sequestration," a process entailing the automatic imposition of largelyacross-the-board spending cuts. Section 258C, which was never invoked, provided for the consideration of reconciliationlegislation in the fall in order to achieve deficit reductions that would obviate the need for anexpected sequester under the PAYGO requirement (or, previously, the deficit targets). The PAYGOrequirement effectively expired at the end of the 107th Congress. (13) All of the reconciliationmeasures considered by the Senate thus far have originated pursuant to Section 310 of the 1974 act. (Sections 310 and 313 of the 1974 act currently reference the reconciliation process under Section258C of the 1985 act.) The fundamental purpose of reconciliation directives is to compel committees to developlegislation to achieve certain goals reflected in the budget resolution that require changes in existinglaw (or pending legislation) to be realized. A directive to a committee represents an expression ofthe intent of the parent chamber that the specified legislative action be carried out. Reconciliation directives, and the budget resolution policies that underpin them, areexpressed in terms of highly aggregated dollar amounts and do not determine the budgetaryoutcomes for individual accounts, programs, or activities. Decisions at these levels remain theprerogative of the committees with jurisdiction over spending and revenue legislation. In a few rareinstances, however, reconciliation directives have been couched in programmatic terms. In theFY1981 budget resolution, for example, the Senate Appropriations Committee was instructed to"limit appropriations for fiscal year 1981 subsidies to the U.S. Postal Service" to a particular levelas part of the reconciliation directives. (14) In response to a parliamentary inquiry on May 19, 1982,however, the Senate Presiding Officer advised that reconciliation directives may not specify that theinstructed committee must achieve its changes from certain types of programs or in specificways. (15) Nonetheless, the Budget Committees may indicate particular options or assumptions thatwould allow an instructed committee to meet its spending or revenue reconciliation directives, partlyto garner credibility and support for the budget resolution and partly to influence the subsequentpolicy debates. A reconciliation directive to a committee usually consists of several components: (1) anidentification of the House or Senate committee being instructed; (2) the type of budgetary changesthat are intended to be achieved by changes in laws, bills, and resolutions within the instructedcommittee's jurisdiction, together with specified amounts; (3) the fiscal year periods to which thechanges apply; and (4) a deadline by which the instructed committees must submit theirrecommendations to their respective Budget Committee, or, if singly instructed, report them to theirchamber. Each dollar amount of change for a fiscal year time period is regarded as a separatedirective. A committee instructed to achieve savings in direct spending outlays of $100 million forthe first fiscal year and $800 million for a five-fiscal year period, for example, is considered to besubject to two different directives. Given that the language authorizing reconciliation directives refers to "changes," suchdirectives may properly recommend both increases and decreases in revenues, spending, and the debtlimit (see further discussion below). Types of Directives. Section 310(a) of the 1974act enumerates three different types of budgetary changes that reconciliation directives may require: (1) spending , in the form of new budget authority for the budget year and thereafter, budget authorityinitially provided for prior fiscal years, new entitlement authority, and credit authority; (2) revenues ;(3) and the statutory limit on the public debt . In addition, Section 310(a) provides that reconciliationdirectives may combine any of the three types of changes, including "a direction to achieve deficitreduction" (representing a combination of spending reductions and revenue increases). The type of budgetary changes included in the reconciliation directives determines the typeof legislation that will result. After the first several years of experience with reconciliation, spendingdirectives have applied almost exclusively to direct spending (also known as mandatory spending),rather than discretionary spending. Direct spending, which is under the jurisdiction of the legislativecommittees of the House and Senate, funds entitlements and other mandatory programs (e.g.,Medicare, unemployment compensation, federal employee retirement), largely on a permanent basis. Discretionary spending, which mainly funds the ongoing operations of federal agencies, falls underthe jurisdiction of the House and Senate Appropriations Committees and is provided in annualappropriations acts. Under current practice, reconciliation directives for direct spending generally refer to changesin outlay levels. (16) While such directives usually specify the dollar amounts by which outlay levels are to be changed,for a time the House Budget Committee specified the total outlay level that should occur after therequired changes had been made. (Therefore, the amount of changes involved had to be calculatedby comparing baseline levels to the levels expected to occur following reconciliation.) In the courseof complying with a directive to change spending, a committee may recommend changes inoffsetting collections or offsetting receipts within its jurisdiction; offsetting collections, whichinclude many user fees, are treated as negative spending. Reconciliation directives have sometimes been used to affect discretionary spending levels,although this is not the usual practice. Initially, reconciliation was used to directly change the levelsof discretionary spending. The House Appropriations Committee (in the FY1981 budget resolution)and the Senate Appropriations Committee (in the FY1981 and FY1982 budget resolutions) wereinstructed to reduce spending for the fiscal year already in progress. In order to comply with theseinstructions, the committees recommended rescissions of annual appropriations that already had beenenacted. (The rescissions were considered separately from the reconciliation legislation for thoseyears.) A more expansive, and indirect, attempt to reduce discretionary spending through thereconciliation process occurred in 1981. The FY1982 budget resolution included reconciliationdirectives that, in part, required legislative committees to reduce authorizations of appropriations. The intent behind this approach was to set in place reduced authorization levels over a three-yearperiod that would reduce spending levels in the annual appropriations acts considered in each ofthose years. This approach was widely regarded as having unnecessarily complicated thereconciliation legislation and strained relationships between the authorizing committees and theAppropriations Committees. The House and Senate Budget Committees have not returned to thisapproach, except occasionally on a much more selective basis. In the Senate, such languageprobably would be judged extraneous under the Byrd rule, on the ground that it does not affectoutlays. Due to the dispersal of spending jurisdiction to almost every standing committee of theHouse and Senate, nearly every one of them has been involved in reconciliation at least once. Directives to change revenue levels have been less complicated generally in that they havenot differentiated between different sources of revenue, such as individual incomes taxes, corporateincome taxes, or excise taxes. On occasion, revenue reconciliation directives have beenaccompanied by directives to change outlays because some tax-related changes, such as increasesin refundable tax credits, are scored as outlays. (Conversely, in some instances changes in spendingprograms may affect revenue levels.) As mentioned previously, reconciliation directives may also instruct a committee to achievea level of "deficit reduction," reflecting a combination of spending reductions and revenues increasesat the committee's discretion. In the reconciliation process, compliance with reconciliation directives is judged on a netbasis, or on the basis of the "bottom line." Consequently, directives to reduce spending or increaserevenues in order to achieve deficit reduction generally may include "sweeteners" that increasespending and reduce revenues, so long as the required amount of deficit reduction is accomplished. As practiced by the House and Senate, a reconciliation instruction to reduce spending, orincrease revenues, includes a target that is a minimum amount of spending reduction, or revenueincrease (a floor). Similarly, a reconciliation instruction to increase spending, or reduce revenues,includes a target that is a maximum amount of spending increase, or revenue reduction (a ceiling). For years, the public debt limit has been codified in Section 3101(b) of Title 31, UnitedStates Code . Periodic adjustments in the debt limit take the form of amendments to 31 U.S.C.3101(b), usually by striking the current dollar limitation and inserting a new one. While mostadjustments to the debt limit have been increases, in some instances the debt limit has been reducedor extended at its current level for a specified interval. For example, P.L. 455 of the 79th Congress(60 Stat. 316; June 26, 1946) reduced the debt limit from $300 billion to $275 billion as budgetsurpluses reemerged following World War II. While the debt limit has been adjusted inreconciliation legislation, in most instances Congress employs another type of measure for thispurpose. The House Ways and Means Committee and the Senate Finance Committee exercisejurisdiction over the debt limit. (17) From time to time, budget resolutions have included contingent reconciliation directives. Under a contingent directive, the amount of changes in spending or revenue that a committee isdirected to achieve may be adjusted at a later time upon the happening of a contingency. TheFY1998 budget resolution, for example, provided for an adjustment in the Senate FinanceCommittee's reconciliation directives (as well as the committee's spending allocations and otherbudget levels) to accommodate a five-year children's health initiative of up to $16 billion. Theadjustments were made contingent upon the committee reporting reconciliation legislation with anexcess of outlay savings so that the additional spending on the children's health initiative would bedeficit neutral. (18) In at least one instance, reconciliation directives to a committee became effective (withoutany adjustment) upon the happening of a contingency. The FY1996 budget resolution containeddirectives to the Senate Finance Committee to reduce revenues by $245 billion over seven yearsupon the certification by the Congressional Budget Office that spending reconciliation legislationwould lead to a balanced budget by FY2002. Under the budget resolution, if CBO did not certifya balanced budget, the revenue reconciliation directives to the committee would not becomeeffective, and the revenue reductions could not be included in the final reconciliation bill. (19) The House and Senate typically use multiple directives, in terms of the number of committeesinstructed and the types of budgetary changes designated, when initiating the reconciliation process. Whenever the House and Senate included spending reconciliation directives in a budget resolution,more than one House and Senate committee received them, except for the FY2002 and FY2004budget resolutions; in these two cases, the House Ways and Means Committee and the SenateFinance Committee received instructions regarding outlays in order to accommodate the outlayeffects of certain changes in revenue laws. The number of House and Senate committees given spending reconciliation directives in abudget resolution ranged from one, for both chambers (both in the FY2002 and FY2004 budgetresolutions), to 14 for the Senate and 15 for the House (both in the FY1982 budget resolution). Reconciliation directives to change the statutory limit on the public debt are made only to asingle committee in each chamber, because the House Ways and Means Committee and the SenateFinance Committee exercise sole jurisdiction in their chambers over this matter. Whilereconciliation directives to change revenue levels principally involve the Ways and MeansCommittee and the Finance Committee, other committees sometimes receive such instructions aswell. As stated previously, the Ways and Means Committee and Finance Committee exercisejurisdiction in their chambers over the tax code and revenues generally, but some other committeesexercise jurisdiction over matters, such as certain fees, involving budgetary transactions that aretreated as revenues. When reconciliation directives require different types of budgetary changes, the committeerecommendations affecting revenues, spending, or the debt limit, as appropriate, may be incorporatedinto a single omnibus measure or considered as separate measures, depending on how the directivesare fashioned. In the FY1998 budget resolution, for example, the Senate Finance Committeereceived a two-part reconciliation directive in Section 104(a). Section 104(a)(5)(A) instructed thecommittee to reduce outlays (by $40.911 billion for FY2002 and $100.646 billion forFY1998-FY2002) and Section 104(a)(5)(B) instructed the committee to increase the statutory limiton the public debt (to not more than $5.950 trillion). Seven other Senate committees received aninstruction to reduce spending (or the deficit) in Section 104(a). In a separate provision, Section104(b), the Finance Committee was instructed to reduce revenues (by not more than $20.5 billionin FY2002 and $85 billion for FY1998-FY2002). Accordingly, in response to its directives, theFinance Committee could develop reconciliation legislation reducing spending and raising the debtlimit, for inclusion in an omnibus bill, and reducing revenues in a separate bill. Under current procedures in the Senate, only one reconciliation measure of each type ofbudgetary change is allowed. Thus, a budget resolution may create as many as three reconciliationbills -- one for spending, one for revenues, and one for the debt limit. The reconciliation directives,however, may not lead to two reconciliation bills for spending, or two for revenues, or two for thedebt limit. In the case of the FY2006 budget resolution, for example, the directives to eight Senatecommittees to reduce direct spending, and to the Senate Finance Committee to reduce revenues andincrease the debt limit, are expected to result, at most, in three reconciliation measures -- a spendingbill, a revenue bill, and a debt-limit bill. House practices in this regard allow for greater latitude in the development of multiplereconciliation measures. Reconciliation measures may mix together different types of reconciliationchanges, and more than one reconciliation measure involving a particular type of budgetary changemay be provided for under the reconciliation directives. The FY1997 budget resolution, forexample, provided for the potential consideration of three separate reconciliation measures in theHouse, including a "Welfare and Medicaid Reform and Tax Relief" act, a "Medicare Preservation"act, and a "Tax and Miscellaneous Direct Spending Reforms" act. As explained by the HouseBudget Committee: The House conferees note that themulti-reconciliation process provides maximum flexibility to achieve the changes in spending andthe tax relief assumed in this conference report. For example, any of the spending or revenuechanges assumed in the first bill could -- if not enacted -- be achieved in the third bill. (20) Given that the Senate's flexibility in packaging reconciliation legislation is relatively moreconstrained under its current practices compared with past ones, the House is more constrained inits choice of reconciliation packaging as well. Consequently, a reconciliation procedure in the Houseas flexible as the one proposed for FY1997 may no longer be practicable. During the period covering FY1981 through FY2006, the House and Senate adopted 18budget resolutions containing reconciliation directives. (The budget resolutions for FY1985,FY1989, FY1992, FY1993, and FY1995 did not include reconciliation directives; also, the Houseand Senate did not reach final agreement on budget resolutions for FY1999, FY2003, and FY2005.) The reconciliation directives included in budget resolutions through FY1998 were intended to reducethe deficit in the net; the directives in budget resolutions since then (through FY2006), while partof an overall budget resolution policy to improve the budgetary posture over time, on their own termsproposed reducing the surplus or increasing the deficit in the net (by virtue of revenue reductions). The reconciliation directives to House and Senate committees during this period generallywere of comparable scope, although there were some significant differences in particular years. Table 2 and Table 3 present information on the reconciliation directives to House committeesduring this period to illustrate the relationship taken generally by the House and Senate betweenreconciliation and deficit reduction. As Table 2 shows, all 18 of the budget resolutions recommended policies that assumed animprovement in budgetary posture from the budget year to the final fiscal year covered, either bychanging a deficit into a surplus (seven instances), reducing a deficit to a lower level (eightinstances), or increasing a surplus to a higher level (three instances). (21) For example, over afive-year time frame, the budget resolution for FY1991 called for a deficit of $64 billion in the firstyear and surplus of $156 billion in the final year; the budget resolution for FY1994 called for adeficit of $254 billion in the first year and a deficit of $202 billion in the final year; and the budgetresolution for FY2001 called for a surplus of $170 billion in the first year and a surplus of $232billion in the final year. The reconciliation directives in the first 10 budget resolutions listed in Table 2 , coveringthrough FY1981-FY1994, all recommended net deficit reduction in the aggregate, ranging from $12billion (in the FY1981 budget resolution) to $343 billion (in the FY1994 budget resolution). Thereconciliation directives included revenue increases, spending decreases (and other changes), or acombination thereof intended to eliminate or reduce the deficit by the final year. With regard to the next three budget resolutions (for FY1996, FY1997, and FY1998), precisedata are not available because the reconciliation directives to House committees were not expressedas amounts of change from baseline levels, but rather were expressed as the levels of revenue anddirect spending outlays that were to result from the changes. The reconciliation directives in thesethree budget resolutions, however, generally were regarded as containing revenue reductions thatwere expected to be more than offset by reductions in direct spending. (22) The remaining five sets of reconciliation directives (in the FY2000-FY2002, FY2004, andFY2006 budget resolutions), all recommended net reductions in the surplus/increases in the deficit,ranging from $35 billion (over six years) to $1.350 trillion (over 11 years). The budget resolutions for FY2000-FY2002 included directives that recommended largerevenue reductions (and a $100 billion increase in outlays in the FY2002 budget resolution) withoutoffsetting changes. These resolutions recommended allocating a portion of the projected surplusesfor tax cuts; in each case, the estimated final year surplus was larger than estimated for the first year. The FY2004 budget resolution included reconciliation directives that recommended largerevenue reductions (and a $27 billion increase in outlays) without any offsetting changes. Despiteaggregate reductions in the surplus/increases in the deficit through reconciliation of $550 billion over11 years, covering FY2003-FY2013, the budget resolution envisioned a deficit of $385.0 billion forthe budget year becoming a surplus of $36.8 billion by the final year. The FY2006 budget resolution included reconciliation directives that recommended revenuereductions of $70 billion over five years (FY2006-FY2010) and outlay reductions of $35 billion oversix years (including FY2005) in the context of a decline in the total deficit over the period. Table 3 provides more detailed information on the overall deficit and surplus levels and thereconciliation directives to House committees in the budget resolutions for this period. Table 2. Summary of Reconciliation Directives to House Committees and Overall Deficit or Surplus Levelsin BudgetResolutions for FY1981-FY2006 (amounts in $ billions) Sources : conference reports on budget resolutions (see Table 3 for complete listing). a. The budget resolutions for FY1985, FY1989, FY1992, FY1993, and FY1995 did not contain reconciliation directives; also, the House and Senate didnot reach final agreement on budget resolutions for FY1999, FY2003, and FY2005. Details may not add to totals due to rounding. b. The "revenue changes" column reflects reconciliation directives to the House Ways and Means Committee to change revenue levels, and the "outlay(or deficit reduction) changes" column reflects reconciliation directives to all House committees to change outlay levels or to achieve deficitreduction, which in some cases could have allowed additional revenue increases beyond those reflected in the preceding column. "Net decreases(-)" in the deficit also refers to net increases in the surplus; "net increases (+)" in the deficit also refers to net decreases in the surplus. c. Although the text of the budget resolution reflects only the on-budget deficit or surplus (as required by law), tables in the joint explanatory statementaccompanying the conference report usually reflect the total deficit or surplus (which includes the off-budget Social Security trust funds and PostalService Fund). This column presents total deficit or surplus levels, unless otherwise noted. d. The $343.1 billion in "outlay (or deficit reduction) changes" and "net decreases" excludes $42.953 billion in reconciled reductions in authorizations. e. Reconciliation directives to House committees in the budget resolutions for FY1996-FY1998 were not expressed as amounts of change from baselinelevels, but rather were expressed as the levels of revenue and direct spending outlays that were to result from the changes. The amounts of revenuereduction expected to occur over the multiyear period, apparently by means of reconciliation, were indicated in the joint explanatory statementaccompanying the conference report for each of the fiscal years involved; see H.Rept. 104-159 , page 89 (for FY1996), H.Rept. 104-612 , page 51(for FY1997), and H.Rept. 105-116 , page 100 (for FY1998). While the amounts of direct spending reductions in reconciliation directives to Housecommittees were not indicated in the joint explanatory statements, such amounts in reconciliation directives to Senate committees yielded estimatednet savings of $387.1 billion (over seven years) in the FY1996 budget resolution, $228.9 billion (over six years) in the FY1997 budget resolution,and $52.2 billion (over five years) in the FY1998 budget resolution. Table 3. Detailed Information on Reconciliation Directives to House Committees and Overall Deficit orSurplus Levelsin Budget Resolutions for FY1981-FY2006 (amounts in $ billions) Sources : FY1981 -- conference report on H.Con.Res. 307, H.Rept. 96-1051 (May 23, 1980), pages 27 and 28. FY1982 -- conference report on H.Con.Res. 115, H.Rept. 97-46 (May 15, 1981), pages 41-43 and 46. FY1983 -- conference report on S.Con.Res. 92, H.Rept. 97-614 (June 21, 1982), pages 19 and 29; FY1984 -- conference report on H.Con.Res. 91, H.Rept. 98-248 (June 21, 1983), pages 29, 45, and 46; FY1986 -- conference report on S.Con.Res. 32, H.Rept. 99-249 (August 1, 1985), pages 24, 32, and 33; FY1987 -- conference report on S.Con.Res. 120, H.Rept. 99-664 (June 26, 1986), pages 20, 30, and 31; FY1988 -- conference report on H.Con.Res. 93, H.Rept. 100-175 (June 22, 1987), pages 23 and 30-32; FY1990 -- conference report on H.Con.Res. 106, H.Rept. 101-50 (May 15, 1989), pages 19, 29, and 30; FY1991 -- conference report on H.Con.Res. 310, H.Rept. 101-820 (October 7, 1990), pages 21, 26, and 27; FY1994 -- conference report on H.Con.Res. 62, H.Rept. 103-48 (March 31, 1993), pages 38 and 41-43; FY1996 -- conference report on H.Con.Res. 67, H.Rept. 104-159 (June 26, 1995), pages 44 and 50-51; FY1997 -- conference report on H.Con.Res. 178, H.Rept. 104-612 (June 7, 1996), pages 56 and 83-84; FY1998 -- conference report on H.Con.Res. 84 , H.Rept. 105-116 (June 4, 1997), pages 58, 100, and 104-105; FY2000 -- conference report on H.Con.Res. 68 , H.Rept. 106-91 (April 14, 1999), pages 36, and 61; FY2001 -- conference report on H.Con.Res. 290 , H.Rept. 106-577 (April 12, 2000), pages 49 and 66; FY2002 -- conference report on H.Con.Res. 83 , H.Rept. 107-60 (May 8, 2001), pages 48, and 76-77; FY2004 -- conference report on H.Con.Res. 95 , H.Rept. 108-71 (April 10, 2003), pages 38 and 102-104; and FY2006 -- conference report on H.Con.Res. 95 , H.Rept. 109-62 (April 18, 2005), pages 50 and 68-71. Note : Details may not add to totals due to rounding. a. The reconciliation directives applied to the budget year (i.e., the fiscal year beginning on October 1 of the calendar year in which the budget resolutionwas considered) and ensuing fiscal years covered by the budget resolution, except that reconciliation directives in budget resolutions for FY1981,FY2002, and FY2004 also applied to the current year (i.e., the fiscal year in progress at the time). b. This column reflects reconciliation directives to the House Ways and Means Committee to change revenue levels. c. This column reflects reconciliation directives to all House committees to change outlay levels or to achieve deficit reduction (which in some cases couldhave allowed additional revenue increases beyond those reflected in the preceding column). d. "Net decreases (-)" in the deficit also refers to net increases in the surplus; "net increases (+)" in the deficit also refers to net decreases in the surplus. e. Although the text of the budget resolution reflects only the on-budget deficit or surplus (as required by law), tables in the joint explanatory statementaccompanying the conference report usually reflect the total deficit or surplus (which includes the off-budget Social Security trust funds and PostalService Fund). This column presents total deficit or surplus levels, unless otherwise noted, and does not include any revised deficit or surplusfigures for the current fiscal year. f. In addition to reconciliation directives to House and Senate Committees for FY1981, the budget resolution included reconciliation directives to theHouse and Senate Appropriations Committees to reduce spending for FY1980. Accordingly, savings of $1.0 billion in outlays from the directivesto the Appropriations Committees are reflected in this figure. g. The $343.1 billion in "other changes" and "net savings" excludes $42.953 billion in reconciled reductions in authorizations. h. Reconciliation directives to House committees in the budget resolutions for FY1996-FY1998 were not expressed as amounts of change from baselinelevels, but rather were expressed as the levels of revenue and direct spending outlays that were to result from the changes. The amounts of revenuereduction expected to occur over the multiyear period, apparently by means of reconciliation, were indicated in the joint explanatory statementaccompanying the conference report for each of the fiscal years involved; see H.Rept. 104-159 , page 89 (for FY1996), H.Rept. 104-612 , page 51(for FY1997), and H.Rept. 105-116 , page 100 (for FY1998). While the amounts of direct spending reductions in reconciliation directives to Housecommittees were not indicated in the joint explanatory statements, such amounts in reconciliation directives to Senate committees yielded estimatednet savings of $387.1 billion (over seven years) in the FY1996 budget resolution, $228.9 billion (over six years) in the FY1997 budget resolution,and $52.2 billion (over five years) in the FY1998 budget resolution. Four aspects of House action at this stage of the reconciliation process areaddressed in this section: (1) the development of legislative recommendations by theinstructed committees; (2) the preparation of an omnibus measure by the HouseBudget Committee; (3) the special rule providing for the consideration ofreconciliation legislation; and (4) floor consideration of reconciliation legislation. Each committee included in the reconciliation directives is instructed torecommend legislative changes to existing law to meet specific budgetary targets bya certain date. The Congressional Budget Act of 1974 does not provide any specialrequirements (other than meeting those specified in the reconciliation directives ina budget resolution) or any guidance as to the procedures committees must follow todevelop their legislative recommendations pursuant to reconciliation directives. Theinstructed committees generally follow the rules and practices of developinglegislation under the normal legislative process. It is expected that each instructed committee will comply with the pertinentrequirements in the Standing Rules of the House, as well as its committee rules,when developing its legislative recommendations pursuant to the reconciliationdirectives. In particular, clause 2(h)(1) of House Rule XI requires that a committeemust meet, with a majority quorum present, to report its reconciliationrecommendations. Prior to marking up and reporting reconciliation recommendations, as in thecase of other legislation, instructed committees often hold hearings. In 1997, forexample, in developing reconciliation recommendations pursuant to the directivesin the FY1998 budget resolution, at least four of the eight instructed committeesconducted oversight and legislative hearings related to its reconciliationrecommendations subsequently transmitted to the House Budget Committee. (23) Committee Markup Procedures. While there are variations among committees' formal rules and informal practices,House committees typically follow a standard markup process. (24) Under thisprocess, the legislative text to be considered first is read in full, unless waived by amajority vote or unanimous consent, and then it is read for amendment, section bysection. (25) Amendments are considered under a five-minuterule. At the end of consideration of the legislative text and amendments, a committeevotes to order the legislation reported to the House directly or, if instructed by thereconciliation directives, transmitted to the House Budget Committee. A key decision in the markup process is selecting the text the committee willconsider. A committee may consider a bill introduced and referred to the committeeor consider draft legislation that has not been introduced. In most cases, in responseto reconciliation directives, committees have considered draft legislation developedby the committee's staff, instead of a bill introduced and referred to the committee. In 1997, for example, pursuant to the reconciliation directives contained inthe FY1998 budget resolution, all eight committees instructed to submit to the HouseBudget Committee legislative recommendations changing existing law consideredoriginal legislative language as the markup text. (26) Three ofthese committees considered its reconciliation recommendations in the form ofcommittee prints as the markup text. Only one committee considered a billintroduced and referred to the committee. In that case, the Education and theWorkforce Committee considered H.R. 1515 and incorporated the textof the bill, as amended during markup, into its reconciliation recommendations; thecommittee, as well, ordered the bill reported, as amended, to the House directly. (27) In some cases, however, especially in those cases when a committee receivedinstructions to report legislative recommendations to the House directly, as in recentyears, committees have considered a bill introduced and referred to the committee asthe markup vehicle. In 2003, for example, the House Ways and Means Committeeconsidered and marked up H.R. 2 , which had been previously introducedand referred to the committee, as the legislative vehicle to respond to itsreconciliation directives contained in the FY2004 budget resolution. (28) Committee Submissions. Asmentioned above, the reconciliation directives contained in a budget resolutionspecify a certain date in which an instructed committee is required to report itslegislative recommendations. In addition, the directives indicate, as provided in the1974 act, whether a committee is required to report its legislative recommendationsto the House directly or to submit such recommendations to the House BudgetCommittee. Section 310(b) of the 1974 act specifies two options for the submissionof legislative recommendations to comply with reconciliation directives: (1) if onecommittee is instructed, the committee reports its legislative recommendations to itsparent chamber directly; or (2) if two or more committees are instructed, thecommittees submit their legislative recommendations to their respective BudgetCommittee. Of the 17 budget resolutions that have contained reconciliation directives,excluding the FY2006 budget resolution, five budget resolutions contained directivesinstructing a committee to report legislation to the House directly. (29) Thirteenbudget resolutions directed two or more committees to submit legislativerecommendations to the House Budget Committee. In either case, the submission material is similar. A committee reporting itsreconciliation recommendations to the House directly must include the requiredcontents of a written report to accompany the reported legislation. Such informationincludes, for example, supplemental, minority, or additional views, a cost estimate,and committee rollcall votes. (30) In the case of submissions to the House Budget Committee, the BudgetCommittee typically provides guidance to the instructed committees, requesting thatthey include with their reconciliation submissions similar material required in acommittee report. This year, for example, the Budget Committee requested thefollowing material to be submitted by each instructed committee: 1. legislative text; 2. transmittal letter signed by the committee chairman; 3. summary of the major policy decisions in the legislation; 4. section-by-section description; 5. committee oversight findings; 6. constitutional authority statement; 7. committee votes; 8. Ramseyer statement regarding the text of changes made in existing law; 9. performance goals; and 10. supplemental, additional, and minority views. (31) When a committee is directed to submit reconciliation recommendations tothe Budget Committee, it also may report legislation to the House directly. On atleast two occasions, for example, the Ways and Means Committee submittedreconciliation recommendations to the Budget Committee as well as reportinglegislation, containing those recommendations, to the House directly. (32) In addition,on at least one occasion, several instructed committees reported reconciliationlegislation to the House directly instead of submitting their recommendations to theBudget Committee. In 1982, four of the nine instructed committees reportedindividual reconciliation measures to the House directly. The House considered andpassed each of these measures individually and subsequently incorporated them intoone omnibus reconciliation bill (H.R. 6955, 97th Congress). (33) Compliance with ReconciliationDirectives. Each instructed committee is expected to comply withits reconciliation directives, specifically with regard to submitting its reconciliationrecommendations by the date specified and recommending legislative changes toexisting law projected to produce the budgetary changes specified. Neither the 1974act nor the Standing Rules of the House provides a point of order, or any othersanction, against a committee's reconciliation recommendations, or the subsequentomnibus reconciliation legislation, for not complying with the reconciliationdirectives. The House Rules Committee, however, as will be discussed furtherbelow, under Section 310(d)(5) of the 1974 act, may make in order amendments toachieve compliance if one or more committees fail to submit their legislativerecommendations pursuant to their reconciliation instructions. In the past, several committees have submitted their reconciliationrecommendations after the submission deadline or not at all. In 1995, for example,nine of the 12 instructed committees submitted their reconciliation recommendationsto the Budget Committee after the September 22 deadline. (34) All of thetardy submissions were included in the reconciliation measure reported by the BudgetCommittee. In this case, as in the past, it does not appear that the late submissionscaused any procedural consequences. (35) In several instances, one or more of the instructed committees did not submitany legislative recommendations. In at least two years, 1981 and 1995, the HouseRules Committee made in order amendments that provided language within thejurisdiction of the non-compliant committees to satisfy their reconciliation directives. In 1995, for example, the Rules Committee made in order an amendment in thenature of a substitute, offered by then-Budget Committee Chairman John Kasich,that, among other things, achieved compliance for the House AgricultureCommittee. (36) In 1996, several of the instructed committees didnot submit reconciliation recommendations to the Budget Committee, butreconciliation legislation applicable to those committees was not developed. The House Budget Committee plays a significant, if not substantive, role inthe development of reconciliation legislation when two or more committees aredirected to recommend legislative changes pursuant to reconciliation directives. Asmentioned above, when two or more committees are involved, each committee isrequired to submit its legislative recommendations to the Budget Committee, by acertain date, as specified in the reconciliation directives contained in the budgetresolution. Section 310(b)(2) of the 1974 act provides that when the BudgetCommittee receives all the legislative recommendations from the directedcommittees, it is required to report to the House "reconciliation legislation carryingout all such recommendations, without any substantive revision." In practice, this administrative function has entailed incorporating thecommittee's recommendations as separate titles into an omnibus reconciliationmeasure. The Budget Committee has performed this function formally by conductinga markup of the reconciliation legislation. At the end of the markup, the BudgetCommittee orders reported the omnibus reconciliation legislation, containing theinstructed committees' submissions, as an original bill. During the markup, amendments are not considered, as in the case of astandard committee markup, because of the prohibition against any substantiverevision to the instructed committees' recommendations. The Budget Committee,however, traditionally has entertained motions to direct the Budget Committeechairman to request that the Rules Committee make in order certain amendments. In 1997, for example, during the markup of H.R. 2015, the BalancedBudget Act of 1997, committee Members made 11 motions to direct the BudgetCommittee chairman to request that the rule for floor consideration include anamendment; one motion passed, seven motions were rejected, and three motionswere withdrawn. (37) The Budget Committee formally orders reported the omnibus reconciliationmeasure to the House with a written report (see Table 4 ). An original billsubsequently is introduced in the House by the chairman of the Budget Committee. Past committee reports have included an overview of the reconciliation measure,occasionally including comments by the Budget Committee on the instructedcommittees' compliance with the reconciliation directives. The committee report also typically contains report language submitted by thecommittees, including a general explanation of the development of the legislativerecommendations and a section-by-section analysis of the recommendations. Asmentioned above, the committee submissions usually, but not always, include all theinformation that is required to be printed in committee reports, such as committeevotes. In most cases, the Budget Committee report has included a cost estimateprepared by the Congressional Budget Office (or, for revenue measures, the JointCommittee on Taxation) for the recommended legislative changes submitted by eachcommittee. The House considers most major legislation under the provisions of a specialrule, supplementing and at times superseding the Standing Rules of the House. Aspecial rule, when adopted by the House, governs the consideration of the applicablemeasure, including regulating the amending process. (38) The HouseRules Committee has the exclusive responsibility for developing and reporting aspecial rule providing for the consideration of a measure on the House floor. The 1974 act contemplates a role for the Rules Committee in thereconciliation process by providing, under Section 310(d)(5), as mentioned above,that the committee may make in order amendments to achieve changes specified byreconciliation directives if one or more committees fails to comply with them. Aswith most major legislation considered by the House, reconciliation measurestypically have been considered under a special rule reported by the Rules Committee. In most cases, the special rule reported by the House Rules Committee wasagreed to by the House (see Table 5 ). Only one special rule was amended (in 1981for FY1982), after the previous question was defeated, and only two were rejected(in 1984 for FY1985 and 1988 for FY1989). Provisions of the Special Rule. The special rule providing for the consideration of the reconciliation measure usuallyhas provided for general debate; made only certain amendments in order; placeddebate limitations on some of these amendments; waived points of order against theconsideration of the reconciliation bill, the provisions of the bill, and certainamendments; and provided for a motion to recommit with or without instructions. General debate under special rules providing for the consideration of areconciliation measure has ranged from one hour to 10 hours. In 1980, the first timethe House considered an omnibus reconciliation measure, the special rule divided thegeneral debate time among all the instructed committees plus the Budget Committee. After 1980, general debate on an omnibus reconciliation measure has beenequally divided between the chair and the ranking minority member of the BudgetCommittee. In cases when the reconciliation measure was reported by onecommittee, such as in recent years with the Ways and Means Committee, the specialrule has divided the time for general debate equally between the chair and rankingminority member of that committee. The special rule providing for the consideration of a reconciliation measurealways has limited the consideration of amendments to the bill; a reconciliationmeasure has never been considered under an open rule, as defined by the RulesCommittee. In three instances, the Rules Committee reported and the House adopteda rule prohibiting any floor amendments (defined as a closed rule by the RulesCommittee). (39) On several occasions, especially since the mid-1980s, the special ruleprovided that an amendment, or modifications to the underlying reconciliation bill,be considered as adopted upon the adoption of the special rule (sometimes referredto as a self-executing provision). The special rule (H.Res. 186) on theOmnibus Budget Reconciliation Act of 1993, for example, included twoself-executing provisions involving: (1) about two dozen brief amendments affectingvarious titles in the bill; and (2) a new title (Title XV) dealing with the budgetprocess. Both of the self-executing provisions were printed in the Rules Committeereport on the special rule. Most special rules for the consideration of a reconciliation measure havemade in order very few floor amendments. In fact, many special rules allowed onefloor amendment only, usually an amendment in the nature of a substitute. Moreover, only five special rules, excluding those that prohibited any flooramendments, allowed more than two floor amendments; the greatest number of flooramendments made in order by a special rule was 10 in 1989 (H.Res. 249for H.R. 3299). In every instance that a floor amendment was made in order by the specialrule, debate on the amendment was limited by the rule as well. Debate on individualamendments under the special rules has ranged from 20 minutes to four hours,equally divided between the proponent and an opponent of the amendment. Typically, the special rule provided an hour of debate for each floor amendment. All special rules waived one or more points of order against the considerationof the reconciliation bill, the bill itself, or a floor amendment. In most cases, thespecial rule waived all points of order against the reconciliation bill. Two specialrules waived certain points of order against the reconciliation bill except for certainprovisions in the bill. (40) In addition, most special rules waived all pointsof order against the floor amendments, including amendments in the nature of asubstitute, made in order by the special rule. Finally, all the special rules providing for the consideration of a reconciliationmeasure provided for the offering of a motion to recommit. A motion to recommitmay be offered with or without instructions. Most special rules allowed the motionwith instructions. Four special rules, however, explicitly prohibited any motion torecommit that contained instructions. (41) The House floor consideration of a reconciliation measure, as mentionedabove, usually is governed by a special rule. Of the 29 reconciliation measuresconsidered on the House floor during the period covering 1980 to 2003, 23 measureswere considered under a special rule. Of the remaining six reconciliation measures,five measures were considered under "suspension of the rules" procedures and onewas considered by unanimous consent. (42) This section discusses the consideration ofreconciliation measures under a special rule. During the House floor consideration of a reconciliation measure under aspecial rule, at least three key elements can have a substantive impact on themeasure: amendments, points of order, and motions to recommit the measure. Thehistorical experience of the House regarding each of these actions is discussed below. Consideration and Disposition ofAmendments. The special rule providing for the consideration ofa reconciliation measure limited the consideration of floor amendments to thosemade in order by the special rule. In only one instance, a Member offered anamendment not made in order by the rule. (43) In most cases, a Member offered the amendmentsmade in order by the rule. The number of amendments offered to a reconciliation billranged from one (eight times) to 10 (once). In six cases, an amendment made in order by the rule was not offered or waswithdrawn by a Member. In one of these cases, a Member attempted to modify hisamendment prior to offering it but was unsuccessful; consequently, he did not offerhis original amendment made in order by the rule. (44) With regard to 13 reconciliation measures, one or more amendments wereadopted upon the adoption of the special rule; four of these amendments wereamendments in the nature of a substitute to the reconciliation bill. Overall, of the 30 floor amendments offered to reconciliation measures, 19amendments were agreed to and 11 amendments were rejected (see Table 6 ). Thisoverall success of amendments, however, masks the variation over the years. In theearly 1980s, for example, almost all of the amendments offered to the reconciliationmeasures were agreed to (between 1980 and 1985, 16 of the 19 floor amendmentswere agreed to). Since 1985, only eight of the 21 floor amendments to reconciliationmeasures were agreed to. Moreover, over half (five) of these eight floor amendmentswere offered to one reconciliation measure (H.R. 3299 in 1989). Raising and Sustaining Points ofOrder. Any Member may make a point of order against a pendingmatter (e.g., a provision in a bill or an amendment) on the grounds that it violates arule of the House. (45) Unless a special rule waives the relevant pointsof order, a reconciliation measure and amendments thereto are subject to the StandingRules of the House, such as the germaneness requirement under clause 7 of RuleXVI. In addition, as a budgetary measure, a reconciliation bill is subject to thebudget enforcement procedures associated with the Congressional Budget Act of1974 and the annual budget resolution. (46) In particular, a reconciliation measure and anyamendments thereto must not cause the aggregate spending and revenue levels(Section 311), and any committees' spending allocations (Section 302) associatedwith the annual budget resolution, to be exceeded. Under Section 310(d)(1) of the1974 act, amendments to a reconciliation measure also must be deficit neutral to thebill. Most of the special rules providing for the consideration of a reconciliationmeasure, however, waived one or more points of order against the bill and flooramendments made in order. Therefore, while various provisions in the reconciliationbills or amendments offered thereto might have violated certain points of order underthe Standing Rules of the House or the 1974 act, the special rule prohibited aMember from raising such points of order. Two special rules, as mentioned above, made exceptions to the waiver ofcertain points of order. In each of these cases, Members raised points of orderagainst the unprotected provisions during the consideration of the reconciliationmeasure. In 1985, for example, the special rule providing for the consideration of H.R.3500, the Omnibus Budget Reconciliation Act of 1985, waived any pointsof order under clauses 5(a) and (b) of Rule XXI (now clauses 4 and 5(a) of Rule XXI)against the bill except for certain provisions. Clause 5(a) of Rule XXI prohibited anappropriation in legislation reported by a committee not having jurisdiction to reportappropriations. Clause 5(b) of Rule XXI prohibited a tax measure reported by acommittee not having jurisdiction to report a tax measure. During the consideration of H.R. 3500, Representative SidneyYates raised a point of order against one of the unprotected provisions that containedan appropriation in a title of the reconciliation bill reported by a committee nothaving jurisdiction to report an appropriation. In addition, Representative DanRostenkowski raised points of order against two unprotected provisions thatcontained a tax measure in a title of the bill reported by a committee not havingjurisdiction to report tax measures. In all three cases, the points of order weresustained and thus the violating provisions were stricken from the bill. (47) Motions to Recommit. Under theStanding Rules of the House, one motion to recommit a reconciliation measure maybe offered by a Member opposed to the measure, with preference given to a Memberof the minority party, after the previous question has been ordered on the measure butbefore the vote on final passage (House Rule XIX, clause 2). (48) Themotion may be made with or without instructions. A motion to recommit with instructions is debatable for 10 minutes, equallydivided between the proponent and an opponent of the motion; this debate time maybe extended to an hour if requested by the majority floor manager. A motion torecommit without instructions is not debatable. All special rules providing for the consideration of a reconciliation measureallowed for the offering of a motion to recommit. Members offered 16 motions torecommit 15 reconciliation bills. Almost all of these motions to recommit (13 of the16) included instructions. All of the motions to recommit with or withoutinstructions were rejected. In one case, in 2003, a motion to recommit withinstructions fell on a point of order that it was not germane to the bill. (49) Subsequently, another motion to recommit with instructions was offered; it wasrejected. Table 4. Initial House Action on Reconciliation Measures: FY1981-FY2005 Source : Prepared by the Congressional Research Service. a. The first four measures listed, H.R. 6782, H.R. 6812, H.R. 6862, and H.R. 6892, were considered and passed separatelyby the House, but later were incorporated into H.R. 6955, which became the Omnibus Budget Reconciliation Act of 1982 (except forH.R. 6782, which became public law separately, P.L. 97-306 ). b. The House Budget Committee issued a report, Efforts to Reduce the Federal Deficit (H.Rept. 98-673, Apr. 10, 1984) pertaining to the reconciliationrecommendations contained in H.R. 5394, but the report did not officially accompany that measure. c. Following its passage by the House, H.R. 3500 was incorporated into H.R. 3128 by H.Res. 330. Table 5. Special Rules Providing for the Consideration of Reconciliation Measures in the House:FY1981-FY2005 Source : Prepared by the Congressional Research Service. Table 6. House Floor Amendments and Motions to Recommit to Reconciliation Measures:FY1981-FY2005 Source : Prepared by the Congressional Research Service. Note : "ANS" refers to an amendment in the nature of a substitute. a. The previous question on the amendment was agreed to by a vote of 215-212. b. The amendment was agreed to in the Committee of the Whole on a division vote of 31-24. The amendment, subsequently, was agreed to in the Houseon a vote of 245-176, as indicated. c. The ruling of the chair was appealed and a motion to table the appeal was agreed to by a vote of 222-202. The initial consideration of reconciliation measures in the Senate ispotentially a complex process that parallels House action in some respects, but differssignificantly in others. Four aspects of Senate action at this stage of thereconciliation process are addressed in this section: (1) the development oflegislative recommendations by the instructed committees; (2) the preparation of anomnibus measure by the Senate Budget Committee; (3) floor consideration of reconciliation legislation; and (4) the operation of the Senate's "Byrd rule." The reconciliation directives contained in the budget resolution, as finallyagreed to by the House and Senate, inform each instructed Senate committee as to thetype and scope of the legislative recommendations it must develop in order to complywith the directives. In addition, the reconciliation directives include a deadline forthe submission of legislative recommendations to the Budget Committee or thereporting of legislation directly to the Senate. Whether a committee has been instructed to submit legislativerecommendations to the Senate Budget Committee for inclusion in an omnibusreconciliation measure, or has been instructed to report a reconciliation measuredirectly to the Senate, it develops its recommendations in generally the same manneras it develops other legislation. (50) In doing so, the committee must adhere to thepertinent requirements in the Standing Rules of the Senate, as well as it owncommittee rules, including rules regarding the reporting of a measure or matter. (51) Relationship With the BudgetCommittee. Prior to the commencement of work by the instructedcommittees on their reconciliation recommendations, the Senate Budget Committeeusually sends a set of "guidelines" to the chairman and ranking member of eachcommittee. The guidelines summarize the applicable procedural requirementsstemming from the budget resolution containing the reconciliation directives andpertinent provisions of the Congressional Budget Act of 1974, and provide additionalinformation on related matters, such as scoring conventions that will be used toevaluate the reconciliation recommendations. The Budget Committee also mayadvise each instructed committee on drafting considerations (e.g., the number of thetitle or titles in the measure for the committee's recommendations) to avoid confusionwhen compiling the committee recommendations into a single measure. In most instances, the instructed committees maintain an ongoing relationshipwith the Budget Committee during the process of developing their legislativerecommendations, at least informally at the staff level. Consultations occur betweenthe committees to foster a clear understanding of procedural requirements, to assesspotential compliance issues with the aim of avoiding them, and for other reasons. Inaddition, the instructed committees regularly consult with CBO and, if appropriate,the Joint Committee on Taxation (JCT) on the budgetary implications of policyoptions and other budget-related assessments, and seek appropriate guidance andsupport from the Parliamentarian, Legislative Counsel, and other offices. Hearings, Markup, and Reporting or Submissionof Recommendations. While committees typically are afforded acertain amount of flexibility in conducting their legislative activities, Senate RuleXXVI, entitled "Committee Procedure," lays out basic requirements with regard tosuch matters as the scheduling of meetings and hearings, quorums, openness, andvoting and reporting requirements. As in the case of other legislation, instructed committees often hold hearingsprior to marking up their legislative recommendations. The Senate FinanceCommittee, for example, held multiple hearings at the full committee andsubcommittee level before marking up a revenue reconciliation measure on June 19,1997. Over a period spanning from February 4 through June 5 of that year, thecommittee held 10 full committee and two subcommittee hearings on topics relatedto the reconciliation recommendations, covering such matters as the status of theAirport and Airway Trust Fund, Individual Retirement Account proposals, capitalgains and losses, the Administration's FY1998 budget, and tax proposals related toeducation, health care, and small business. (52) Committees may proceed by marking up a bill that already has beenintroduced. The most common approach, however, is for the committee to originatelegislation in the markup, such as by considering a "chairman's mark," which may bealtered by the adoption of amendments in committee. Before an instructed committee can submit reconciliation legislation to theBudget Committee or report it directly to the Senate, it must meet to consider andapprove the legislation, including relevant amendments and motions that may beoffered, and then order the legislation reported by a majority vote. A majority of thecommittee must be physically present in order to vote to report the legislation;otherwise, a point of order may be raised on the Senate floor to prevent itsconsideration. (53) Committee Report or SubmissionRequirements. In addition to complying with reportingrequirements under Senate Rule XXVI, the committee must comply with reportingrequirements in Section 308 (2 U.S.C. 637), Section 402 (2 U.S.C. 653), and Section423 (2 U.S.C. 658b) of the 1974 act. These sections pertain to various analyses ofbudgetary legislation, including cost estimates and assessments of unfundedmandates prepared by CBO and, in the case of revenue legislation, the JCT. TheCBO and JCT estimates must be included in committee reports only if they areavailable in a timely manner. Further, with respect to revenue legislation, Section 4022(b) of the InternalRevenue Service Reform and Restructuring Act of 1998 ( P.L. 105-206 ) requires theinclusion of a tax complexity analysis in the report accompanying any revenuemeasure reported by the House Ways and Means Committee, the Senate FinanceCommittee, or a conference committee, if the measure directly or indirectly amendsthe Internal Revenue Code and has widespread applicability to individuals or smallbusinesses. Committee submissions to the Budget Committee usually consist of fourrequired elements. In addition to the legislative text, the submission includes thecommittee report language, the CBO or JCT estimates, and a transmittal letter signedby the chairman of the instructed committee. In many instances, the ranking memberof the instructed committee signs the transmittal letter as well. Like committee reports on other measures, the committee report languageaccompanying reconciliation legislation may include additional, supplemental, ordissenting views, which allow committee members individually, or as part of a group,to amplify their views, register their concerns, or express their dissent regarding partor all of the legislation. In the case of 1995 reconciliation legislation, for example,eight minority members of the Budget Committee signed a statement collectivelyexpressing their views. (54) On occasion, the CBO or JCT estimates may not be prepared in time forinclusion in the committee's submission and are omitted, but usually becomeavailable in time for inclusion in the Budget Committee's report on the omnibusreconciliation measure. On other occasions, the instructed committee may includeCBO or JCT estimates that are preliminary and are revised later. While a committee that is participating in the development of an omnibusreconciliation measure must submit its legislative recommendations to the BudgetCommittee, it may also publish them separately or report them as separate legislationaltogether. Senate committee actions that led to the enactment of two reconciliation actsin one year during the 105th Congress, the Balanced Budget Act of 1997 and theTaxpayer Relief Act of 1997, illustrate the potential complexity involved. TheFY1998 budget resolution provided for a revenue reconciliation act and an omnibusspending reconciliation act. The initial Senate version of the spending reconciliation measure, theBalanced Budget Act (S. 947), originated in the Budget Committee andwas reported on June 20, 1997. In lieu of a written report on the bill, the BudgetCommittee issued a 241-page committee print containing the transmittal letters,report language, and cost estimates provided by the eight instructed Senatecommittees. (55) The print included (on pages 71-197) a 126-pagesubmission from the Senate Finance Committee. As a supplement to the BudgetCommittee's print, the Finance Committee issued its own 474-page committee print,explaining its spending reconciliation recommendations in more detail. (56) The initial Senate version of the revenue reconciliation measure, the TaxpayerRelief Act of 1997 ( S. 949 ), was reported directly to the Senate by theFinance Committee (because it was the sole committee subject to revenuereconciliation directives) on June 20. The committee issued a written report toaccompany the measure. (57) In the course of preparing an omnibus reconciliation measure, the BudgetCommittee's task usually is described as a "ministerial function." Under Section310(b)(2) of the 1974 act, after receiving the legislative recommendations of theinstructed committees, the Budget Committee must report omnibus reconciliationlegislation carrying out the recommendations "without any substantive revision." Ensuring Accuracy andCompleteness. Although this task may be described correctly asbeing ministerial, the Budget Committee still is faced with several issues at thispoint. First, the Budget Committee must endeavor to ensure that all responses frominstructed committees are complete and accurate. As indicated previously, theBudget Committee secures any CBO or JCT estimates that were not prepared in timefor inclusion with the committee submissions, or secures final estimates in place ofpreliminary ones. In order to ensure accuracy, the Budget Committee from time to time hasmade technical corrections in the submissions at the request of the instructedcommittees. In the case of reconciliation legislation in 1996 dealing with welfarereform, for example, both of the instructed committees asked the Budget Committeeto make corrections in their previous submissions. On July 9, 1996, ChairmanRichard Lugar and Ranking Member Patrick Leahy of the Senate Agriculture,Nutrition, and Forestry Committee sent a letter to Budget Committee Chairman PeteDomenici, with technical corrections to four provisions in the June 28 submissionattached. (58) Similarly, on July 15, Chairman William Rothof the Finance Committee sent a letter to Chairman Domenici notifying him that theJuly 11 submission "inadvertently included a change to the child care section of thebill which was not actually made by the Committee." (59) TheBudget Committee indicated that it had made the changes requested by bothcommittees. It was the instructed committees, and not the Budget Committee, thathad the authority to make these changes. Dealing With Tardy Responses. A second issue faced by the Budget Committee is what to do if one or morecommittees does not submit its recommendations by the deadline. The initialpractice of the Senate was to extend the deadline when the Budget Committee feltthat such action was warranted. This practice was motivated by the view thatincluding tardy committee submissions could "taint" the reconciliation measure,thereby causing it to lose its privilege and the protection of expedited procedures. In1985, for example, the Senate extended the September 27 deadline set in the FY1986budget resolution to October 1 by unanimous consent in order to accommodate theBanking, Housing, and Urban Affairs Committee. (60) In someinstances, the deadline was extended in a series of tightly constrained steps. In 1986,for example, the deadline of July 25 set in the FY1987 budget resolution wasextended to 6:00 p.m. on July 29, to 12:00 noon on July 30, and then to 3:30 p.m. onthat same day, July 30. (61) Finally, the deadline has been extended by largermargins; the July 28 deadline in the FY1988 budget resolution was extended toSeptember 29 and then to October 19. (62) Under more recent practice, the Budget Committee may be afforded somediscretion in awaiting the responses of tardy committees in order to include them inthe omnibus reconciliation measure. While the budget resolution provides a deadlinefor the submissions by the instructed committees, it does not impose a reportingdeadline on the Budget Committee. Under Section 310(b)(2) of the 1974 act, theBudget Committee is obliged to report the omnibus reconciliation measure only"upon receiving all such recommendations." Consequently, the Budget Committee'sobligation to report does not ripen until all recommendations have been received,even tardy ones. (63) Nonetheless, the Budget Committee is expected to report the omnibusreconciliation measure in a reasonably prompt manner. Accordingly, when facedwith lingering delay in the responses by one or more instructed committees, it maychoose to report the omnibus reconciliation measure without the responses and seeka remedy for the omissions during floor consideration. Evaluating Compliance. A thirdtask facing the Budget Committee at this stage of the reconciliation process, andperhaps the most important one, is evaluating compliance by the respondingcommittees. Compliance may be judged by several criteria. First and foremost, theBudget Committee assesses whether each instructed committee has met the goals laidout in the reconciliation directives. In the case of each committee, the estimatedlevels of spending changes (and, if appropriate, revenue changes and debt-limitchanges) that would be achieved for each time period are measured against theinstructed levels. Although the Budget Committee and each instructed committee receives costestimates from CBO and the JCT, it is the Budget Committee's responsibility andprerogative to assess committee compliance on the basis of spending or revenuelevels. In measuring compliance, the Budget Committee sometimes will makeadjustments to the estimates provided by CBO or the JCT. One such adjustment,which occurred in 1995, involved a change in the enactment date assumed by CBO,which shortened the time available in FY1996 for the sale of the Naval PetroleumReserves. As a consequence of this change, CBO judged that the sale could not becompleted in FY1996 and reduced the savings attributed to the Armed ServicesCommittee accordingly. As explained by the Senate Budget Committee: The FY1996 budget resolutionassumed an October 1, 1995 enactment date and the reconciliation instructions tocommittees were based on this enactment date. Due to the delay of some of thecommittee's submissions and other factors, CBO is currently using a November 15,1995 enactment date. As a result, some committees followed the assumptions in thebudget resolution and still failed to meet their fiscal year 1996 reconciliationinstruction because of this change in the assumption on the enactment date.... However, if a committee follows the assumptions in the budget resolution and failsto meet its instructions for fiscal year 1996 solely because of an assumption on theenactment date, the Senate Budget Committee will hold the committee harmless andwill score the committee as achieving its instruction. Therefore, with thisadjustment, the Armed Services Committee has complied with the budget resolution'sreconciliation instructions for FY1996. (64) A second criterion for determining compliance involves the "fungibility rule," which is set forth in Section 310(c) of the 1974 act. (65) Thepurpose of the rule is to allow some flexibility in the response of a committeeinstructed to change both spending and revenues. The fungibility rule may not applyif revenue and spending changes are reported in separate reconciliation measurespursuant to separate directives. In sum, the fungibility rule: (1) applies to any Senate (or House) committeethat is subject to reconciliation directives in a budget resolution requiring it torecommend reconciliation legislation changing both spending and revenues; (2)deems any such committee to be in compliance with its reconciliation directives ifits recommended legislation does not cause either the spending changes or therevenue changes to exceed or fall below the directives by more than 20% of the sumof the two types of changes, and the total amount of changes recommended is not lessthan the total amount of changes that were directed; and (3) authorizes the chairmanof the Senate Budget Committee to file appropriate adjustments in the levels in thebudget resolution, and committee spending allocations thereunder, upon the exerciseof the rule, and requires any committee receiving revised spending allocations topromptly report Section 302(b) suballocations. The operation of this rule in the Senate was described in 1993 in a print of theSenate Budget Committee, as follows: For an example of the rule inoperation, take the case of a budget resolution that instructs a committee to achieve$3 million in outlay reductions and $7 million in revenue increases, for a total of $10million in deficit reduction. By virtue of this section, that committee maypermissibly achieve outlay reductions as low as $1 million ($3 million minus 20percent of $10 million, or $2 million), as long as it achieves a total of at least $10million in deficit reduction by also achieving at least $9 million in revenue increases. Alternatively, the committee may achieve revenue increases as low as $5 million ($7million minus 20 percent of $10 million, or $2 million), as long as it achieves a totalof at least $10 million in deficit reduction by also achieving outlay reductions of atleast $5 million. (66) In its current form, the fungibility rule authorizes the chairman of the SenateBudget Committee to file changes in budget resolution levels, and committeespending allocations thereunder, whenever the rule is exercised, and to require thatany committee receiving revised spending allocations promptly report Section 302(b)suballocations. (67) As Senate and House rules grant jurisdiction over revenue matters primarilyto the Senate Finance Committee and House Ways and Means Committee,respectively, these are the two main committees to which the fungibility rule applies. Finally, a third criterion for assessing committee compliance with thereconciliation directives is the Senate's "Byrd rule," which is discussed in detailbelow. Briefly, the rule bars the inclusion of matter in reconciliation legislation thatis extraneous to the purposes of the reconciliation directives. The Parliamentarian also plays a role in assessing compliance withreconciliation directives, determining whether provisions from the instructedcommittees are within their respective jurisdictions. Further, the Parliamentariandetermines, as a threshold matter, whether the assembled submissions from theinstructed committees constitute a reconciliation bill and, thus, whether the bill maybe considered under the expedited procedures of the reconciliation process. While the Budget Committee must report the legislative recommendationssubmitted to it, the committee need not necessarily issue a written report. Beginningin the late 1980s, the practice of the Senate Budget Committee has been to reportomnibus reconciliation bills without a written report. The purpose of this practiceis to avoid both a Budget Committee rule providing for time to submit additional andminority views, and the Senate rule requiring legislation accompanied by a writtenreport to lay over for a period of time before floor consideration. The BudgetCommittee usually issues a committee print explaining the legislation in lieu of areport. The Budget Committee, because it must report an omnibus reconciliation bill"without any substantive revision," may not resolve any substantive issues onnon-compliance at this point. The Budget Committee may, however, in concert withthe leadership, evaluate strategies for remedying the non-compliance on the Senatefloor through one or more manager's amendments or by other means. The basic contours of Senate procedure for the consideration of reconciliationmeasures are shaped by Section 310 of the 1974 act. In particular, Section 310(e)provides that the provisions of Section 305 of the act, which establish procedures forthe consideration of budget resolutions and conference reports thereon in the Senate,shall also apply to the consideration of reconciliation measures and conferencereports thereon. In one important exception, a 20-hour limit on debate is set forreconciliation measures, instead of the 50-hour limit applicable to budget resolutions. The timetable for the congressional budget process set out in Section 300 ofthe 1974 act indicates that Congress should complete action on any requiredreconciliation by June 15. While Section 310(f) of the act is intended to enforce thisdeadline in the House (by barring the consideration in July of an adjournmentresolution providing for the traditional August recess if the House has not completedaction), the act does not contain any comparable provision for the Senate. Like other budgetary legislation, reconciliation measures generally must bein compliance with budget enforcement procedures in the 1974 act and included inannual budget resolutions. In particular, spending levels in the measure must notcause any committee's spending allocations under the budget resolution to beexceeded (Section 302), revenues levels in the measure must not drop below therevenue floor established in the budget resolution (Section 311), and no policy orprocedural matters within the Budget Committee's jurisdiction can be included(Section 306), or the bill will be subject to points of order under these sections thatrequire a three-fifths vote to waive. Patterns in the Consideration of Senate and HouseLegislation. During the period from 1980-2004, covering budgetresolutions for FY1981-FY2005, the Senate completed action on a total of 19reconciliation acts stemming from reconciliation directives in budget resolutions for17 different years (see Table 7 ). In all but three of these years, the Senate considereda single reconciliation measure in response to the reconciliation directives in thebudget resolution. In the three remaining years, the Senate considered two differentreconciliation measures each year, resulting in the enactment of five reconciliationacts -- one act in 1980 (for FY1981) and two acts each in 1982 and 1997 (for FY1983and FY1998). As a general matter, the Senate initially considers a single, Senate-numberedreconciliation measure, either an omnibus reconciliation act reported by the BudgetCommittee or a reconciliation act reported by the Finance Committee. Following thecompletion of debate and amendment, the Senate positions itself for conference withthe House by taking up the House-passed reconciliation measure, striking all after theenacting clause, and inserting the text of the Senate-passed measure. This procedure is especially important with respect to reconciliation measuresthat affect revenues due to the requirement in the Constitution that revenue measuresoriginate in the House. By passing a House-numbered bill in the final instance, theSenate abides by the constitutional requirement. (After the Senate considers theSenate-numbered bill, the 1974 act would allow an additional 20 hours to considerthe House-numbered bill, but the Senate usually considered the House-numbered billby unanimous consent.) Different patterns of legislative action have occurred as well. In 1980, forexample, the Senate Budget Committee reported two different original Senate billscarrying out revenue and spending reconciliation instructions, and the Senateconsidered each of them separately. Following their consideration, the Senateincorporated both of the measures into the House-passed reconciliation bill. (68) Table 7. Initial Senate Action on Reconciliation Measures: FY1981-FY2005 Source : Prepared by the Congressional Research Service. On two occasions, in 1982 and 1997, the Senate considered separate revenueand spending reconciliation acts that each became law. (69) Three ofthe four measures were original Senate bills reported by the Budget Committee (twobills) or the Finance Committee (one bill), but in the remaining instance the FinanceCommittee reported a House-passed bill instead of an original Senate bill. (70) In 2001 and 2003, the Finance Committee reported original Senate billscarrying out revenue reconciliation instructions, but the Senate did not consider them. Instead, the Senate considered House-passed reconciliation bills under an acceleratedschedule. (71) The Senate usually completes initial action on reconciliation measures overa period of two to four days. In 1980, the Senate devoted only one day each to theinitial consideration of two reconciliation bills, but in 1985 it considered areconciliation measure for eight days. Initiating Consideration and ControllingTime. Although not explicitly stated in the 1974 act, reconciliationmeasures are privileged measures. Accordingly, the motion to proceed to theconsideration of a reconciliation measure is not debatable. In practice, mostreconciliation measures are laid before the Senate by unanimous consent. A reconciliation measure does not need to lie over on the calendar for onelegislative day, but if such legislation is accompanied by a written report, the reportmust be available for 48 hours before the measure can be considered. As statedpreviously, the usual practice of the Budget Committee since the late 1980s has beento report omnibus reconciliation bills without a written report, issuing a committeeprint in lieu of a report. The Finance Committee has been instructed to reportlegislation directly to the Senate on several occasions in recent years, sometimesissuing a written report and sometimes not doing so. Reconciliation legislation is subject to a 20-hour debate limitation. Debateon first degree amendments is limited to two hours, and debate on second degreeamendments and debatable motions or appeals is limited to one hour. In practice,debate time may vary from these limits, pursuant to unanimous consent agreements. Control of time under the 20-hour limit is equally divided between, andcontrolled by, the majority leader and the minority leader or their designees. Thechairman and ranking member of the Budget Committee usually are designated toserve as floor managers and to control the time. With respect to amendments (anddebatable motions and appeals), time is divided equally and controlled by the Senatorwho proposed the amendment and the majority manager (or, if the majority managerfavors the amendment, the minority manager). Not all actions pertaining to a reconciliation measure are counted under the20-hour time limit. Debate on the measure, all amendments thereto, debatablemotions and appeals, and time used in quorum calls (except for those that precede arollcall vote) is counted under the limit, but time used to read amendments, to vote,or to establish a quorum prior to a rollcall vote is not counted, absent a unanimousconsent agreement to the contrary. Therefore, it is possible, especially with theconsideration of a large number of amendments under a "vote-arama" situation(discussed below), for consideration to extend well beyond 20 hours. Conversely,because the time for debate may be reduced by yielding back time, by unanimousconsent, or by a nondebatable motion, the consideration of a reconciliation measuremay not consume the full 20 hours. Restrictions on Amendments and Motions toRecommit. There are several restrictions on the consideration ofamendments. First, as provided in Section 305(b)(2) of the 1974 act, amendmentsmust be germane (the germaneness requirement also applies to amendments tobudget resolutions). (72) While certain amendments are per se germane(e.g., an amendment to strike, or to change numbers or dates), the germaneness of anamendment typically is determined on a case-by-case basis if a point of order israised. Once matter has been stricken from the measure by amendment, the mattercan no longer be used to justify germaneness. Conversely, matter added to themeasure by amendment can be used as the basis for additional amendments to bedeemed germane. An important exception to the germaneness requirement is made inconnection with a motion to recommit with instructions intended to bring acommittee's recommendations into full compliance. Although the motion itself mustbe germane, the amendment reported back by the instructed committee is not subjectto a germaneness requirement. This practice recognizes the fact that in order to makethe changes in spending or revenues necessary to achieve full compliance, it may benecessary to address matter not included in the instructed committee's originalrecommendations. Section 310(d) prohibits the consideration of any amendment that wouldcause the reconciliation measure to reduce outlays by less than the amount instructed,or would cause it to increase revenues by less than the amount instructed, unless theresulting deficit increase is offset. The prohibition does not interfere, however, witha motion to strike, regardless of that motion's effect on the deficit. Section 310(g) bars the consideration of any reconciliation legislation,including any amendment thereto or conference report thereon, "that containsrecommendations with respect to" Social Security. For purposes of these provision,Social Security is considered to include the Old-Age, Survivors, and DisabilityInsurance (OASDI) program established under Title II of the Social Security Act; itdoes not include Medicare or other programs established as part of that act. Finally, Section 313, the Senate's "Byrd rule," prohibits the consideration ofany reconciliation legislation, including amendments, that include extraneous matter(see discussion below). One provision of the Byrd rule buttresses the prohibitionagainst considering recommendations affecting Social Security set forth in Section310(g). Each of the restrictions discussed above requires an affirmative vote ofthree-fifths of the membership (60 Senators, if no seats are vacant) to waive or toappeal the ruling of the chair. An amendment fashioned to avoid one restriction still may run afoul ofanother. An amendment may be germane, for example, yet violate the Byrd rulebecause it has no budgetary effect and therefore is extraneous. Motions to recommit, as previously indicated, afford a means of bringingcommittee recommendations into full compliance. Section 305(b)(5) of the 1974 actprohibits any motion to recommit, except for a motion to recommit with instructionsto report back within no more than three days. In practice, such motions usuallyrequire the instructed committee to report back "forthwith." While the committeenamed in the instructions may not be amended, the legislative language included inthe instructions is amendable in two degrees. If not necessary to bring a committeeinto compliance, the amendments proposed by a motion to recommit must begermane. "Vote-arama". The number ofamendments offered to reconciliation measures generally has increased over thehistory of the reconciliation process. Only a few amendments were offered to theearliest reconciliation bills, but dozens of amendments have been offered toreconciliation bills in recent years. When the 20-hour debate limit has been reached, Senators may continue toconsider amendments and motions to recommit with instructions (and to take otheractions as well), but they may not debate them unless unanimous consent is granted. The circumstance under which debate time on a reconciliation measure (or budgetresolution) has expired but amendments and motions continue to be considered hascome to be known as "vote-arama." As a general matter, accelerated votingprocedures sometimes are put into effect under a vote-arama scenario, allowing twominutes of debate per amendment for explanation and a 10-minute limit per vote. During the consideration of the three most recent reconciliation measures, in2000, 2001, and 2003, the Senate considered 162 amendments and motions torecommit (38 in 2000, 59 in 2001, and 65 in 2003). Many of the amendments andmotions were considered and disposed of under a vote-arama, as discussed in moredetail below. Marriage Tax Relief Reconciliation Act of 2000 (vetoed). TheSenate considered H.R. 4810 ( S. 2839 ) on July 14, 17, and18, 2000. Under a series of unanimous consent agreements, 37 amendments and onemotion to recommit were offered and debated on the first day of consideration, July14, without any final action being taken on them. On the second day ofconsideration, July 17, the Senate took up these amendments for disposition at 6:15p.m., with two minutes of debate time available for explanation of each amendment. This procedure was employed on the following day, July 18, as well, ending withfinal passage of the bill. Over the two days, 37 amendments and one motion torecommit were considered under this procedure; 10 amendments were adopted, threeamendments (and one motion to recommit) were rejected, seven amendments fell ona point of order, and 17 amendments were withdrawn. Economic Growth and Tax Relief Reconciliation Act of 2001(P.L. 107-16). The Senate considered H.R. 1836 on May 17, 21, 22, and23, 2001. On the second day of consideration, May 21, after the 20-hour limit ondebate apparently had expired, (73) the Senate took up and disposed of a series ofamendments under a unanimous consent agreement, propounded by Senator Lott,under which the votes would be limited to 10 minutes each, with two minutes beforeeach vote for an explanation. (74) This procedure was employed on the followingtwo days of consideration, May 22 and May 23, as well, ending with final passageof the bill. Under this procedure, over the three-day period, the Senate considered59 amendments and motions to recommit; eight were adopted, 20 were rejected, 26fell on a point of order, and five were withdrawn. Thirty-five of these 59amendments and motions to recommit had been offered, considered, and temporarilylaid aside prior to the expiration of the 20-hour limit. Subsequently, these 35amendments and motions to recommit were considered under the accelerated votingprocedures; three were adopted, 14 amendments were rejected, 13 fell on a point oforder, and five were withdrawn. Jobs and Growth Tax Relief Reconciliation Act of 2003 (P.L.108-27). The Senate considered S. 1054 on May 14 and 15, 2003. Onthe first day of consideration, the Senate agreed by unanimous consent that the20-hour limit on debate be expired and that the Senate proceed to vote onamendments at the beginning of the following day. (75) At the endof May 14, Senator Grassley announced that during consideration of the amendmentson May 15, all votes after the first vote would be limited to 10 minutes each. (76) On May15, the Senate considered 65 amendments; 30 amendments were adopted, nineamendments were rejected, 19 amendments fell on a point of order, and sevenamendments were withdrawn. Of these 65 amendments, 26 amendments wereoffered, considered, and set aside prior to the expiration of the 20-hour limit. Subsequently, these 26 amendments were considered under the accelerated votingprocedures; eight amendments were adopted, 14 amendments fell on a point of order,and four amendments were withdrawn. During the first several years' experience with reconciliation, the legislationcontained many provisions that were extraneous to the purpose of implementingbudget resolution policies. The reconciliation submissions of committees includedsuch things as provisions that had no budgetary effect, that increased spending orreduced revenues when the reconciliation instructions called for reduced spendingor increased revenues, or that violated another committee's jurisdiction. Reconciliation procedures, and other expedited procedures that limit debateand restrict the offering of amendments, run counter to the long-standing practicesof the Senate applicable to most legislation, in which Senators may engage inextended debate and freely offer amendments. Many Senators were willing tosurrender customary freedoms with respect to debate and amendment in order toexpedite reconciliation legislation, but they sought a means of confining the scopeof such legislation to its budgetary purposes. In 1985 and 1986, the Senate adopted the Byrd rule (named after its principalsponsor, Senator Robert C. Byrd) on a temporary basis as a means of curbing thesepractices. The Byrd rule has been extended and modified several times over theyears. In 1990, the Byrd rule was incorporated into the 1974 Congressional BudgetAct as Section 313 and made permanent. (77) In general, a point of order authorized under the Byrd rule may be raised inorder to strike extraneous matter already in the bill as reported or discharged (or inthe conference report), or to prevent the incorporation of extraneous matter throughthe adoption of amendments or motions. A point of order may be raised against asingle provision or two or more provisions in the bill (usually as designated by titleor section number, or by page and line number), in amendments offered thereto, orin motions made thereon, or against an entire amendment or amendments. The chairmay sustain a point of order as to all of the provisions (or amendments) or only someof them. The maker of the point of order defines the scope of the provision orprovisions being challenged. The Byrd rule is nearly unique in that points of order made thereunder bringdown the offending matter, but not the entire measure. Once material has beenstricken from reconciliation legislation under the Byrd rule, it may not be offeredagain as an amendment. A motion to waive the Byrd rule, or to sustain an appeal of the ruling of thechair on a point of order raised under the Byrd rule, requires the affirmative vote ofthree-fifths of the membership (60 Senators if no seats are vacant). (78) A singlewaiver motion can: (1) apply to the Byrd rule as well as other provisions of theCongressional Budget Act; (2) involve multiple as well as single provisions oramendments; (3) extend (for specified language) through consideration of theconference 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 ordermoot. While the point of order itself is not debatable, the motion to waive isdebatable, subject to the time limits for debatable motions. When a reconciliation measure, or a conference report thereon, is considered,the Senate Budget Committee must submit for the record a list of potentiallyextraneous matter included therein. (79) This list is advisory, however, and does not bindthe chair in ruling on points of order. Determinations of budgetary levels for purposes of enforcing the Byrd ruleare made by the Senate Budget Committee. Definitions of Extraneous Matter. Subsection (b)(1) of the Byrd rule provides definitions of what constitutes extraneousmatter for purposes of the rule. Some aspects of the Byrd rule require considerablejudgment regarding its application to complex legislation. As the Senate BudgetCommittee noted in its report on the budget resolution for fiscal year 1994,"'Extraneous' is a term of art." (80) In the most general terms, the rule bars theinclusion of matter that is not related to the purposes of the reconciliation process. A provision is considered to be extraneous if it falls under one or more of thefollowing six definitions: 1. It does not produce a change in outlays or revenues; 2. It produces an outlay increase or revenue decrease when theinstructed committee is not in compliance with its instructions; 3. It is outside of the jurisdiction of the committee that submitted thetitle or provision for inclusion in the reconciliation measure; 4. It produces a change in outlays or revenues which is merelyincidental to the non-budgetary components of the provision; 5. It would increase the deficit for a fiscal year beyond those coveredby the reconciliation measure; and 6. It recommends changes in Social Security. The last definition complements the ban in Section 310(g) of the 1974 actagainst considering any reconciliation legislation that contains recommendationspertaining to Social Security. While a successful point of order under the lastdefinition in the Byrd rule would excise the offending provision, a successful pointof order under Section 310(g) would defeat the entire bill. Exceptions to the Definition of ExtraneousMatter. Subsection (b)(2) of the Byrd rule provides that aSenate-originated provision that does not produce a change in outlays or revenuesshall not be considered extraneous if the chairman and ranking minority members ofthe Budget Committee and the committee reporting the provision certify that: the provision mitigates direct effects clearly attributable to aprovision changing outlays or revenues and both provisions together produce a netreduction in the deficit; or the provision will (or is likely to) reduce outlays or increaserevenues: (1) in one or more fiscal years beyond those covered by the reconciliationmeasure; (2) on the basis of new regulations, court rulings on pending legislation, orrelationships between economic indices and stipulated statutory triggers pertainingto the provision; or (3) but reliable estimates cannot be made due to insufficientdata. Subsection (b)(3) of the Byrd rule provides an exception to the definition ofextraneousness on the basis of committee jurisdiction for certain provisions reportedby a committee, if they would be referred to that committee upon introduction as aseparate measure. Additionally, under subsection (b)(1)(A), a provision that does not changeoutlays or revenues in the net, but which includes outlay decreases or revenueincreases that exactly offset outlay increases or revenue decreases, is not consideredto be extraneous. The Byrd rule has been applied to 19 reconciliation measures considered bythe Senate from 1985 through 2004. In 42 of the 55 actions involving the Byrd rule,opponents were able to strike extraneous matter from legislation (18 cases) or bar theconsideration of extraneous amendments (24 cases) by raising points of order. Nineof 41 motions to waive the Byrd rule, in order to retain or add extraneous matter,were successful. The Byrd rule has been used only four times during considerationof a conference report on a reconciliation measure (twice in 1993, once in 1995, andonce in 1997). Under the usual practice, the House and Senate initially consider and passtheir own reconciliation measures. In addition, reconciliation measures are complex,and in many instances, quite lengthy legislation. Accordingly, these factorseffectively guarantee that the House and Senate bills will be different. The twochambers must, however, as with all legislation, agree to the same reconciliationmeasure in the exact same form before it can be sent to the President. For the mostpart, the House and Senate employ the usual legislative procedures and practicesunder their rules to resolve differences on reconciliation measures, although theCongressional Budget Act of 1974 specifies some aspects of procedure at this stage. As with other complex legislation, the House and Senate typically use aconference as the means of developing an agreement on reconciliation legislation. In the case of all but one of the 19 reconciliation measures ultimately submitted byCongress to the President, the House and Senate convened a conference on themeasure and a conference report was issued. In the one instance in which aconference was not used, the two chambers passed identical legislation and therewere no differences to resolve. (In response to reconciliation directives in theFY1984 budget resolution, the Senate passed a House-passed reconciliation billwithout amendment, clearing it for the President.) The pattern with regard to conference procedure on reconciliation measureshas been for the Senate to consider one or two Senate bills initially, then to take upand amend the House-passed bill in order to proceed to conference. Table 8 provides information on House and Senate actions on conference reports onreconciliation measures. The one exception to the pattern occurred in 1982. Inresponse to reconciliation directives in the FY1983 budget resolution, the Senateinitially considered, and went to conference with the House on, a House-numberedbill, H.R. 4961 (which became the Tax Equity and Fiscal ResponsibilityAct of 1982). The House and Senate also may use an amendment exchange instead of aconference in order to resolve differences regarding legislation, or as a fallbackprocedure when conference agreements are not completed successfully. In the caseof reconciliation legislation, amendment exchanges are seldom used. The conferencereport on the Consolidated Omnibus Budget Reconciliation Act of 1985, forexample, was rejected by the House on December 19, 1985, by a vote of205-151. (81) Between December 19, 1985, and March 20, 1986, the House and Senate exchangedamendments nine times before their disagreements were resolved. (82) In addition,a successful point of order raised under the Byrd rule against the conference reporton the Balanced Budget Act of 1995 resulted in the Senate receding and concurringwith a further amendment that effectively deleted the offending matter. Although theHouse had previously adopted the conference report, it resolved the disagreement byconcurring in the further Senate amendment. In order to proceed to conference, the second chamber to act insists on itsamendment, thereby expressing its disagreement with the recommendations of thefirst chamber. Then, the second chamber requests a conference with the firstchamber in order to resolve the disagreement. In the case of reconciliationlegislation, the Senate has always been the "second" chamber to act, with respect tosetting up a conference. After a conference has been requested and agreed to, each chamber appointsconferees. Upon the appointment of conferees by both chambers, the conferencecommittee may then convene to carry out its work. In the Senate, these steps usuallyare merged together into a single unanimous consent request; in the House, confereesare not necessarily appointed at the time that the other actions occur. (83) In instances where there is unusual controversy or complications in enteringinto a conference, each of the three required steps may entail a separate motion (andvote). The House, in a few cases, used special rules reported by the House RulesCommittee to go to conference. In the House, it is the prerogative of the Speaker to appoint conferees, whilein the Senate, the usual practice is for the full Senate by unanimous consent toauthorize the Presiding Office to appoint them. Conferees can be appointed to consider the entire matter in conference or onlyfor limited-purposes. "General conferees" negotiate over the entire bill and anyamendments, and "limited-purpose" conferees negotiate only on a portion of thematter in conference designated at the time of appointment. Both types of conferees are appointed on omnibus reconciliation measures. Members of the House and Senate Budget Committee are appointed as generalconferees (and the chairman and ranking member serve as floor managers of theconference report). Members of the committees that submitted reconciliationrecommendations make up the rest of the conference committee. The conferees fromthe legislative committees have the responsibility of resolving differences in thelegislative language within their committee's jurisdiction, while the conferees fromthe Budget Committees work to facilitate the conference actions generally andpromote a timely resolution of policy disagreements. From time to time, when aMember must drop out of conference proceedings, a replacement may be appointed. When a conference committee deals with a reconciliation measure that wasreported to each chamber by a single committee, the conferees usually are chosenfrom the legislative committee's membership. Sometimes matter within the jurisdiction of a committee in one chamber thatdid not receive a reconciliation instruction may be before the conferees because ofthe action of the other body. Therefore, a chamber may include conferees from morecommittees than were instructed in the budget resolution. Conferences on reconciliation measures sometimes involve only a fewMembers from each chamber. The House and Senate appointed three conferees each,for example, on the Marriage Tax Relief and Reconciliation Act of 2000. In manyinstances, however, the wide range of issues encompassed by reconciliation, and thelarge number of conferees appointed to address them, leads to the creation ofsubconferences. The largest conference on a reconciliation measure, the OmnibusBudget Reconciliation Act of 1982, involved 184 Representatives and 69 Senatorsand relied upon 58 subconferences. The subconferences are established informally by agreement of theconference leaders. Members of the legislative committees involved in theconference typically are assigned only to the subconferences that deal with matterswithin their committee's jurisdiction. The general conferees from the BudgetCommittees also are assigned to subconferences, but they do not directly negotiatethe resolution of the pending legislative issues. These procedures are informal in theSenate, for under the Senate rules, a Senate conferee is a conferee for all purposes,and a majority of all Senate conferees must sign the conference report to conclude theconference, regardless of the purposes for which the Senate appointed the conferees. When the House and Senate prepare to go to conference on a measure, it isnot uncommon in either chamber for one or more motions to be considered thatinstruct conferees. Instructions to conferees may encourage them to take a particularposition on an issue, or set of issues, but neither chamber regards the instructions asbinding the conferees in any way. In the House, the motion to instruct can be offered at three separate times inthe legislative process: (1) prior to the appointment of conferees; (2) after theconferees have been appointed for 20 calendar days and 10 legislative days, butbefore they report to the House; (3) and after the conferees have reported, inconjunction with a motion to recommit the conference report. Only one motion toinstruct conferees is allowed prior to the appointment of conferees, and only one ina motion to recommit a conference report; in contrast, the practice of the House is toadmit multiple 20-day motions to instruct. Members of the minority party areaccorded preference in recognition to offer motions to instruct in the first twoinstances, but are not accorded preference in recognition to offer the 20-day motion. Motions to instruct conferees are not as common in the Senate as in theHouse, in part because Senators generally have more opportunity thanRepresentatives to be heard on measures and to let their views on conferencenegotiations be known. In the Senate, motions to instruct can only be offered priorto the appointment of conferees, but Senators also instruct their conferees throughsimple resolutions and amendments to legislation. Motions to instruct conferees have been made to reconciliation measures, justas they have been made to budget resolutions. In the case of budget resolutions,motions to instruct conferees have been made regularly in the House but infrequentlyin the Senate. (84) With respect to reconciliation measures,however, such motions have been made regularly in the House and on occasion in theSenate. Some examples of the circumstances under which motions to instructconferees were made in each chamber are discussed below: Motions to Instruct in the House . In the House, the firstmotion to instruct conferees on a reconciliation measure occurred the first year thatreconciliation was used. On September 18, 1980, the House agreed to such a motionwith respect to the conference on H.R. 7765 by a vote of 300-73. In 1997,motions to instruct conferees were made in the case of both reconciliation bills thatyear. A motion offered by Representative John Spratt, ranking member of the BudgetCommittee, on July 10, 1997, to the Balanced Budget Act of 1997 (H.R.2015) was approved by a vote of 414-14, but a motion offered the same dayby Representative Charles Rangel, ranking member of the Ways and MeansCommittee, to the Taxpayer Relief Act of 1997, was rejected by a vote of199-233. Motions to Instruct in the Senate . The Senate considered asingle motion to instruct conferees in 1981 and 1989. The first such motion insistedthat funding for the Head Start Program be set at specified levels forFY1982-FY1984, while the second instructed the Senate conferees not to accept anyHouse language that would not result in savings or in revenue increases. Duringconsideration of the Balanced Budget Act of 1995, the Senate on November 13,1995, considered four different motions to instruct conferees, adopting three of themand tabling the other. Motions to instruct conferees may be amended. On July 14, 1993, forexample, a motion to instruct House conferees on the Omnibus BudgetReconciliation Act of 1993 was amended by an amendment in the natureof a substitute, by a vote of 235-183; the motion to instruct, as amended, was agreedto by a vote of 415-0. Procedures relating to the conduct of conferences between the House andSenate on legislation are relatively informal, and conferees are granted considerablelatitude in resolving the chambers' differences. The chairmanship of the conferencecommittee is determined by the conferees, who usually select the chairman of theBudget Committee, in the case of omnibus reconciliation bills, or the chairman of theHouse Ways and Means Committee or the Senate Finance Committee, when thosecommittees were instructed to report separate reconciliation legislation. By tradition,the chairmanship of the conference alternates between the House and Senate. When the conferees reach agreement with respect to their disagreements ona reconciliation measure, they submit a conference report explaining the agreement. The report consists of two separate items: (1) the conference report, which explainsthe actions proposed by the conferees to resolve the disagreements between the twobodies, including the recommended legislative text; and (2) the accompanying "jointexplanatory statement," also referred to as the "managers' statement," which explainsthe actions of the conferees with regard to the particular policy issues that theyaddressed, often in great detail. The conference report reflects the agreement of a majority of the confereesof the House and a majority of the conferees from the Senate. Each of the confereesthat supports the conference report signs a signature sheet for both the conferencereport and the joint explanatory statement. Any conferee who does not support theagreement is not required to sign the signature sheets, and usually does not do so. For a conference report to be valid in the House, a majority of the Membersfrom each chamber who were appointed to negotiate each provision must sign thereport; limited-purpose House conferees sign only for the portion of the agreementthey were given authority to negotiate. For a conference report to be valid in theSenate, a majority of all House conferees and a majority of all Senate conferees mustsign the report, regardless of whether or not any of the conferees were appointed forlimited purposes. The conference report and joint explanatory statement are published as aHouse report and printed in the Congressional Record . (Although a conferencereport may be published as a Senate report too, the Senate usually defers such action.) Conference reports are privileged matters in both the House and Senate andmay be called up for consideration as a priority matter. Motions to proceed to theconsideration of a conference report are not debatable. In the House, conferencereports typically are considered for one hour, but in the Senate conference reportsmay be debated for up to10 hours. The House usually considers conference reports on major legislation underthe terms of a special rule. In recent years, the special rule has provided a "blanket"waiver of all points of order against the conference report and, in some instances,more than the typical hour of debate time. In 1997, for example, special rulesextended the debate time on the conference report on the Balanced Budget Act of1997 to 90 minutes, under H.Res. 202 , and extended the debate time onthe Taxpayer Relief Act of 1997 to two and one-half hours, under H.Res. 206. In the Senate, the consideration of a conference report on a reconciliationmeasure may differ markedly from the consideration of conference reports on othertypes of measures in one key respect. The Byrd rule, which applies only toreconciliation measures, allows for extraneous matter to be stricken from aconference report pursuant to the successful raising of a point of order. Typically,when a point of order is successfully raised against a conference report in the Senate,the conference report is defeated. Pursuant to the Byrd rule, however, the Senate mayremove language from the conference report without causing the remainder of theconference report to be rejected. In that case, under the Byrd rule, the Senate recedesand concurs with a further amendment that effectively deletes the offending matter. The House and Senate may reach final agreement on the measure by resolving theirdisagreement on the further Senate amendment, as occurred in connection with theBalanced Budget Act of 1995. The Senate sometimes will use unanimous consent agreements to customizeprocedures during the consideration of a conference report, and agreements reachedduring initial consideration of a reconciliation measure often are made applicable tothe consideration of the conference report as well. In July of 1997, for example, theSenate considered two reconciliation measures under a unanimous consent agreementthat had been entered into on May 21 of that year, at the time the FY1998 budgetresolution was under consideration. (85) The agreement suspended the application of onecomponent of the Byrd rule under certain circumstances, during both initial actionon the reconciliation measures and during consideration of the conference reports,effectively allowing long-term tax cuts in one act to be offset by long-term spendingreductions in the other. One chamber may recommit the conference report to the existing conferencecommittee if the other chamber has not yet acted on the report. This situationoccurred in 1982, during House consideration of the conference report (H.Rept.97-750) on the Omnibus Budget Reconciliation Act of 1982. On August 17, 1982,the House recommitted the report to the conference by a vote of 266-145. Subsequently, the conference committee reported a second agreement (H.Rept.97-759), which both chambers accepted. Once a chamber acts on the conference report, the conference committeeformally is dissolved and cannot resume consideration of the measure. If eitherchamber disagrees to a conference report, "the matter is left in the position it was inbefore the conference was asked but in the stage of disagreement." (86) At thispoint, the chambers may dispose of the matter in disagreement by motion, or send itto a further conference. In the case of reconciliation legislation, a further conferencenever has been convened. The House and Senate often consider measures pertaining to the enrollmentof complex and lengthy legislation, either to expedite the enrollment or to maketechnical corrections. Title 1, Section 107 of the United States Code , requires that measures beenrolled on parchment paper. In order to expedite the enrollment of the measure,thereby speeding up its presentation to the President, the requirement in 1 U.S.C. 107sometimes is waived (upon certification by the House Administration Committee thata "true" or accurate enrollment is prepared) by the enactment of a joint resolution. On July 31, 1997, for example, the House and Senate agreed to H.J.Res. 90 , which waived the enrollment requirements with respect to the two reconciliationmeasures, H.R. 2014 and H.R. 2015. The measure became P.L.105-32 (111 Stat. 250) on August 1, 1997. Second, the House and Senate may make technical corrections in a measureprior to enrollment by adopting a concurrent resolution directing the Clerk of theHouse or the Secretary of the Senate, as appropriate, to make the necessary changes. Enrollment correction measures may originate in either the House or Senate and oftenhave been used in connection with the reconciliation process. Technical correctionswere made, for example, in the Omnibus Budget Reconciliation Act of 1981 pursuantto H.Con.Res. 167, and such corrections were made in the Omnibus BudgetReconciliation Act of 1983 pursuant to S.Con.Res. 102. Table 8. House and Senate Action on Conference Reports on Reconciliation Acts:FY1981-FY2005 Source : Prepared by the Congressional Research Service. Reconciliation measures follow the same legislative path to enactment asother legislation. After a bill is submitted to him, the President has 10 days(excluding Sundays) in which to approve or disapprove it. If the President signs ordoes not sign the bill during the 10-day period, it becomes law; however, if Congressadjourns sine die during the 10-day period, thereby preventing the bill's return, it isdisapproved by "pocket veto." If the President vetoes the bill during the 10-dayperiod, it is returned to the chamber in which it originated (as a "return veto"), alongwith a message explaining the President's objections. The House and Senate thenhave an opportunity to override the President's veto, thus enacting the measure intolaw. In 1996, the Line Item Veto Act conferred line-item veto authority on thePresident, which President Clinton used in 1997 in connection with tworeconciliation measures and several annual appropriations acts; the act was nullifiedby the Supreme Court in 1998. Congress has sent the President 19 reconciliation acts, of which 16 have beensigned by the President into law. None of these measures became law without thePresident signing them. Eleven reconciliation acts were signed into law byRepublican Presidents -- Ronald Reagan (7), George H.W. Bush (2), and George W.Bush (2); five reconciliation acts were signed into law by Democratic Presidents -- Jimmy Carter (1) and Bill Clinton (4). While congressional deliberations on reconciliation legislation are underway,the President may signal his approval of congressional action through various means. In the case of major budgetary legislation, these signals are conveyed principallythrough the issuance of Statements of Administration Policy (SAPs), which theOffice of Management and Budget maintains for the current administration on itsWeb site ( http://www.whitehouse.gov/omb/ ). SAPs take on more significance ifcongressional action is at significant variance with the President's recommendations. In such instances, his advisers may use SAPs to raise the possibility or likelihood ofa presidential veto if policy adjustments acceptable to the Administration are notmade in the legislation (see discussion below). In view of the significance usually attached to reconciliation legislation, thePresident often signs such legislation into law in an official signing ceremonyattended by Members of Congress, cabinet members, and other executive officialsinvolved in the process that culminated in the enactment of the legislation. Anyofficial statement issued by the President upon the signing of the measure, as well asany remarks made during the event, are included in the Weekly Compilation ofPresidential Documents , which is maintained by the National Archives and RecordsAdministration and is available at the GPO Access Web site http://www.gpoaccess.gov . Three of the reconciliation acts sent to the President by Congress were vetoed,all by President Bill Clinton. (87) In each instance, Republican majorities inCongress fashioned reconciliation measures proposing significant policy changes thatwere fundamentally at odds with President Clinton's policy agenda. When an Administration is engaged with Congress in the formulation ofbudgetary legislation, the SAPs may be used to motivate Congress to adopt policiesfavored by the Administration and to drop policies that it does not favor. Thelanguage of the SAPs may be modulated to present the mix of encouragement andveto threat considered appropriate. With respect to a particular issue encompassedby the legislation, for example, the SAP might express the "concern" of seniorAdministration officials and indicate the possibility that they might recommend tothe President that he veto the bill if the offending provisions are retained or notappropriately modified. In the case of the three reconciliation acts that President Clinton vetoed, theSAPs clearly communicated his opposition. The SAP issued on July 27, 1999,pertaining to Senate action on the Taxpayer Refund and Relief Act of 1999, forexample, stated: "The Administration strongly opposes the package of tax cutproposals contained in S. 1429 . If a bill encompassing these proposalswere to pass the Congress, the President would veto it." The bluntness of thewording left Congress no doubt regarding how the President would react to such abill, if it were presented to him. When the President vetoes a bill, he returns it to the House of its origin witha message notifying the chamber of his action and explaining the basis of hisobjections. The veto message, together with the vetoed bill, is printed as a Housedocument. President Clinton's message to the House regarding his veto of theBalanced Budget Act of 1995 began: I am returning herewith withoutmy approval H.R. 2491, the budget reconciliation bill adopted by theRepublican majority, which seeks to make extreme cuts and other unacceptablechanges in Medicare and Medicaid, and to raise taxes on millions of workingAmericans. (88) The veto message continued with a title-by-title summary of the majorprogrammatic objections to the legislation. In addition, a nine-page enumeration of82 specific objections, arranged by program area (e.g., Medicare, Medicaid, studentloans, food stamps, and special interest tax provisions), was attached. (89) Upon the return of a vetoed bill to the House or Senate, the veto message isread and the measure either is reconsidered, referred to committee, or tabled. If thechamber to which the vetoed bill was returned passes it by a two-thirds vote, it isthen sent to the other chamber. If the second chamber also passes it by a two-thirdsvote, then it becomes law over the President's objections. All of the reconciliation bills sent to the President carried a House number. Consequently, the three vetoed bills were returned to the House. The vetoed billswere referred to the committee that reported them, either the House BudgetCommittee or the House Ways and Means Committee. Subsequent motions todischarge the bill from committee were made with respect to the two bills referredto the Ways and Means Committee. One discharge motion was tabled by a vote of215-203, but the other discharge motion was successful. In that instance, the Housereconsidered the vetoed bill (the Marriage Tax Relief Reconciliation Act of 2000),but the bill failed on a vote of 270-158, by not securing the necessary two-thirdsmargin. These actions are discussed in more detail below: the Balanced Budget Act of 1995 (H.R. 2491) wasvetoed on December 6, 1995, and returned to the House. Later that day, the chair laidthe veto message (H.Doc. 104-141) before the House, which referred the messageand the bill to the Budget Committee by unanimous consent. The House took nofurther action on the matter. the Taxpayer Refund and Relief Act of 1999 ( H.R. 2488 ) was vetoed on September 23, 1999, and returned to the House. Later that day,the chair laid the veto message (H.Doc. 106-130) before the House, which referredthe message and the bill to the Ways and Means Committee by voice vote. OnOctober 19, a motion to discharge the bill from committee was tabled by a vote of215-203. the Marriage Tax Relief Reconciliation Act of 2000( H.R. 4810 ) was vetoed on August 5, 2000, and returned to the House. The chair laid the veto message (H.Doc. 106-291) before the House on September6 and, later that day, the House referred the message and the bill to the Ways andMeans Committee by unanimous consent. On September 13, the House dischargedthe bill from committee and reconsidered it. Upon reconsideration, the bill failed bya vote of 270-158, lacking the necessary two-thirds. Because the House did not successfully reconsider any of the three vetoedreconciliation bills, they were not sent to the Senate. The Line Item Veto Act was enacted into law on April 9, 1996 ( P.L. 104-130 ;110 Stat. 1200-1212) and became effective on January 1, 1997. The main proceduresunder the act were incorporated into the Congressional Budget and ImpoundmentControl Act of 1974, as amended, as a new Part C of Title X (Sections 1021-1027). Reconciliation measures were included in the several types of budgetary legislationsubject to line item veto authority. In 1998, the Line Item Veto Act was nullified by the Supreme Court in Clinton v. City of New York , 524 U.S. 417 (1998). (90) The caseinvolved actions taken by President Bill Clinton pertaining to reconciliationlegislation enacted in 1997. The reasoning behind the Supreme Court's decision ischaracterized as follows: The Court rejected the argument that thePresident's power to cancel items was a mere exercise of discretionary authoritygranted by Congress. Instead, the cancellation authority represented the repeal of lawthat could be accomplished only through the regular legislative process, includingbicameralism and presentment. In the two cancellations that reached the Court,Congress did not pass a resolution of disapproval. As a result, the Court concludedthat "the President has amended two Acts of Congress by repealing a portion ofeach." (91) The act authorized the President to cancel any dollar amount of discretionarybudget authority, any item of new direct spending, or any limited tax benefit in an actif such cancellation will reduce the deficit, not impair any essential governmentfunctions, and not harm the national interest. The President could exercise thisauthority only within five days of signing an act into law. If he chose to line-itemveto any provisions in an act, he was required to notify Congress in a specialmessage. Each cancellation had to be separately identified by its own referencenumber. Congress could consider, under expedited procedures set forth in the act,special legislation to disapprove any cancellations. At the end of July 1997, the House and Senate completed action on tworeconciliation measures implementing the tax cuts and most of the deficit reductioncalled for in the FY1998 budget resolution ( H.Con.Res. 84 ). The firstreconciliation act, the Balanced Budget Act of 1997 ( H.R. 2015 ), madenet reductions in direct spending of $122 billion over the five fiscal years andincreased the statutory limit on the public debt to $5.950 trillion. The secondreconciliation act, the Taxpayer Relief Act of 1997 ( H.R. 2014 ),contained tax cuts which partially are offset by revenue increases. The net effect ofrevenue changes in the Taxpayer Relief Act of 1997, coupled with several revenueprovisions in the Balanced Budget Act of 1997 (most notably, an increase in thetobacco tax), was a revenue reduction of $95 billion. President Clinton signed the two measures into law on Tuesday, August 5 --the Balanced Budget Act of 1997 as P.L. 105-33 (111 Stat. 251), and the TaxpayerRelief Act of 1997 as P.L. 105-34 (111 Stat. 788). On Monday, August 11, President Clinton exercised his authority under theLine Item Veto Act to cancel one item of direct spending in the Balanced Budget Actof 1997 and two limited tax benefits in the Taxpayer Relief Act of 1997. Theseactions represented the first use of the line-item veto authority. Cancellation of Limited TaxBenefits. Section 1027 of the Line Item Veto Act required the JointCommittee on Taxation (JCT) to prepare a statement for any revenue orreconciliation measure (amending the Internal Revenue Code of 1986) for which aconference report was being prepared, identifying whether such legislation containedany limited tax benefits. The conferees, at their discretion, could include the JCTinformation in a separate section of the measure, using a form prescribed by the LineItem Veto Act. If such a section was included, then the President could use theitem-veto authority only against the limited tax benefits identified in the section;otherwise, the President could use the authority against any provision in the measurethat he felt met the definition of limited tax benefit provided in the act. A total of 80 limited tax benefits were identified in the two reconciliationbills sent to the President. The conference report on the Balanced Budget Act of1997 ( H.Rept. 105-217 ) was filed on July 29. Section 9304 of the act identified onesection as providing a limited tax benefit subject to the line-item veto (see the Congressional Record of July 29, 1997, vol. 143, no. 109, part II, at page H6140). That section, Section 5406, pertained to the tax treatment of certain servicesperformed by prison inmates. The conference report on the Taxpayer Relief Act of 1997 ( H.Rept. 105-220 )was filed on July 30. Section 1701 set forth a list prepared by the JCT of 79 limitedtax benefits subject to the line-item veto (see the Congressional Record of July 30,1997, vol. 143, no. 110, part II, at pages H6490-91 and H6607-08). President Clinton applied the line-item veto to two limited tax benefits in theTaxpayer Relief Act of 1997. The first, identified in his special message asCancellation No. 97-1, canceled Section 1175 (Exemption for Active FinancingIncome) of the act. Cancellation No. 97-2 applied to Section 968 (Nonrecognitionof Gain on Sale of Stock to Certain Farmers' Cooperatives) of the act. Theseprovisions were identified in Section 1701 of the act as items 54 and 30, respectively,and dealt with the sheltering of income in foreign tax havens by financial servicescompanies and the treatment of capital gains on the sale of certain agricultural assets. Cancellation of Direct SpendingItem. Unlike limited tax benefits, there was no special procedurefor congressional identification of items of new direct spending. The cost estimateprepared by the Congressional Budget Office on the Balanced Budget Act of 1997identified about a dozen accounts that had increases in direct spending for one ormore fiscal years. Presumably, at least a dozen (if not dozens) of "items" of newdirect spending were associated with these accounts. President Clinton applied the line-item veto to one item of new directspending in the Balanced Budget Act of 1997. Cancellation No. 97-3 applied tosubsection 4722(c) (Waiver of Certain Provider Tax Provisions) of Section 4722(Treatment of State Taxes Imposed on Certain Hospitals), a Medicaid provisioninvolving New York State. (Section 310 of the Congressional Budget Act of 1974; 2 U.S.C. 641) Reconciliation (Section 313 of the Congressional Budget Act of 1974; 2. U.S.C. 644) Extraneous Matter in Reconciliation Legislation CRS Report 98-814 , Budget Reconciliation Legislation: Development and Consideration , by [author name scrubbed] CRS Report RL30458 , The Budget Reconciliation Process: Timing of LegislativeAction , by [author name scrubbed]. CRS Report RL30862 , The Budget Reconciliation Process: The Senate's "ByrdRule," by [author name scrubbed]. CRS Report RL30714, Congressional Action on Revenue and Debt ReconciliationMeasures in 2000 , by [author name scrubbed]. CRS Report RL31902(pdf) , Revenue Reconciliation Directives in the FY2004 BudgetResolution , by [author name scrubbed]. CRS Report RS20870 , Revenue Reconciliation Directives to the Senate FinanceCommittee in Congressional Budget Resolutions , by [author name scrubbed]. CRS Report RS21993 , Spending Reconciliation Directives to the Senate FinanceCommittee in Congressional Budget Resolutions , by [author name scrubbed] and [author name scrubbed] CRS Report RS22098 , Deficit Impact of Reconciliation Legislation Enacted in 1990,1993, and 1997 , by [author name scrubbed]. CRS Report RS22160(pdf) , Reconciliation and the Deficit in FY2006 and ThroughFY2010: Fact Sheet , by Philip D. Winters. CRS Congressional Distribution Memorandum, January 14, 2005, ReconciliationDirectives to House Committees in Budget Resolutions for FY1976-FY2005 , by BillHeniff Jr. CRS Congressional Distribution Memorandum, Reconciliation Directives to SenateCommittees in Budget Resolutions for FY1976-FY2005 , January 14, 2005, by BillHeniff Jr. | The budget reconciliation process is an optional procedure that operates as an adjunct to thebudget resolution process established by the Congressional Budget Act of 1974. The chief purposeof the reconciliation process is to enhance Congress's ability to change current law in order to bringrevenue, spending, and debt-limit levels into conformity with the policies of the annual budgetresolution. Reconciliation is a two-stage process. First, reconciliation directives are included in thebudget resolution, instructing the appropriate committees to develop legislation achieving the desiredbudgetary outcomes. If the budget resolution instructs more than one committee in a chamber, thenthe instructed committees submit their legislative recommendations to their respective BudgetCommittees by the deadline prescribed in the budget resolution; the Budget Committees incorporatethem into an omnibus budget reconciliation bill without making any substantive revisions. In caseswhere only one committee has been instructed, the process allows that committee to report itsreconciliation legislation directly to its parent chamber, thus bypassing the Budget Committee. The second step involves consideration of the resultant reconciliation legislation by theHouse and Senate under expedited procedures. Among other things, debate in the Senate on anyreconciliation measure is limited to 20 hours (and 10 hours on a conference report) and amendmentsmust be germane and not include extraneous matter. The House Rules Committee typicallyrecommends a special rule for the consideration of a reconciliation measure in the House that placesrestrictions on debate time and the offering of amendments. As an optional procedure, reconciliation has not been used in every year that thecongressional budget process has been in effect. Beginning with the first use of reconciliation byboth the House and Senate in 1980, however, reconciliation has been used in most years. In threeyears, 1998 (for FY1999), 2002 (for FY2003), and 2004 (for FY2005), the House and Senate did notagree on a budget resolution. Congress has sent the President 19 reconciliation acts over the years;16 were signed into law and three were vetoed (and the vetoes not overriden). Following an introduction that provides an overview of the reconciliation process anddiscusses its historical development, the report explains the process in sections dealing with theunderlying authorities, reconciliation directives in budget resolutions, initial consideration ofreconciliation measures in the House and Senate, resolving House-Senate differences onreconciliation measures, and presidential approval or disapproval of such measures. The text of tworelevant sections of the Congressional Budget Act of 1974 (Sections 310 and 313) is set forth in theappendices, along with a list of other Congressional Research Service products pertaining toreconciliation procedures. This report will be updated as developments warrant. |
Since 1995, legislation that would guarantee collective bargaining rights for state and local public safety officers has been introduced in Congress. The Public Safety Employer-Employee Cooperation Act (PSEECA)—introduced in the 111 th Congress as H.R. 413 by Representative Dale E. Kildee, S. 1611 by Senator Judd Gregg, and S. 3194 and S. 3991 by Senator Harry Reid—would recognize such rights by requiring compliance with federal regulations and procedures if these rights are not provided under state law. Supporters of the measure maintain that strong partnerships between public safety officers and the cities and states they serve are not only vital to public safety, but are built on bargaining relationships. Opponents argue, however, that the bill infringes on an area that has traditionally been within state control. This report reviews the PSEECA and discusses the possible impact of the legislation. The report also identifies existing state laws that recognize collective bargaining rights for public safety employees, and considers the constitutional concerns raised by the measure. Under the PSEECA, the Federal Labor Relations Authority (FLRA) would be required to determine whether a state substantially provides for specified labor-management rights within 180 days of the measures enactment. If the FLRA determines that a state does not substantially provide for such rights, the state would be subject to regulations and procedures prescribed by the FLRA. The FLRAs regulations and procedures would be consistent with the labor-management rights identified in the PSEECA. These rights include granting public safety officers the right to form and join a labor organization that is, or seeks to be, recognized as the exclusive bargaining representative of such employees; requiring public safety employers to recognize the employees labor organization (freely chosen by a majority of the employees), to agree to bargain with the labor organization, and to commit any agreements to writing in a contract or memorandum of understanding; providing for bargaining over hours, wages, and terms and conditions of employment; making available an interest impasse resolution mechanism, such as fact-finding, mediation, arbitration, or comparable procedures; and requiring the enforcement of all rights, responsibilities, and protections provided by state law and any written contract or memorandum of understanding in state courts. The FLRA would have one year from the date of enactment of the PSEECA to issue regulations that establish these rights for public safety officers in states that do not substantially provide them. The new regulations would become applicable in noncomplying states either two years after the date of enactment of the PSEECA or on the date of the end of the first regular session of the states legislature that begins after the date of enactment of the PSEECA, whichever is later. The PSEECA defines the term public safety officer to include law enforcement officers, firefighters, and emergency medical services personnel. An employer, for purposes of the act, includes any state, political subdivision of a state, the District of Columbia, and any territory or possession of the United States that employs public safety officers. A political subdivision of a state that has a population of less than 5,000 or that employs fewer than 25 full time employees, however, may be exempted from the acts requirements. The sponsors of the PSEECA appear to rely on the Commerce Clause of the U.S. Constitution for the authority to enact the measure. Section 2(5) of the PSEECA states, The potential absence of adequate cooperation between public safety employers and employees has implications for the security of employees, impacts the upgrading of police and fire services of local communities, the health and well-being of public safety officers, and the morale of the fire and police departments, and can affect interstate and intrastate commerce. During the 110 th Congress, the House Committee on Education and Labor further observed that there is "little question that public safety employees [sic] and their role in homeland security affects interstate commerce.... The economic impact of terrorism and natural disasters is not limited to the locality where these events occur. Rather, such events have regional and economic impacts for which the federal government must be responsive." Whether the Commerce Clause provides sufficient authority to support the PSEECA, however, may not be entirely certain. Although the U.S. Supreme Court has found that the Fair Labor Standards Act, a statute enacted pursuant to Congresss authority under the Commerce Clause, can be applied to employees of a public mass-transit authority, more recent decisions involving the Commerce Clause suggest that the regulation of labor-management relations for public safety officers may not be sufficiently related to commerce and may be invalidated, if challenged. In United States v. Lopez , a 1995 case involving the Gun-Free School Zones Act of 1990 and Congresss authority under the Commerce Clause, the Court identified three broad categories of activity that Congress may regulate pursuant to its commerce power: First, Congress may regulate the use of channels of interstate commerce.... Second, Congress is empowered to regulate and protect the instrumentalities of interstate commerce, or persons or things in interstate commerce, even though the threat may come only from intrastate activities.... Finally, Congress commerce authority includes the power to regulate those activities having a substantial relation to interstate commerce ... i.e. , those activities that substantially affect interstate commerce. The Lopez Court concluded that the act, which prohibited any individual from possessing a firearm at a place the individual knew or had reasonable cause to believe was a school zone, exceeded Congresss authority under the Commerce Clause because the possession of a gun in a local school zone did not have a substantial effect on interstate commerce. The Court maintained that upholding the act would require the Court to "pile inference upon inference in a manner that would bid fair to convert congressional authority under the Commerce Clause to a general police power of the sort retained by the States." Similarly, in United States v. Morrison , a 2000 case involving Congresss commerce power and a section of the Violence Against Women Act, the Court found that Congress exceeded its authority because gender-motivated crimes of violence occurring within a state have no substantial effect on interstate commerce. The Court maintained that its cases upholding federal regulation of intrastate activity all involve activity that reflects some form of economic endeavor. The Court noted that the regulation and punishment of intrastate violence that is "not directed at the instrumentalities, channels, or goods involved in interstate commerce has [sic] always been the province of the States." Most recently, in Gonzales v. Raich , the Court upheld the Controlled Substances Act (CSA) as a valid exercise of Congresss commerce authority. The CSA was challenged by two users of medical marijuana that was locally grown and prescribed in accordance with California law. They argued that Congress lacked the authority to prohibit the intrastate manufacture and possession of marijuana for medical purposes. Citing its decision in Wickard v. Filburn , a 1942 case that recognized Congresss authority under the Commerce Clause to regulate intrastate activities, the Court reiterated that even if an activity is "local and ... may not be regarded as commerce, it may still, whatever its nature, be reached by Congress if it exerts a substantial economic effect on interstate commerce." The Court maintained that the production of a commodity has a substantial effect on supply and demand in the national market for that commodity, and observed that there was a likelihood that the high demand in the interstate market would draw marijuana grown for home consumption into that market. The Court distinguished Raich from Lopez and Morrison by noting that the CSA, unlike the Gun-Free School Zones Act and the Violence Against Women Act, regulates activities that are "quintessentially economic." The Court indicated that "[t]he CSA is a statute that regulates the production, distribution, and consumption of commodities for which there is an established, and lucrative, interstate market. Prohibiting the interstate possession or manufacture of an article of commerce is a rational (and commonly utilized) means of regulating commerce in that product." While the PSEECA would not seem to regulate the channels or instrumentalities of interstate commerce, it has been argued that it would regulate an activity that substantially affects interstate commerce. By "improving the cohesiveness and effectiveness of public safety employers and their employees," it is believed that the PSEECA would minimize the costs associated with terrorism and natural disasters. During the 110 th Congress, the House Committee on Education and Labor noted, "The economic impact of terrorism and natural disasters is not limited to the locality where these events occur. Rather, such events have regional and national economic impacts for which the federal government must be responsive." Some maintain, however, that public safety employment is not an economic activity that may be regulated pursuant to Congresss commerce authority. In light of the Courts decisions in Lopez , Morrison , and Raich , it has been argued that police work, firefighting, and emergency medical services are not economic enterprises or activities related to commercial transactions. Rather, such duties are public services provided by states and localities to their citizens. Moreover, the PSEECA would not be regulating the production, distribution, or consumption of a commodity for which there is an interstate market by requiring collective bargaining rights for public safety officers. While the PSEECA would seem to raise questions involving Congresss authority under the Commerce Clause, it does not appear to present concerns over the commandeering of state or local regulatory processes in violation of the Tenth Amendment. In New York v. United States , a 1992 case involving a federal requirement that gave states a choice between taking title to radioactive waste or regulating in accordance with congressional directives, the Court indicated that "Congress may not simply 'commandee[r] the legislative processes of the States by directly compelling them to enact and enforce a federal regulatory program.'" Unlike the provision at issue in New York , the PSEECA would not seem to direct states to legislate collective bargaining for public safety officers. Instead, states would be given the option of either enacting legislation that satisfies the federal standards or becoming subject to the FLRAs regulations. One might also contend that the measure does not appear to require state or local governments to implement a federal regulatory program. Rather, a federal collective bargaining scheme for public safety officers would be implemented by the FLRA only if a state chose not to enact a program of its own. The PSEECA has generated strong reactions from both the business and organized labor communities, with the former generally opposing the measure and the latter supporting it. Critics of the act emphasize the administrative and personnel costs that would likely be expended to comply with the measure. Because of the difficulty in predicting how many workers may organize or what terms and conditions would be negotiated, the cost of the measure for state and local governments was not estimated by the Congressional Budget Office (CBO) when earlier versions of the legislation were considered. CBO did estimate, however, that the FLRA would need to spend an additional $3 million to develop regulations, to determine whether states were in compliance with the law, and to respond to judicial review of its determinations. Indeed, some have maintained that the PSEECA could increase demands on the FLRA, either by stretching its resources or requiring new staff. Although subsequent costs are difficult to predict because states may respond differently and, once given the right, public safety officers may or may not unionize, CBO estimated that the FLRA would spend about $10 million annually to administer the act. Opponents of the PSEECA have also argued that the measure could raise the cost of public safety because of potentially higher wages and benefits, as well as the cost of negotiating and administering collective bargaining agreements. Supporters of the PSEECA contend that the measure would give many public safety workers the right to organize and bargain collectively—rights that they may not currently have. The arguments in support of the act are generally based on what proponents maintain are the benefits of collective bargaining. For example, collective bargaining may improve the hours, pay, benefits, and working conditions of public safety workers. Higher pay and better working conditions may reduce turnover. Arguably, lower turnover could reduce the cost of hiring and training new workers. Supporters also argue that the PSEECA would give workers a "voice" in the workplace. They maintain that unions provide workers an additional way to communicate with management. Instead of expressing their dissatisfaction by quitting, workers can use formal procedures to resolve issues relating to working conditions or other matters. Thus, according to supporters, the PSEECA would give labor and management a way to work together to resolve differences. Therefore, supporters further maintain that, by improving labor-management relations, the measure would improve public safety. | Since 1995, legislation that would guarantee collective bargaining rights for state and local public safety officers has been introduced in Congress. The Public Safety Employer-Employee Cooperation Act (PSEECA)—introduced in the 111th Congress as H.R. 413 by Representative Dale E. Kildee, S. 1611 by Senator Judd Gregg, and S. 3194 and S. 3991 by Senator Harry Reid—would recognize such rights by requiring compliance with federal regulations and procedures if these rights are not provided under state law. Supporters of the measure maintain that strong partnerships between public safety officers and the cities and states they serve are not only vital to public safety, but are built on bargaining relationships. Opponents argue, however, that the bill infringes on an area that has traditionally been within state control. This report reviews the PSEECA and discusses the possible impact of the legislation. The report also identifies existing state laws that recognize collective bargaining rights for public safety employees, and considers the constitutional concerns raised by the measure. |
Almost four decades since the end of the Vietnam War, the controversy surrounding the spraying of an herbicide known as "Agent Orange" and the exposure of Vietnam-era veterans to this herbicide continues. Since the late 1970s, Vietnam-era veterans have voiced concerns about how exposure to Agent Orange may have affected their health and caused certain disabilities, including birth defects in their children, and now their grandchildren. The Department of Veterans Affairs (VA) received the first claims asserting conditions related to Agent Orange in 1977. Since then, Vietnam-era veterans have made efforts to obtain disability compensation and health care from Congress and through the judicial system. In response to issues raised by Vietnam-era veterans, Congress has passed legislation to research the long-term health effects of Agent Orange on Vietnam veterans and to provide benefits and services to those who may have been exposed to it. In addition, the courts have addressed some concerns of Vietnam-era veterans. This report provides an overview of how Congress and the judiciary have addressed the concerns of Vietnam-era veterans and briefly describes some of the current issues raised by Vietnam-era veterans. This report should be read in conjunction with CRS Report R41405, Veterans Affairs: Presumptive Service Connection and Disability Compensation . The first part of the report discusses previous legislative efforts to address health care and disability compensation issues of Vietnam-era veterans exposed to Agent Orange. The second part discusses litigation pertaining to Agent Orange. The last part of the report briefly addresses current major issues related to Agent Orange and Vietnam-era veterans. In addition, the appendixes contain three tables. Table A-1 provides a summary of congressional action related to health care for Vietnam-era veterans. Table B-1 provides a list of diseases and conditions that are presumptively service-connected with exposure to Agent Orange. Lastly, Table B-2 provides a list of diseases and conditions not presumed to be service-connected. As part of a military strategy to remove foliage that provided cover for the enemy, to destroy enemy crops, and to destroy tall grasses and bushes from the perimeters of U.S. military bases, the U.S. military—from 1962 to 1971—sprayed tactical herbicides in combat military operations in Vietnam. The U.S. Air Force sprayed nearly 19 million gallons of herbicides in Vietnam, of which at least 11 million gallons were Agent Orange—making it the most widely used herbicide in the war. "Agent Orange (so named because of orange color stripes on the barrels used to store and ship the chemical) was a 50-50 mixture of the herbicides 2,4,5-T and 2,4-D." This mixture was contaminated with varying concentrations of numerous dioxins, including 2,3,7,8-tetrachlorodibenzo-pdioxin (TCDD) during the manufacturing process. This contaminant was shown to be highly toxic in animals, and it was implicated in birth defects seen in mice. However, its effects on humans have not been fully understood. It is important to note that "Agent Orange" and "dioxin" are not the same. For simplicity the term Agent Orange is used throughout this report. Spraying of Agent Orange occurred over inland forests at the junction of the borders of Cambodia, Laos, and South Vietnam; inland jungles north and northwest of Saigon; mangrove forests on the southernmost peninsula of Vietnam; and mangrove forests along major shipping channels southeast of Saigon. Initially, the Department of Defense (DOD) maintained that only a limited number of U.S. military personnel could be positively identified as having been exposed to Agent Orange in South Vietnam (e.g., the crews of aircraft that were used to spray herbicides). However, following the publication of a 1979 General Accounting Office (GAO, now called Government Accountability Office) report documenting ground troop exposure, DOD acknowledged that ground troops were also exposed to Agent Orange. Likewise, the Department of Veterans Affairs (VA) consistently took the position that because the long-term exposure to Agent Orange was unclear, and because of scientific uncertainty of the evidence linking Agent Orange to specific illnesses, it could not compensate veterans who alleged that exposure to Agent Orange had caused their diseases. In testifying before the House Committee on Veterans' Affairs, the then Administrator of Veterans Affairs stated: Unless or until some such latent effects of Agent Orange or its derivative components are scientifically documented there are intrinsic limitations to VA's authority to allow these [Agent Orange] claims under current law. Though I cannot emphasize enough our policy to resolve reasonable doubt as to service incurrence of disabilities in favor of claimants, there is currently no medical basis upon which adverse health effects of late-post-exposure onset can be reasonably tied to Agent Orange. In December 1979, Congress passed the Veterans Health Programs Extension and Improvement Act of 1979 ( P.L. 96-151 ) and directed the VA to investigate the long-term effects of dioxin exposure during the Vietnam War. In 1981, Congress passed the Veterans' Health Care, Training, and Small Business Loan Act of 1981 ( P.L. 97-72 ) and required the VA to include the study of other environmental exposures that may have occurred during the Vietnam conflict. However, the VA never designed a protocol for conducting the study, and responsibility for conducting the study was transferred to the Centers for Disease Control and Prevention (CDC). In 1987, the CDC ceased attempts to produce a study and never released any findings. Although Vietnam-era veterans continued to urge Congress to establish policies for health care and disability compensation (see text box "Eligibility for Health Care and Disability Compensation") for Agent Orange exposure, a lack of a substantial, scientific consensus on the potential health effects of Agent Orange in Vietnam veterans and their offspring impeded those efforts. Since the late 1970s and early 1980s, disability compensation policies and health care for possible adverse health outcomes pertaining to veterans exposed to Agent Orange have proceeded on two parallel tracks: through legislation and through the judicial system. In April 1970, Congress held the first of many hearings on the health effects of Agent Orange. Policy makers began to address the health concerns of Vietnam-era veterans in 1981 with the passage of the Veterans' Health Care, Training and Small Business Loan Act ( P.L. 97-72 ). Since the enactment of P.L. 97-72 , Congress has from time to time passed legislation to provide medical care to veterans—and to some of their offspring—who may have been exposed to Agent Orange. In particular, Congress has addressed specific health care concerns of male and female Vietnam-era veterans. These concerns typically involve adverse reproductive effects. For instance, for male veterans, service in Vietnam has been associated with one particular adverse reproductive outcome: spina bifida. However, among female veterans, Vietnam service has been associated with the risk of having children with a wide range of birth defects. Therefore, special programs have been established based on gender. Table A-1 summarizes major legislation pertaining to health care for Vietnam-era veterans who served in Vietnam or other select locations. In general, Congress has passed legislation to provide health care to Vietnam-era veterans and, when warranted, their children—even though according to the Institutes of Medicine (IOM) there was no definitive scientific evidence showing that the disorders treated were related to the exposure. Nevertheless, for the purposes of disability compensation, Congress and the VA have relied on scientific evidence concerning Agent Orange exposure during Vietnam service and diseases and conditions suspected to be associated with such exposure. Since the 1980s, two major laws have affected disability compensation policies of Vietnam-era veterans exposed to Agent Orange. The Veterans' Dioxin and Radiation Exposure Compensation Standards Act of 1984 ( P.L. 98-542 ) required the VA to develop regulations for disability compensation to Vietnam veterans who may have been exposed to Agent Orange. Veterans seeking compensation for a condition they thought to be related to herbicide exposure had to provide proof of a service connection that established the link between herbicide exposure and disease onset. P.L. 98-542 authorized disability compensation payments to Vietnam veterans for the skin condition chloracne, which is associated with herbicide exposure. In 1991, the Agent Orange Act ( P.L. 102-4 ) established a presumption of service connection for diseases associated with herbicide exposure (see text box "What is Presumption of Service Connection ?"). The act directed the VA to "prescribe regulations providing that a presumption of service connection is warranted for [a] disease" when a positive statistical association exists between Agent Orange exposure and the occurrence of that disease in humans. In making this determination, P.L. 102-4 authorized the VA to contract with the Institute of Medicine (IOM) of the National Academy of Sciences (NAS) to review and summarize the scientific evidence concerning the association between exposure to herbicides used in support of military operations in Vietnam during the Vietnam era and each disease suspected to be associated with such exposure. P.L. 102-4 mandated that IOM determine, to the extent possible, (1) whether there is a statistical association between the suspect diseases and herbicide exposure, taking into account the strength of the scientific evidence and the appropriateness of the methods used to detect the association; (2) the increased risk of disease among individuals exposed to herbicides during service in Vietnam during the Vietnam era; and (3) whether there is a plausible biological mechanism or other evidence of a causal relationship between herbicide exposure and the health outcome. The law requires the VA, within 60 days of receiving a report from IOM regarding the relationship between exposure to herbicides used in Vietnam during the Vietnam War and certain diseases, to consider whether a presumption of service connection is warranted for any of the diseases discussed in the report, as well as all other available sound medical and scientific information. Within 60 days of making such a determination, the VA is required to issue proposed regulations setting forth that determination. Within 90 days of issuing the proposed regulations, the VA must issue final regulations establishing a presumption of service connection for any disease for which there is scientific evidence of a positive association with herbicide exposure. Once the VA has established a presumption of service connection for a certain disease or medical condition, a veteran who, during active military, naval, or air service, served in the Republic of Vietnam (or its inland waterways) during the Vietnam era shall be presumed to have been exposed during such service to Agent Orange, and a service connection for that disease or condition will be granted. Those who did not serve in in the Republic of Vietnam or its inland waterways could still establish service connection on a direct basis. Based on the most recent IOM report, "Veterans and Agent Orange: Update 2012," the VA decided not to establish any new presumptions. Table B-1 provides a list of diseases and conditions that are presumptively service-connected. The VA's authority to issue regulations establishing additional presumptions of service connection for diseases found to be associated with Agent Orange exposure will expire on September 30, 2015. The Agent Orange Act of 1991 ( P.L. 102-4 ) also mandated the VA to publish a notice when the VA determines that a presumption of service connection is not warranted. On April 11, 2014, based on the 2010 and 2012 IOM reports on Agent Orange, the VA issued a notice that a presumption of service connection is not warranted for certain diseases and conditions based on exposure to herbicides used in Vietnam during the Vietnam era. Table B-2 provides a list of diseases and conditions that are not presumptively service-connected. With regard to Agent Orange exposure and disability compensation, litigation has largely focused on two questions. First, which diseases are presumed to be caused by exposure to Agent Orange? Second, which veterans have been presumptively exposed to Agent Orange? These questions have been resolved by two lines of cases. Nehmer claims involve which diseases are presumed to be caused by exposure to Agent Orange, and Haas claims involve which veterans have been presumptively exposed to the herbicide. This section provides a discussion of the laws, regulations, and court decisions that have emerged from these cases. In 1986, numerous Vietnam veterans brought a class action lawsuit against the VA, arguing that their previous claims for service-connected compensation for disabilities allegedly caused by exposure to Agent Orange were improperly denied. At the time, the VA had promulgated a rule that found only one disease, chloracne, associated with exposure to Agent Orange. When promulgating this rule under the Veterans' Dioxin and Radiation Exposure Compensation Standards Act, the VA had used a stringent "cause and effect" test for determining which diseases would be associated with Agent Orange exposure. The veterans argued that the "cause and effect" standard was too stringent and contrary to the legislative intent of Congress. In 1989, the U.S. District Court for the Northern District of California agreed and declared that the VA was required to use a more lenient "significant statistical association" standard when determining whether a disease is associated with Agent Orange exposure. The court invalidated the VA regulations and voided all benefit denials made under those regulations. In response to this court decision, Congress enacted the Agent Orange Act of 1991 in February of that year. After the enactment of the Agent Orange Act of 1991, the parties from Nehmer entered into a Final Stipulation and Order (Final Stipulation) that established the actions that the VA would take in response to the 1989 court decision. Most notably, the VA was required to issue new regulations regarding which diseases are associated with exposure to dioxin under the Agent Orange Act of 1991 and then readjudicate the claims that were previously denied by the VA under the invalid regulations. The Final Stipulation also stated that any benefits awarded upon such readjudication or adjudication shall be paid retroactively. Generally, when claims are awarded based on a new regulation, the effective date of the award can be no earlier than the date in which the regulation came into effect; however, under the Final Stipulation, the effective date would be either the date the claim was filed or the date the disability arose, whichever was later. Following the Final Stipulation, the VA began to readjudicate the voided Agent Orange claims. However, the VA established a policy only to readjudicate claims in which the veteran had specifically alleged Agent Orange to be the cause of disease. The veterans again sued the VA, and in February 1999, the court clarified which compensation claims were voided by the 1989 decision. The court again agreed with the veterans and struck down the VA's policy. The court noted that the 1989 decision "voided those decisions in which the disease or cause of death is later found – under valid Agent Orange regulation(s) – to be service connected." Therefore, the 1989 decision voided all VA decisions in which the disease or condition is later found to be associated with Agent Orange, regardless of whether the veterans specifically alleged that their diseases were caused by Agent Orange. Finally, later litigation clarified that the VA must pay the full retroactive benefit to the estates of deceased class members. In 2001, Congress extended the sunset date of the Agent Orange Act from September 30, 2002, to September 30, 2015, thus requiring the Secretary to continue issuing regulations designating service-connected diseases in response to scientific reports. In 2003, the VA found Chronic Lymphocytic Leukemia (CLL) to be associated with Agent Orange exposure. However, the VA did not readjudicate the prior claims of Vietnam veterans suffering from CLL and did not pay them retroactive benefits. The VA contended that the Final Stipulation did not apply to diseases that it determined to be service-connected after September 30, 2002, the original sunset date of the Agent Orange Act of 1991. In 2004, the plaintiff class, disputing this interpretation, filed a motion for clarification and enforcement of the Final Stipulation as to disease determinations made after September 30, 2002. In 2005, the court again agreed with the veterans and rejected the VA's interpretation. The court stated that the extension of the sunset provision also extended the duration of the Final Stipulation. Therefore, so long as diseases are determined to be associated with dioxin under the Agent Orange Act, the VA is required to readjudicate any previously denied claims for those conditions. The U.S. Court of Appeals for the Ninth Circuit in 2007 upheld the decision and ordered the VA to reajudicate all prior claims related to CLL and to provide retroactive benefits on such claims. On October 13, 2009, after reviewing an independent study by the Institute of Medicine, the VA announced that three additional conditions would be granted presumptive service connection as associated with exposure to Agent Orange. On August 31, 2010, the VA published the final rule in the Federal Register , officially adding B-cell leukemias (such as hairy cell leukemia), Parkinson's disease, and ischemic heart disease to the list of conditions associated with exposure to dioxin. Because these conditions were added pursuant to the Agent Orange Act, which does not expire until 2015, the VA is required to readjudicate any claims previously denied for these conditions in order to comply with the Nehmer Final Stipulation. According to the Agent Orange Act of 1991, certain veterans of Vietnam have been presumptively exposed to Agent Orange. If a veteran falls within such a presumption, he does not have the burden of proving that he was actually exposed to the herbicide in order to obtain disability compensation. According to the statute, if a veteran proves that he "served in the Republic of Vietnam" between January 9, 1962, and May 7, 1975, any disease determined to be associated with exposure to Agent Orange will "be considered to have been incurred in or aggravated by" his service in Vietnam. The VA has interpreted this statutory language to include only veterans who have actually set foot on the landmass of Vietnam or served in the inland waterways of Vietnam (veterans who served in the inland waterways are generally known as "brown water" veterans). Veterans who served on ships that remained off the coast of Vietnam (generally referred to as "Blue Water Navy" veterans) do not satisfy the test and are not considered to be presumptively exposed to Agent Orange. This interpretation of the statute was challenged in court. Although the Court of Appeals for Veterans Claims (CAVC) found the VA's interpretation to be invalid, the Court of Appeals for the Federal Circuit overturned the CAVC's decision and, therefore, the VA's "foot-on-land" test remains the current standard. The following section provides the details of the litigation. In 2001, a Vietnam veteran, Jonathan Haas, applied for disability compensation for Type 2 Diabetes allegedly caused by his exposure to Agent Orange. Mr. Haas claimed that he was entitled to a presumptive service connection because he "served in the Republic of Vietnam." Mr. Haas never physically went ashore to Vietnam but instead served on a U.S. vessel that remained off the coast during his service. Both the VA Regional Office and the Board of Veterans' Appeals (BVA) denied Mr. Haas the presumption of service connection, stating that a veteran must have actually "set foot on land in the Republic of Vietnam" to qualify for a presumption of service connection for exposure to Agent Orange. Mr. Haas appealed the decisions to the CAVC, arguing that his service off the coast of Vietnam should entitle him to a presumptive service connection based on his "service in the Republic of Vietnam." In 2006, the CAVC agreed with Mr. Haas and overturned the BVA's decision. The CAVC found the regulation to be ambiguous and determined that the current interpretation conflicted with the agency's earlier interpretations. Furthermore, the court stated that the VA could not make such a change in its interpretation without undertaking proper notice and comment rulemaking procedures. The CAVC also found the "foot-on-land" test to be an unreasonable interpretation of the law, and stated that there could be "the same risk of exposure" for veterans who served on ships near the coast. As a result of the CAVC's ruling, the VA directed the BVA to stay all proceedings involving Agent Orange exposure claims of veterans who only served on ships off the coast of Vietnam. The VA also published a notice of proposed rulemaking in the Federal Register declaring its intent to clarify its interpretation. Finally, the VA also appealed the CAVC's decision to the U.S. Court of Appeals for the Federal Circuit. On appeal, the case name was changed to Haas v. Peake after James Peake became the Secretary of Veterans Affairs. The U.S. Court of Appeals for the Federal Circuit reversed the decision of the CAVC, ruling in favor of the VA. As a result of this decision, the VA still maintains its "foot-on-land" policy for a Vietnam veteran to qualify for a presumption of exposure to Agent Orange. Although "Blue Water" veterans can still receive compensation for Agent Orange exposure if they prove they were actually exposed to Agent Orange, they will not receive a presumption of exposure due to their service. Throughout its opinion, the court reversed each basis of the CAVC's ruling. The court stated that the agency's interpretation of the statute was due deference under the Chevron doctrine. The court found the "foot-on-land" rule to be a reasonable interpretation of the statute, noting that Congress had been silent regarding the scope of the statutory language, and stated that the VA's interpretation was a reasonable line to draw. The court also noted that the agency had consistently applied this interpretation for an extended period of time. Finally, the court declared that because this was an interpretive rule, not a substantive rule, the agency did not have to follow notice and comment rulemaking procedures when promulgating its interpretation. Therefore, there was no violation of the Administrative Procedure Act. The court reversed the CAVC decision and remanded the case. Although it ruled in favor of the VA, the court noted that Mr. Haas was free to "pursue his claim that he was actually exposed to herbicides while on board his ship.... However, he [was] not entitled to the benefit of the presumptions set forth in [the Agent Orange Act of 1991]." The Supreme Court of the United States denied certiorari on Mr. Haas's appeal. Currently, three major issues pertain to Vietnam-era veterans and their exposure to Agent Orange: (1) providing presumptive service-connected disability compensation for those who served in the waters surrounding Vietnam and in other areas that Agent Orange may have been stored or used; (2) providing disability compensation and health care for paternally mediated birth defects; and (3) researching and providing disability compensation and health care services to biological grandchildren and later generations of Vietnam-era veterans. Each of the three issues is briefly discussed in detail. Under current law, veterans who have diseases or conditions listed in Table B-1 are entitled to service-connected disability compensation as long as they (1) stepped foot on land in Vietnam or (2) served on the inland waterways of Vietnam during active duty at any time between January 9, 1962, and May 7, 1975. Other veterans who have an Agent Orange-related disease or condition are entitled to these benefits if they can prove they were exposed to Agent Orange during active duty service. However, there are some exceptions to this general requirement (see text box on "Presumption of Exposure to Agent Orange in Veterans who served in Korea"). Furthermore, only veterans who served in Vietnam are entitled to retroactive benefits. As discussed under the " Blue Water Veteran Litigation " section, some veterans of the Vietnam era who served aboard deep-water naval vessels off the coast of Vietnam—referred to as "Blue Water Navy" veterans—have been pressing Congress and the judicial system to expand the definition of service in Vietnam, thereby qualifying this group to receive disability compensation for diseases or conditions presumed to be associated with Agent Orange. These veterans contend that they were exposed to Agent Orange while on board vessels anchored offshore, either directly through contact with aircraft that sprayed Agent Orange or while handling drums of Agent Orange or by drinking distilled water. In late 2009, the VA asked the Institute of Medicine (IOM) to conduct a study and prepare a report on whether Vietnam-era veterans who served in the waters off Vietnam ("Blue Water Navy" veterans) or who served on boats or ships that operated on the inland waterways and delta areas of Vietnam ("brown water" navy veterans) experienced a comparable range of exposures to Agent Orange as the veterans who served on the ground. In 2011, IOM announced that it was unable to determine whether "Blue Water Navy" veterans were exposed to Agent Orange. IOM's report stated: The committee was unable to state with certainty that Blue Water Navy personnel were or were not exposed to Agent Orange and its associated [2,3,7,8-Tetrachlorodibenzo-p-Dioxin] TCDD. Owing to a lack of data on environmental concentrations of Agent Orange and Agent Orange–associated TCDD and an inability to reconstruct likely concentrations, as well as the dearth of information about relative exposures among the ground troops and Brown Water Navy personnel and Blue Water Navy personnel, it is impossible to compare actual exposures across these three populations. Furthermore, the committee concludes that because of the small number of studies and their limitations, there is no consistent evidence to suggest that Blue Water Navy Vietnam veterans were at higher or lower risk for cancer or other long-term adverse health effects associated with Agent Orange exposure than shore-based veterans, Brown Water Navy veterans, or Vietnam veterans in other branches of service. The committee's judgment is that exposure of Blue Water Navy Vietnam veterans to Agent Orange-associated TCDD cannot reasonably be determined. In addition, several groups of Vietnam-era veterans have asserted that they may have been exposed to Agent Orange based on storage and transportation of Agent Orange. For example, veterans have contended that they came into contact with Agent Orange on Guam in the late 1960s during the Vietnam War. Moreover, some veterans have asserted that Agent Orange had been used in testing performed in the Panama Canal Zone in the 1960s and 1970s, and others have contended that they were exposed during storage at Johnston Island in the North Pacific between 1971 and 1977. Furthermore, some Vietnam-era veterans have asserted that they were exposed to Agent Orange in C-123 airplanes used after the Vietnam War. All these veterans groups have sought to establish a presumption of exposure, thereby qualifying them to receive disability compensation for diseases or conditions presumed to be associated with Agent Orange. The VA is reviewing all these claims on a case-by-case basis. Currently, the VA provides disability compensation and health care services for only one paternally mediated birth defect: spina bifida in the children of male Vietnam-era veterans. Nevertheless, the VA provides disability compensation and health care for a range of maternally mediated birth defects in children of female Vietnam-era veterans. This more liberal compensation for female Vietnam-era veterans was based on the results of a health study of 8,280 women Vietnam-era veterans (half of whom served in the Republic of Vietnam and half of whom served elsewhere), completed in October 1998 and titled "Women Vietnam Veterans Reproductive Outcomes Health Study." This study was conducted by the Environmental Epidemiology Service of the Veterans Health Administration of the VA. The most recent 2012 Agent Orange report from IOM stated that there was inadequate or insufficient evidence to determine whether an association exists between exposure to Agent Orange and birth defects in the offspring of male Vietnam-era veterans. However, some veteran service organizations have asserted that more research should be done regarding paternally mediated birth defects and that eventually disability compensation policies should be developed for disabilities and health conditions that appear in later generations. Some Vietnam-era veterans have raised concerns that the genetic effects of Agent Orange may skip a generation and reappear in third or subsequent generations. In November 2010, some veterans made presentations to the IOM, requesting that it assess the "transgenerational effects resulting from exposure-related epigenetic changes, either in the parents or exposed fetuses, which would lead to adverse health effects in later generations, such as grandchildren." During previous reviews of Agent Orange studies, the IOM focused "only on birth defects (primarily limited to problems detectable at birth or within the first year of life) and childhood cancers (usually restricted to particular cancers that characteristically appear in infants and children and are diagnosed before the age of 18 years)." However, beginning with the 2010 review, the IOM extended its focus to include all types of medical conditions occurring in Vietnam-era veterans' children, regardless of age, and to include such conditions in successive generations. According the most recent 2012 Agent Orange report from IOM, there is inadequate or insufficient evidence to determine whether an association exists between exposure to Agent Orange and specific health issues such as endometriosis; semen quality; infertility; spontaneous abortion; stillbirth; late fetal, neonatal, or infant death; low birth weight or preterm delivery; birth defects other than spina bifida; childhood cancers; or diseases in more mature offspring or later generations. However, the report from IOM states that The committee [the IOM Agent Orange study committee] favors renewed efforts to conduct epidemiologic studies on all the developmental effects in offspring that may be associated with paternal exposure . In addition, new studies should evaluate offspring for defined clinical health conditions that develop later in life, focusing on organ systems that have shown the greatest effects after maternal exposure, including neurologic, immune, and endocrine effects. Finally, although the committee recognizes that there is evidence that environmental exposures can affect later generations through fetal and germ-line modifications, epidemiologic investigation designed to associate toxicant exposures with health effects manifested in later generations will be even more challenging to conduct than research on adverse effects on the first generation. Appendix A. Health Care Legislation for Vietnam Veterans Appendix B. Diseases and Conditions Presumed/Not Presumed to Be Service-Connected with Exposure to Agent Orange | The U.S. Armed Forces used a variety of chemical defoliants to clear dense jungle land in Vietnam during the war. Agent Orange (named for the orange-colored identifying stripes on the barrels) was by far the most widely used herbicide during the Vietnam War. Many Vietnam-era veterans believe that their exposure to Agent Orange caused them to contract several diseases and caused certain disabilities, including birth defects in their children, and now their grandchildren. The Department of Veterans Affairs (VA) received the first claims asserting conditions related to Agent Orange in 1977. Since then, Vietnam-era veterans have sought relief from Congress and through the judicial system. Beginning in 1979, Congress enacted several laws to determine whether exposure to Agent Orange in Vietnam was associated with possible long-term health effects and certain disabilities. The Veterans' Health Care, Training and Small Business Loan Act (P.L. 97-72) elevated Vietnam veterans' priority status for health care at VA facilities by recognizing a veteran's own report of exposure as sufficient proof to receive medical care, absent evidence to the contrary. The Veterans' Health Care Eligibility Reform Act of 1996 (P.L. 104-262) completely restructured the VA medical care eligibility requirements for all veterans. Under P.L. 104-262, a veteran does not have to demonstrate a link between a certain health condition and exposure to Agent Orange; instead, medical care is provided unless the VA determines that the condition did not result from exposure to Agent Orange. This authority was permanently authorized by the Caregivers and Veterans Omnibus Health Services Act of 2010 (P.L. 111-163). Likewise, Congress passed several measures to address disability compensation issues affecting Vietnam veterans. The Veterans' Dioxin and Radiation Exposure Compensation Standards Act of 1984 (P.L. 98-542) required the VA to develop regulations for disability compensation to Vietnam veterans exposed to Agent Orange. In 1991, the Agent Orange Act (P.L. 102-4) established a presumption of service connection for diseases associated with herbicide exposure. P.L. 102-4 authorized the VA to contract with the Institute of Medicine (IOM) to conduct scientific reviews of the evidence linking certain medical conditions to herbicide exposure. Under this law, the VA is required to review the reports of the IOM and issue regulations, establishing a presumption of service connection for any disease for which there is scientific evidence of a positive association with herbicide exposure. Based on these IOM reports, currently 15 health conditions are presumptively service-connected. Under current regulations, a servicemember must have actually set foot on Vietnamese soil or served on a craft in its rivers (also known as "brown water" veterans) to be entitled to the presumption of exposure to Agent Orange. Those who served aboard deep-water naval vessels (commonly referred to as "Blue Water Navy" veterans) do not qualify for presumption of service connections for herbicide-related conditions unless they can prove that the veteran's service included duty or visitation within the country of Vietnam itself, or on its inland waterways. Recently, Vietnam-era veterans have increasingly expressed concerns about all types of medical issues occurring in their children, regardless of age, and in successive generations. Furthermore, they have asserted that more research should be done on paternally mediated birth effects, so that compensation policies might be developed similar to those that address maternally mediated birth effects of Vietnam-era progeny. |
RS20737 -- The Federal Republic of Yugoslavia: U.S. Economic Assistance Updated August 16, 2001 As a result of the September 2000 election of Vojislav Kostunica to the Presidency of the Federal Republic of Yugoslavia (FRY) and the subsequent end of theMilosevic regime, the people of Yugoslavia have opened the door to dramatic political and economic change likethat already in progress in the rest of centralEurope and the former Soviet Union. (1) The FRY, however, not only faces the daunting challenge of a transition to a free market economy anddemocratic systemafter decades of authoritarian rule, but the added burden of a devastated infrastructure from years of war with otherformer republics, the NATO bombing of 1999,and international sanctions. Responding to this situation, the United States and Europe have issued offers ofassistance. (See CRS Report RL30371 , Serbia andMontenegro: Political Situation and U.S. Policy by [author name scrubbed].) Due to the sanctions put in place by the international community, including the United States, as a result of the Bosnia conflict, there was only limited U.S.economic assistance to the FRY in the 1990s. All but humanitarian and democracy assistance were prohibited underU.S. law. A humanitarian aid program,mostly benefitting the vulnerable and elderly in Kosovo, began in 1993, and, in 1996, USAID launched a food aidprogram targeted mainly toward refugees fromBosnia and Croatia and the poor, and implemented through U.S. private charitable organizations and the WorldFood Program. Democratization efforts, however, continued to be stymied by the lack of a U.S. monitoring presence on the ground. In the mid-1990s, some assistance wasnonetheless provided to Albanian language newspapers and a civic education program was initiated in Kosovo. But,following the lifting of Bosnia-relatedsanctions at the end of 1996, a USAID office was established in Belgrade, and it initiated a small program to helpbuild democracy, encourage economic growth,and improve the quality of life (health and education). Projects were mostly conducted through U.S. and localnon-governmental organizations (NGOs), focusingon the grassroots and local government. Democracy programs assisted the development of independent media,strengthened indigenous NGOs, and advisedpolitical parties. Economic growth-related projects were aimed at Montenegro, which, with the rise to power ofan anti-Milosevic government in 1997, hadshown some progress in adopting economic reforms. Among other activities, USAID helped the government ofMontenegro privatize its economy and providedbusiness services to entrepreneurs, including microcredit assistance. The 1999 war in Kosovo significantly altered the U.S. assistance program in the Federal Republic of Yugoslavia. In the aftermath of the war, the province ofKosovo - now occupied by an international military force and administered by the United Nations - began to receivelarge-scale infusions of U.S. assistance. Aidwent to such items as the UN administrative budget, infrastructure repair, and law enforcement, in addition totraditional development activities. Kosovo iscurrently treated as a separate entity by the U.S. assistance program. (For discussion of U.S. and international aidprograms, see CRS Report RL30453 , Kosovo:Reconstruction and Development Assistance .) Montenegro, as a bone fide opponent of Milosevic, also became the focus of greater attention, larger amounts of assistance, and separate treatment by the U.S. aidprogram. Following the Kosovo war, the United States provided $15 million in balance-of-payments support andtechnical assistance, aimed at helpingMontenegro survive the economic disruption and influx of Kosovar refugees caused by the war, as well as Serbianefforts to destabilize it. Aid to Serbia, restricted by Congress to humanitarian and democracy assistance, was increased immediately after the war. In June 1999, President Clintonformally committed at least $10 million to democratization - $11.8 million was eventually used. In the months justbefore the FRY elections, most of another $25million commitment was used. These funds helped support the opposition parties, by providing equipment suchas computers, training organizers, and fundingvoter surveys. Assistance was also provided to independent media, labor unions, and opposition local governments,with a view toward strengthening opponentsto Milosevic's rule. Since the end of the Milosevic regime, both the Administration and Congress have taken steps to assure Serbia of U.S. support as it moves toward democracy andeconomic reform. In the first weeks after the change in government, the Administration ordered many financial andtrade sanctions lifted, including the oilembargo and flight ban. The Administration also notified Congress of its plan to provide Serbia immediately with$10 million in emergency energy support forelectricity to meet its energy deficit and $45 million in humanitarian food aid from the PL480 account. U.S. Economic Aid to the FRY: FY1998-2002 (in $ millions) Source: USAID Note: Economic aid includes Development Assistance, SEED, and Economic Support Fundaccounts. Food, disaster, and peacekeeping aid are excluded from thetable. Congressional action on the annual foreign operations legislation in October 2000 offered an opportunity for Congress to make its views known on the dramaticchanges in Serbia. The FY2001 Foreign Operations Appropriations, signed into law on November 6 ( H.R. 4811 , P.L. 106-429 ), removed previousappropriations language prohibiting all but democracy assistance for Serbia. It approved the use of up to $100million for Serbia aid (an across-the-boardrescission reduced that amount to $99.780 million) and, in the conferee report, recommended expenditure of notless than $89 million in Montenegro. Congressalso encouraged Administration efforts to support FRY membership in international organizations and internationalfinancial institutions (sec. 594). FY2001 SEED appropriations for Serbia are funding the following activities: $24.9 million for electricity supply and $9.8 million to improve the heating system and meet basic needs of the poorest people immediatelyafter the 2000 election; $22.1 million aimed at municipal communities to encourage citizen participation, restore essentialservices, and generatejobs; $14.3 million for technical experts to assist economic policy reform of the banking system and publicfinance and fiscal reform; efforts tostrengthen bank supervision and international accounting standards; emergency assistance to the National Bank ofYugoslavia to prevent a collapse of the bankingsystem; and microfinance activities, and $18.7 million to support democratic systems, including NGOs, an independent media, the politicalprocess, and the rule of law. Providestechnical assistance to local governments. For Montenegro, the United States was expected to provide $12.9 million in food aid and more than $72 million in SEED funds in FY2001. Of the latter, $30.0million are being used for emergency pension and energy costs, $26.7 million for private sector development andmacro-economic reform technical assistance, $7million for technical assistance to municipal governments, and $5 million for democracy and civil society support. In its FY2002 budget request, the Bush Administration requested $145 million for the FRY (Serbia and Montenegro). On July 24, the House approved H.R. 2506 , the FY2002 foreign operations appropriations. While the legislation does not earmark funds forthe FRY, Appropriations Committeereport language ( H.Rept. 107-142 ) "directs" that $60 million be provided to Montenegro. On July 26, the SenateAppropriations Committee approved its versionof the bill. While it has not released a report or introduced legislation, a press release notes that $115 million isprovided for Serbia in the bill. At the June 2001 international donor conference, the United States pledged $181.6 million for calendar year 2001, $75 million of which are FY2002 funds not yetappropriated. Constraints on U.S. Assistance. Two legislative provisions contained in the FY2001 appropriations threatenedto limit aid. Under section 594, any unobligated amounts of the $100 million provided as FY2001 bilateral aid toSerbia, except humanitarian and democracy aid,could not be obligated after March 31, 2001, unless the President certified that the FRY is cooperating with theInternational Criminal Tribunal for the FRY(ICTY), taking steps to abide by the Bosnia peace accords, or implementing policies respecting minority rights andthe rule of law. On April 2, the Administrationprovided the certification required by section 594, with the qualification that the United States would be watchingclosely to see if the FRY continued to meet theconditions. Section 594 also applied conditions to the U.S. position on entry of the FRY into international organizations, including the World Bank and the European Bank(EBRD) which is expected to supply the bulk of large-scale development assistance. While Montenegro has beenexempted from most bilateral aid restrictions, it,too, stands to benefit from international loans to the FRY. The bill instructed U.S. representatives to theseinstitutions to support membership, once the Presidentcertified that the FRY has taken steps to resolve issues related to debts and other liabilities. Responsibility for debtsand assets of the pre-1991 former Yugoslaviaremained in dispute among the former constituent republics until May 25 when the FRY and the four other successorstates reached an agreement on the divisionof assets, a step toward resolution of liability issues with donor nations. U.S. support for individual loans and otherassistance from international institutions afterMarch 31, 2001, also rested on the same presidential determination governing the $100 million in bilateral aid, andmay now occur Under section 564, no assistance, with the exception of humanitarian, democracy, cross border physical infrastructure and some other categories, could beprovided to countries that give sanctuary to indicted war criminals, such as Milosevic in the FRY. This sectioncould be waived for specific programs if a writtendetermination was provided to Congress. Because SEED appropriations are provided "notwithstanding" any otherprovision of law, both conditions could beignored as they apply to SEED funds. However, the Administration did not intend to utilize that provision. Despite the April certification, Members of Congress, including the authors of section 594, Senators Leahy and McConnell, indicated that the FRY's record ofcooperation with the Tribunal must be taken into account by the Administration if aid notifications and future aidrequests were to go forward. During his visit tothe White House on May 9, President Kostunica was, reportedly, reminded of U.S. interest in seeing Milosevichanded over to the Tribunal. The BushAdministration threatened to skip the international donors conference if no further steps were taken. As Milosevicwas being extradited on June 28, theAdministration announced that it would attend the June 29 conference, but it has indicated that disbursement ofpledges would continue to be dependent on FRYcooperation with the Tribunal. Role of Other Donors. Apart from the United States, the chief potential aid donors to Serbia are the EuropeanUnion (EU), its members, and the multilateral financial institutions. The latter, especially the World Bank andEBRD, could be expected to supply the bulk oflarge-scale development assistance. A key factor hindering assistance from these quarters had been the state of theFRY's debts and other liabilities. The IMF and World Bank cannot provide assistance to countries that are not members, and the FRY could not become a member until it settled its arrears withthese institutions (the FRY had no arrears to the EBRD and joined on December 15, 2000). On December 20,following a $129 million payment to the IMF, theFRY was granted IMF membership and provided with a $151 million loan. The loan allowed it to reimburseSwitzerland and Norway which had advanced it thefunds that enabled it to pay off its IMF arrears. On June 11, the IMF approved a stand-by loan for the FRY of about$249 million through March 2002. Although the FRY currently owes the World Bank $1.7 billion in arrears, its membership in the Bank was announced on May 10, when the FRY met Bankrequirements, including agreement to resolve the arrears issue. Prior to membership, the Bank had beeninstrumental in organizing a donor coordination meetingand helping to assess FRY needs. In March 2001, the Bank set up a $30 million Trust Fund for the FRY to providesome short-term grant assistance prior tomembership. European donors launched assistance initiatives soon after the election results in Yugoslavia were known. The EU approved nearly $190 million in aid - forurgent needs such as heating oil, and supply of medicines and basic foodstuffs - for the winter of 2000-2001. It alsopromised up to $21 million for restoration ofnavigation on the Danube, which will benefit the entire region. Together EU members, the European Commission,and the European Investment Bank pledgednearly $637 million at the June donor conference. As they did for Kosovo and the southeast Europe region, theEuropean Union and the World Bank organizedboth the December 2000 donor coordination meeting, which clarified the FRY's priority needs, and the June donorpledging conference. In most parts of the world, the extent of other bilateral donor assistance has little impact in determining the size of the U.S. aid program. However, with acongressional limitation on U.S. aid to Kosovo at 15% of total donor contributions, the role of other donors couldbecome a factor in the U.S. program in the restof the FRY, especially because the United States has expressed the view that Europe should take the lead in Balkandevelopment. A potential drawback tolimiting U.S. assistance is that it may also lessen U.S. influence on events in the region. At the June donorconference, a total of $1.3 billion was pledged, ofwhich the U.S. pledge accounts for 13.5%. EU members and institutions represent 47.4% of the total. U.S. Aid and Relations Between Kosovo, Montenegro, and Serbia. Cooperation with the International CriminalTribunal is not the only major issue that remains as a possible obstruction affecting U.S. assistance to Serbia. Serbia's treatment of its sister republic,Montenegro, and the province of Kosovo are likely to influence the quality and quantity of future U.S. aid to Serbia,and moves by Montenegro towardindependence from the FRY may affect assistance to it. Although the United States does not formally support the independence movements of either Kosovo or Montenegro, U.S. aid has been employed in ways thatworked to strengthen the independence of each vis-a-vis the FRY. U.S. assistance to Montenegro grew in tandemwith Montenegrin policies at variance withMilosevic. U.S. aid projects fostered economic and political reform, facilitating Montenegrin separateness fromits sister entity. In Kosovo, U.S. and allied aidhas, in effect, created the framework of an independent state, despite the formal UN - and U.S. - position inResolution 1244 that the FRY maintains sovereigntyover the province. With the change of regime in Belgrade, new possibilities have arisen for a peaceful settlement of both relationships. Montenegrin officials have postponed plansfor an independence referendum until, perhaps, early 2002. Although FRY leaders currently say they would not actto stop Montenegrin independence, the UnitedStates and EU countries oppose independence and have indicated that aid might be cut off as a consequence. Duringthe past year, however, members of Congresshave indicated strong support for Montenegro. The Appropriations committee report on H.R. 2506 supportsa specific funding level for Montenegroand pointedly directs that it be identified as a separate line item in the Administration aid report, demonstratingCommittee "disappointment" with theAdministration for combining the Serbia and Montenegro budget requests into one figure. In Kosovo, U.S. assistance would likely support any peaceful and mutually cooperative outcome. But such an outcome may not be possible, and how U.S.assistance would be used in that eventuality is unclear at this time. | U.S. economic assistance to the Federal Republic of Yugoslavia (FRY) seeks to fosterdemocratic institutions andeconomic reform. Congress approved $100 million for Serbia for FY2001 and the Administration has requested$145 million for the FRY for FY2002. Congressional debate may center on constraints on that aid, the role of other donors, and Serbia's relationship withMontenegro and Kosovo in that context. |
T he United States has initiated renegotiations of the North American Free Trade Agreement (NAFTA) with Canada and Mexico. The Administration's agriculture-related objectives in the renegotiation include a contentious proposal to establish trade remedies for perishable and seasonal products. The proposal would establish separate domestic provisions for seasonal products such as fruits and vegetables in anti-dumping and countervailing duties (AD/CVD) proceedings, making it easier to initiate a trade remedy case against (mostly Mexican) exports to the United States. While some in Congress support adding a seasonal AD/CVD proposal as part of NAFTA renegotiations, others in Congress and most U.S. food and agricultural groups—including U.S. fruit and vegetable producer groups—oppose the proposal. Some also worry that efforts to push for seasonal protections, among other U.S. proposals, could derail agricultural provisions in the NAFTA renegotiation. The Office of the U.S. Trade Representative's (USTR) agriculture-related NAFTA negotiating objectives cover agricultural market access and regulatory cooperation, sanitary and phytosanitary (SPS) measures (including agricultural biotechnology), geographical indications (GIs), and trade remedies for perishable and seasonal products in AD/CVD proceedings, among other general provisions addressing dispute settlement and regulatory harmonization. Selected USTR agriculture-related objectives are shown in the text box below. The Administration's most recent market access objectives for U.S. agriculture specifically target remaining Canadian tariffs on imports of U.S. dairy, poultry, and egg products that are subject to tariff-rate quotas (TRQs) and certain technical barriers to U.S. grain and alcohol beverages. Potential opportunities for the U.S. food and agriculture industries as part of the ongoing NAFTA renegotiation include the following: improve agricultural market access by liberalizing remaining dutiable agricultural products that were exempted from the original agreement; update NAFTA's SPS provisions by "going beyond" existing World Trade Organization (WTO) obligations regarding risk assessment, transparency, notification, response and enforcement; and address certain outstanding agricultural trade disputes between the United States and its NAFTA partners, including concerns regarding dairy, fruits, vegetables, wine, and a range of SPS and GI concerns. One of the more controversial agricultural proposals considered by U.S. negotiators would establish seasonal protections for U.S. agriculture in trade remedy cases. The U.S. proposal would "[s]eek a separate domestic industry provision for perishable and seasonal products in AD/CVD proceedings." Although the precise text of the proposal is not publicly available, the proposal would reportedly protect certain U.S. fruit and vegetable producers by making it easier to initiate trade remedy cases against (mostly) Mexican seasonal exports to the United States. The proposal responds to complaints by some fruit and vegetable producers, mostly in Southeastern states, who claim to be adversely affected by import competition from Mexico. Antidumping (AD) and countervailing duties (CVD) address unfair trade practices by providing relief to U.S. industries and workers that are "materially injured," or threatened with injury, due to imports of like products that are sold in the U.S. market at less than fair value (AD) or where production has been subsidized by a foreign government or public entity (CVD). Dumping refers to a form of price discrimination whereby goods are sold in one export market at prices lower than the prices of comparable goods in the home market or in other export markets. Unfair subsidies refer to financial payments and other forms of government support to foreign manufacturers or exporters that might give them an unfair advantage over U.S. producers and comparable domestic goods. At the end of an investigative process, in AD cases, the remedy is an additional duty placed on the imported merchandise to offset the difference between the price (or cost) in the foreign market and the price in the U.S. market. In CVD cases, a duty equivalent to the amount of subsidy is placed on the imports. The U.S. International Trade Commission (USITC) determines if a U.S. industry has suffered material injury, and, if so, the International Trade Administration (ITA) of the U.S. Department of Commerce then determines the existence and amount of dumping or subsidy. AD and CVD provisions in U.S. law are in Title VII of the Tariff Act of 1930 (19 U.S.C. 1671-1677n, as amended). U.S. laws and those of other WTO members must comply with obligations under the WTO Antidumping and Subsidies Agreements. There are no seasonal provisions under current U.S. laws governing AD/CVD. CVD law and regulation establish standards for determining when an unfair subsidy has been conferred by a foreign government and is intended to offset any unfair competitive advantage that foreign manufacturers or exporters might have over U.S. producers because of foreign countervailable subsidies. Such subsidies provide financial assistance to benefit the production, manufacture, or exportation of goods (e.g., either through direct cash payments, export subsidies, import substitution subsidies, credits against taxes, or loans at terms below market rates). The amount of subsidies the foreign producer receives from the government is the basis for the subsidy rate by which the subsidy is offset, or "countervailed," through higher import duties. AD law and regulations authorize higher duties on imported goods if ITA determines that an imported product is being sold at less than its fair value and if the USITC determines that a U.S. producer is thereby being injured. If an AD/CVD investigation results in final affirmative determinations by both agencies, the ITA issues an AD or CVD order directing U.S. Customs and Border Protection to collect duties on the imported merchandise. Previous USITC investigations have highlighted the increased competitive market and trade pressures on U.S. fruit producers from lower-cost foreign fruit and vegetable producers (such as those in China, Thailand, Chile, Argentina, and South Africa) as well as from countries with subsidized fruit and vegetable production (such as in the European Union, including Spain). Import injury investigations initiated by the United States further highlight concerns that some countries might be supplying imports at prices below fair market value. Since the 1990s, dumping petitions filed by the U.S. fruit and vegetable sectors have included charges against imports of fresh tomatoes (Canada, Mexico), frozen raspberries (Chile), apple juice concentrate (China), frozen orange juice (Brazil), lemon juice (Argentina, Mexico), fresh garlic (China), preserved mushrooms (China, Chile, India, Indonesia), canned pineapple (Thailand), table grapes (Chile, Mexico), and tart cherry juice (Germany, former Yugoslavia). Many of these petitions were decided in favor of U.S. domestic producers and resulted in higher tariffs being assessed on U.S. imported products from some of these countries. In addition, seasonal tariffs—for example, higher import tariffs for certain fruits and vegetables imported during U.S. peak season—are already part of the U.S. tariff schedule for many fruits and vegetables imported from countries under most-favored-nation (MFN) status. In the United States, higher MFN seasonal tariffs apply to berries, melons, citrus, pears, stonefruit, tomatoes, cucumbers, asparagus, eggplant, cole crops, legumes, and tropical products. Specific details regarding USTR's perishable and seasonal proposal for NAFTA are not publicly available. However, according to groups that are supporting such a provision, the proposal would establish new rules for seasonal and perishable products, such as fruits and vegetables, and ensure that producers who are susceptible to trade surges at certain times of the year have recourse to trade remedies. It would also address practices that adversely affect trade in perishable and cyclical crops while also improving import relief mechanisms. Other reports indicate that the proposal seeks to modify U.S. AD/CVD laws by allowing growers to bring an injury case by domestic region and draw on seasonal data. This differs from current law, which requires that an injury case be supported by a majority (at least 50%) of the domestic industry, whereas USTRs seasonal proposal would allow regional groups representing less than 50% of nationwide seasonal growers to initiate an injury. This would make it easier for a group of regional producers to initiate trade remedy cases even if the majority of producers within the industry, or in other regions, do not support initiating an injury case. As will be discussed later, such a change to U.S. trade laws could further deepen divisions in the fruit and vegetable industry regarding the proposal. Also, under current law, three years of annual data are necessary to prove injury, whereas the proposal would allow for the use of seasonal data to prove injury. Although an industry can currently initiate an AD/CVD case under U.S. law, such efforts can often be costly to initiate, time-consuming, and difficult to prove. USTR's proposal would require a change in AD/CVD requirements, making it easier for a group of regional producers to initiate an injury case and make it easier to prove injury and thus institute higher tariffs on imported products. Mexico's production of some fruits and vegetables—tomatoes, peppers, cucumbers, squash, berries, and melons—has increased sharply in recent years. Increased supplies have contributed to increased U.S. imports for many types of fruits and vegetables from Mexico, particularly for tomatoes, avocados, peppers, and berries ( Figure 1 , Figure 2 ). Researchers at the U.S. Department of Agriculture (USDA) report that Mexico is the largest foreign supplier of U.S. imports of vegetables and fruits (excluding bananas). In large part, Mexico's increased production and export supplies are attributable to its investment in large-scale greenhouse production facilities and other types of technological innovations, among other factors. Studies have highlighted that Mexico's "protected agriculture" represents a "fast-growing activity in Mexico with a large potential to increase yield, quality, and market competiveness." Over the years, USDA has conducted a series of studies regarding greenhouse tomato production. These studies also highlight how rapidly increased greenhouse production has impacted North American markets, resulting in a series of AD cases among the NAFTA countries. The most well-known case dates back to 1996, when the U.S. tomato industry filed an AD petition alleging that Mexican tomato producers/exporters were selling tomatoes in the United States at less than fair value, which lasted until 2013 under an agreement suspending the AD investigation on fresh tomatoes from Mexico. Rising imports from Mexico are generally regarded as supporting rising consumer demand for fruits and vegetables by ensuring year-round counter-seasonal supplies of products, including during the U.S. off-season (or winter months) for some products. Counter-seasonal fruit and vegetable imports are said to complement U.S. production and are generally considered to have a positive impact on U.S. consumer demand by ensuring year-round supply. Fruit ( Figure 3 ) and vegetable ( Figure 4 ) imports from Mexico tend to be higher during the winter months (complementary). Counter-seasonal imports may also benefit consumers through lower costs, given a wider supply network, and may also stimulate additional demand by introducing new products and varieties. However, technological and production improvements may be further altering this trend. For example, greenhouse production may allow for year-round production, including during U.S. peak season. In addition, the development of early- and late-maturing varieties has expanded U.S. production seasons, allowing producers to grow many types of fruits and vegetables throughout the year. Improvements in transportation and refrigeration have also made it easier to ship fresh horticultural products. As the U.S. production season has expanded, the winter window for some imports has narrowed, and imports of some fruits and vegetables are now directly competing with U.S. production. Across all countries importing to the United States, products facing steeper competition from imports include fresh tomatoes, peppers, potatoes, onions, cucumbers, melons, citrus, grapes, apples, and other tree fruits. Imports of processed fruit and vegetable products, including fruit juices, directly compete with U.S. processed products year-round. With respect to U.S. imports from Mexico under NAFTA, analysis from USDA researchers suggest that although imports continue to supplement U.S. supplies during the year, imports from Mexico may be outcompeting certain Florida-grown crops, particularly for tomatoes, cucumbers, peppers, raspberries, and blueberries, particularly of greenhouse-grown crops. Rising imports also exacerbate an already sizeable and widening trade deficit in U.S. fruit and vegetable trade. As imports have risen, so have imports as a share of total U.S. domestic supplies and consumption for some fresh and processed fruits and vegetables, according to data from USDA ( Table 1 ). Total imports from all U.S. suppliers accounted for 32% of all U.S. fresh fruit supplies (excluding bananas) in 2007, rising to 38% in 2016. Fresh vegetable imports accounted for 20% of all U.S. supplies in 2007, rising to 31% in 2016. These averages mask even larger import shares for some fruits and vegetables. For example, imports of fresh cucumbers accounted for 52% of U.S. supplies in 2007, rising to 74% in 2016. Imports of fresh tomatoes rose from 41% of supplies in 2007 to 57% in 2016. Imports of avocados accounted for 86% in 2016, up from 65% a decade earlier. Imports of asparagus now account for nearly all U.S. supplies. The Florida Fruit and Vegetable Association (FFVA) claims that Mexico's investment in its greenhouse production has been supported by government subsidies that should be addressed through higher CVDs on U.S. imports of some products. Concerns have mostly centered on U.S. imports of tomatoes, peppers, strawberries, raspberries, and blueberries. Limited information is available regarding support or incentives for Mexico's fruit and vegetable sectors. Available information indicates that Mexico's agricultural ministry, SAGARPA, does not provide direct financial support to its produce growers. SAGARPA's primary agricultural support program, PROAGRO Productivo, comprises most of its agricultural budget. In general, Mexico's farm programs support rural and/or entrepreneurial development, including production by new farmers and women, and also domestic feeding programs. Overall, Mexico's producers of sugar, corn, and milk receive the highest level of support across all programs. (The Appendix provides additional information regarding the Mexican government's support for its agricultural sectors.) However, available support may be part of Mexico's overall support geared to rural and business development and other productivity improvements in Mexico's horticultural sectors. Such support may be assisting the cost of investments in Mexican greenhouses and shade houses but cannot be confirmed based on publicly available information. FFVA claims that SAGARPA spent $50 million from 2001 to 2008 on 1,220 hectares of greenhouses and other forms of protected agriculture and spent $189.2 million from 2009 to 2010 on 2,500 hectares of protected agriculture. FFVA claims that expenditures for 2009-2010 covered greenhouses (65%), shade houses (25%), macro-tunnels (7%), and micro-tunnels (3%). FFVA claims this support focused on production of tomatoes, cucumbers, bell peppers, berries, zucchini, grapes, brussels sprouts, habanero peppers, and green peppers, among other specialty products. Another 2010 study also highlights that support for greenhouse tomatoes was available from the Mexican government's Alianza program, which is still in operation. FFVA claims that SAGARPA has continued to provide support for its protected agriculture sectors. It contends that existing "regulations specifically authorize greenhouse 'incentives' of up to $48,000 per hectare" while "subsidies for new greenhouse installations are as high as $162,000 per agricultural project." FFVA claims that greenhouse funds can cover up to 50% of the investment costs and may be used to purchase materials, equipment, and infrastructure and for the management, conservation, and processing of greenhouse products. In addition, FFVA also claims that Mexico's fruit and vegetable imports are sold to the United States at prices below the cost of production and alternatively could be countered by imposing higher AD duties. FFVA further claims that Mexico's labor cost advantage in fruit and vegetable production gives Mexico additional competitive advantage over U.S. produce growers. The perishable and seasonal provisions in USTR's NAFTA objectives have divided the U.S. fruit and vegetable industry, and opinions are split between producers in some Southeastern states and producers in other states, such as California. Opinions in Congress are also divided. For example, at a House Agriculture Committee hearing in July 2017, producer groups representing FFVA broadly claimed that import competition from Mexico of fruits and vegetables under NAFTA is affecting producers across the United States, claiming that "all the specialty crop producers in this country are having a problem with the current NAFTA trade relationship." This claim was in part countered by a committee member, Representative Jimmy Panetta, who stated that NAFTA is benefitting fruit and vegetable producers in California and that countercyclical production between California and Mexico is complementary, as some producers have production facilities in both the United States and Mexico. Information on the extent that U.S. companies may be engaged in fruit and vegetable production in Mexico is not available. Some in Congress support USTR's seasonal proposal, claiming that it is necessary to address perceived unfair trading practices by Mexican exporters of fresh fruits and vegetables. Others in Congress oppose including the proposal, contending that seasonal production complements rather than competes with U.S. growing seasons. They also worry that it could open the door to an "uncontrolled proliferation of regional, seasonal, perishable remedies against U.S. exports." Most U.S. food and agricultural groups, including some U.S. fruit and vegetable producer groups, also oppose seasonal proposals. Some worry that efforts to push for seasonal protections, among other U.S. proposals, could derail agricultural provisions in the NAFTA renegotiation. Some claim that the proposal is intended to favor a few "politically-connected, wealthy agribusiness firms from Florida" at the expense of others in the U.S. produce industry and at the expense of both consumers and growers in other fruit and vegetable producing states, such California and Washington. In general, the U.S. agricultural sectors have not broadly supported proposals that could potentially damage existing export markets under NAFTA. Mexican trade officials do not support seasonal proposals, nor do they support limiting access for some products. Reports indicate that the United States intended to table the proposal during the first round of the negotiations, but pushback forced it to hold the proposal back. Other reports indicate that Mexico is considering retaliation by including its own list of protected products in response to the U.S. proposal. Such a list could include certain grain and pork products and other types of limitations to protect Mexican products in certain production areas. Some U.S. agricultural groups have expressed concerns about "negotiating at the edges" and carving out certain products for special treatment as part of the NAFTA renegotiation. Former U.S. trade officials have also expressed skepticism about whether efforts to limit imports would benefit U.S. producers. American food and agricultural producers continue to express concerns about the Trump Administration's threats to withdraw from the agreement. A broad coalition of U.S. agricultural groups claim that "withdrawal from NAFTA would result in substantial harm to the U.S. economy generally, and U.S. food and agriculture producers, in particular." Agriculture groups also remain concerned about growing uncertainty in U.S. trade policy and the potential for the ongoing NAFTA renegotiation to disrupt U.S. export markets. Economic studies commissioned by some U.S. agriculture groups claim that 43.3 million jobs—about one-fourth of all U.S. employment—are connected to the food and agriculture industries. Some in Congress continue to support maintaining U.S. agricultural export markets under most preferential trade agreements, including NAFTA. The U.S. food and agriculture industries have much at stake in the current NAFTA renegotiations. Canada and Mexico are the United States' two largest trading partners, accounting for 28% of the total value of U.S. agricultural exports and 39% of its imports in 2016. Under NAFTA, U.S. agricultural exports to Canada and Mexico have increased sharply, rising from $8.7 billion in 1992 to $38.1 billion in 2016. The United States supplies 58% of Canada's and 71% of Mexico's agricultural imports. Mexico's agricultural policies have undergone a series of changes in the past few decades. Previously, Mexico's policies were a combination of price support and general consumption subsidies. Starting in the 1980s, Mexico initiated unilateral reforms to its agricultural sector, eliminating its state enterprises related to agriculture and removing price supports and subsidies for staple commodities. In addition, as part of reforms to Mexico's agrarian laws, lands that had been distributed to rural community groups following the 1910 revolution were allowed to privatize. Additional domestic reforms in agriculture coincided with negotiations under NAFTA beginning in 1991 and continued beyond the implementation of NAFTA in 1994. Another major reform was the 1999 abolishment of CONASUPO, Mexico's primary agency for government intervention in agriculture. In 1993, Mexico introduced PROCAMPO (now named PROAGRO Productivo), a domestic agricultural support program with a budget of about U.S. $1 billion (2013 data) across all agricultural sectors. According to USDA: The program was created to facilitate the transition under NAFTA to more market oriented policies from the previous system of guaranteed prices. It provides direct cash payments at planting time on a per hectare basis to growers of many crops, including feed grains as well as oilseeds. Initially, PROCAMPO was designed to be in place until the 2008-2009 fall-winter crop cycles. However, the Felipe Calderon administration (2006-2012) decided to extend the program until 2012 with some minor changes. PROAGRO Productivo continues to target rural development and poverty alleviation and is intended to help producers cope with lower trade protections and the removal of direct price supports through direct payments to rural producers. The program grants direct supports to growers with farms in operation that are appropriately registered in the PROAGRO directory. It provides a flat rate payment to farmers with production areas based on the size of their production unit as follows: Subsistence growers with up to five hectares (about 12.4 acres) of non-irrigated land and 0.2 hectares (about 0.5 acres) of irrigated land, as well as subsistence growers with up to three hectares (about 7.4 acres) of non-irrigated land for units located within specific municipalities; Transition growers with more than five hectares and up to 20 hectares (about 50 acres) of non-irrigated land and more than 0.2 hectares and up to five hectares of irrigated land; and Commercial growers with more than 20 hectares non-irrigated land and more than five hectares irrigated land. "Subsistence" growers located within specific municipalities with up to three hectares of non-irrigated land receive the largest amount of support payment per hectare for their production units at 1,500 pesos (about $82/hectare or $33/acre). Others outside these municipalities get about 1,300 pesos (about $71/hectare or $29/acre). "Transition" production units receive 800 pesos per hectare (about $44/hectare or $18/acre) and "commercial" production units receive 700 pesos per hectare (about $38/hectare or $15/acre). The maximum subsidy amount that a grower can receive under PROAGRO Productivo cannot exceed 100,000 pesos (roughly U.S. $7,750) per crop cycle. Available information indicates that PROAGRO mostly supports corn, sorghum, wheat, and rice production. Other information further indicates that, overall, Mexico's producers of sugar, corn, and milk receive the highest level of support across all programs. As a member of the WTO, Mexico has committed to abide by WTO rules and disciplines, including those that govern domestic farm policy. The WTO's Agreement on Agriculture spells out the rules for countries to determine whether their policies for any given year are potentially trade-distorting, how to calculate the costs of any distortion, and how to report those costs to the WTO in a public and transparent manner. As part of each member's obligations and commitments, each country is required to file periodic notifications of its agricultural domestic support measures and export subsidies for review by the relevant bodies of the WTO. Mexico's most recent notification to the WTO of its domestic farm program spending lists the following agricultural support measures: Food Support Programme; Rural Supply Programme; Milk Supply Programme; PROMUSAG: Programme for Women Working in the Agricultural Sector; PROMETE: Programme in Support of Production Projects by Women Entrepreneurs; FAPPA: Support Fund for Production Projects in Agrarian Clusters; Young Rural Entrepreneur Programme; COUSSA: Conservation and Sustainable Use of Soil and Water; Small-Scale Hydraulic Works Construction Programme; Native Mexican Maize (Corn) Conservation Programme; PRODEZA: Arid Zone Development Programme; PESA: Strategic Food Security Programme; and PROAGRO Productivo (formerly PROCAMPO). In general, these programs provide support for rural and/or entrepreneurial development focused on poverty alleviatio n, domestic feeding programs, and production by new farmers and women. Mexico identifies each of these programs to be non-trade-distorting (i.e., "green box" programs that are considered to be minimally or non-trade distorting and are not subject to any spending limits under WTO rules). Overall, Mexico's producers of sugar, corn, and milk receive the highest level of support across all programs. There do not appear to be domestic farm programs that provide direct support to Mexico's fruit and vegetable growers among the notified programs listed above. Limited other information is available regarding support or incentives for Mexico's fruit and vegetable sectors. Available information indicates that Mexico does not provide direct financial support to its produce growers, which is similar to the situation that prevails in the United States. Mexico's notification of its agricultural export subsidies covers only maize (corn), beans, wheat, sorghum, and sugar. Available information does not indicate existing export subsidies benefitting Mexico's fruit and vegetable growers. For purposes of comparison with U.S. government support for its fruit and vegetable sectors, see CRS Report R42771, Fruits, Vegetables, and Other Specialty Crops: Selected Farm Bill and Federal Programs , and also CRS Report R43632, Specialty Crop Provisions in the 2014 Farm Bill (P.L. 113-79) . | The United States has initiated renegotiations of the North American Free Trade Agreement (NAFTA) with Canada and Mexico. Among the Administration's agriculture-related objectives in the renegotiation is a proposal to establish new rules for seasonal and perishable products, such as fruits and vegetables, which would establish a separate domestic industry provision for perishable and seasonal products in anti-dumping and countervailing duties (AD/CVD) proceedings. This could protect certain U.S. seasonal fruit and vegetable products by making it easier to initiate trade remedy cases against (mostly Mexican) exports to the United States and responds to complaints by some fruit and vegetable producers, mostly in Southeastern U.S. states, who claim to be adversely affected by import competition from Mexico. Mexico's production of some fruits and vegetables—tomatoes, peppers, cucumbers, berries, and melons—has increased sharply in recent years, in large part due to Mexico's investment in large-scale greenhouse production facilities and other types of technological innovations. Some claim that this investment is supported by government subsidies and should be addressed through higher countervailing duties (CVD) on U.S. imports of these products. They also claim that these imports are sold to the United States at prices below the cost of production and alternatively could be countered by higher anti-dumping (AD) duties. Concerns have mostly focused on U.S. imports of tomatoes, peppers, and berries. The Administration's seasonal proposal is among the more contentious of the agricultural proposals reportedly considered by U.S. negotiators. The proposal would likely require changes to U.S. AD/CVD laws by allowing growers to bring an injury case by domestic region and draw on seasonal data. Under current law, an injury case must be supported by a majority (at least 50%) of the domestic industry. The Administration's proposal could reportedly allow regional groups—representing less than 50% of producer nationwide—to initiate an injury, even if the majority of producers within the industry, or in other regions, do not support initiating an injury case. Also, under current law, three years of annual data is necessary to prove injury, whereas the proposal would allow for the use of seasonal data to prove injury. The seasonal proposal has divided the U.S. fruit and vegetable industry, and opinions are split between producers in some Southeastern states and producers in other states, such as California. Opinions in Congress are also divided. Some in Congress support the seasonal proposal, claiming that such a change is necessary to address perceived unfair trading practices by Mexican exporters of fresh fruits and vegetables. Others in Congress oppose including the proposal, contending that seasonal production complements rather than competes with U.S. growing seasons. They also worry that this change could open the door to retaliation by U.S. trading partners and to the imposition of similar regional and seasonal remedies against U.S. exports. Mexican trade officials also do not support including a seasonal AVD/CVD proposal as part of the NAFTA renegotiations, nor do they support limiting access for some products. Some reports indicate that Mexico is considering retaliation by including its own list of protected products in response to the U.S. proposal. Such a list could include certain grain and pork products and other types of limitations to protect Mexican products in certain production areas. The U.S. food and agriculture industries have much at stake in the current NAFTA renegotiations. Canada and Mexico are the United States' two largest trading partners, accounting for 28% of the total value of U.S. agricultural exports and 39% of its imports in 2016. Under NAFTA, U.S. agricultural exports to Canada and Mexico has increased sharply, rising from $8.7 billion in 1992 to $38.1 billion in 2016. |
The 112 th Congress and the Obama Administration face a range of trade issues. Many of these issues, such as pending free trade agreements and trade negotiations, trade preferences for developing countries, trade enforcement and compliance, and renewal of trade promotion authority, are legacies of previous administrations and congresses. New issues may be on the horizon. Trade policy is an important element of economic policy, and as such, its objective is to enhance national economic welfare. However, what constitutes economic welfare can vary among the interest groups that comprise the stakeholders in U.S. trade policy, such as farmers, manufacturers, service providers, workers, importers, consumers, and environmentalists, and among members of Congress who represent them. The shape and conduct of trade policy are the subject of much debate among policymakers. U.S. policymakers appear to be at a crossroads on these questions at this time. The future shape, direction, and content of U.S. trade policy are uncertain. Some observers have suggested that the role of trade policy should be given lower priority relative to foreign policy and domestic economic issues; others call for an activist policy that faces the challenges head on. Besides these questions, there is the overarching question of what role, if any, should or can trade policy have in promoting U.S. economic and foreign policy interests. On the one hand, it can be argued that the emergence of global production networks, within which manufacturers have internationalized production processes across borders, is making government-to-government trade agreements and trade policy in general less effective, if not obsolete. In addition, the rapid increase in capital flows across borders dwarf the impact of flows of goods and services, reducing the effectiveness of trade policy initiatives. On the other hand, it can be argued that trade policy remains a significant aspect of economic and foreign policy that can hinder or promote national interests and has a high-level of relevance as reflected in the rapid growth of trade (U.S. trade in goods and services totaled $3.5 trillion in 2009), and the increase in bilateral and regional trade agreements throughout the world. This report is designed to assist the 112 th Congress as it grapples with these complex issues of trade policy in a rapidly changing economic landscape. How Congress and the Obama Administration respond could have long-term implications for U.S. trade, economic, and foreign policy interests. The report discusses the issues that the 112 th Congress could face and the political and economic context in which these issues are being debated. It then analyzes the debate that is taking place among policy experts and stakeholders over the future form and role of trade policy and concludes with an examination of some of the options available to Congress and the pros and cons of each. This report will be updated as events warrant. A number of political factors and economic conditions will influence the shape, direction, and content of U.S. trade policy in the next few years. The relative significance of each of these factors could change over time. One factor that will likely affect the direction of U.S. trade policy is American public opinion, including the views of major stakeholders, such as businesses, labor, farmers, and non-government organizations(NGOs), on trade liberalization and trade agreements. Some recent opinion surveys suggest an overall ambivalence, if not growing opposition, among the American public regarding trade liberalization. On the one hand, a plurality of Americans believe that free trade agreements hurt the United States. A Pew Research Center survey released on November 9, 2010, showed that 44% of the American public thought that free trade agreements were a "bad thing," while 35% viewed them as a "good thing.". These percentages were reverse from those that resulted from a December 2009 survey where 43% thought free trade agreements were a "good thing" and 32% thought they were a "bad thing" for the United States. On the other hand, a majority of those surveyed in the same study thought increasing trade with Canada, Japan, the European Union (EU), and other major trading partners was good for the United States. Views vary among the major stakeholders. In general, the U.S. business community has supported trade agreements. The agriculture community largely supports them, although some groups, such as sugar producers, have opposed agreements that would increase access of foreign producers to their markets. U.S. labor in general has been skeptical on trade and has opposed most free trade agreements. Some NGOs, particularly those that serve poor countries, have opposed trade liberalization, while others view trade liberalization as an avenue to economic growth and development. Congress appears to reflect the public's ambivalence on trade policy much of the time. The congressional perspective is particularly critical because the Constitution assigns primary responsibility on trade policy to the legislative branch. Ambivalence on trade appears to be especially evident in the House of Representatives. Over the years, support in Congress for trade liberalization, by some measures, seems to have declined. For example, the House approved the Trade Act of 1974, which established "fast-track trade authority," by a vote of 272-140. On December 6, 2001, however, the House passed the most recent version of "fast-track" (now also called trade promotion authority [TPA]) by the thinner margin of 215-214. Votes on specific trade agreements perhaps indicate a greater congressional ambivalence on trade liberalization. On November 8, 2007, the House passed implementing legislation ( H.R. 3688 , P.L. 110-138 ) for the U.S.-Peru Free Trade Agreement—the most recent FTA to be approved—by a vote of 285-132, but passed the U.S.-Dominican Republic-Central American (DR-CAFTA) ( H.R. 3045 , P.L. 109-53 ) by a much narrower margin of 217-215. Senate votes on fast-track and trade agreements tended to be not as close. The President's role and his stance on trade is a third political factor shaping trade policy. While influenced by the other two factors, presidents have favored trade liberalization for economic and foreign policy reasons, while acknowledging, through rhetoric and actions, the adverse affects trade liberalization may have on some segments of the economy. This has been the case with both Republican and Democratic Administrations. The United States completed and enacted the Tokyo Round Agreements under President Carter, the negotiations for which were launched under President Nixon. NAFTA and the Uruguay Round Agreements were enacted under President Clinton, but the negotiations for both were launched under President Reagan and continued under President George H.W. Bush. This pattern may be continuing. President Obama has expressed qualified support for the pending free trade agreements (FTAs) with Colombia, Panama, and South Korea and for the completion of the Doha Development Agenda (DDA) round of WTO negotiations, all of which were launched under President George W. Bush. The U.S. Constitution assigns express authority over foreign trade to Congress. Article I, section 8, gives Congress the power to "regulate commerce with foreign nations ..." and to "... lay and collect taxes, duties, imposts, and excises...." For more than a century and half, Congress exercised its foreign trade policy responsibility primarily through setting tariff rates. Tariffs were also a major source of federal government revenue at that time. Early congressional trade debates pitted members from northern manufacturing regions, who benefitted from protectionist tariffs, against those from largely southern raw material exporting regions, who lobbied for low tariffs. However, for political and pragmatic reasons, Congress has increasingly delegated certain trade authority to the President—without relinquishing overall congressional authority over trade policy. One important example is in the area of trade agreement negotiations. In 1934, Congress enacted the Reciprocal Trade Agreements Act (RTAA; P.L. 73-316). The RTAA authorized the President to negotiate reciprocal agreements that reduced tariffs within pre-approved levels. The tariffs were applied on an MFN basis. Under the RTAA, Congress authorized the president to implement the new tariffs by proclamation without additional legislation. The RTAA was the first time Congress expressly delegated to the President major trade authority. In so doing, it is argued, Congress aimed to lessen pressure to protect specific firms and industries from import competition and also to assure trading partner-countries that agreements would not be changed by Congress before enactment. In addition, the RTAA was also a practical way for Congress to exercise its constitutional responsibility for trade while recognizing the President's constitutional role (Article II) as the sole authority to negotiate foreign agreements for the United States. Over the years, Congress expanded presidential trade authority as trade negotiations and agreements became more complex. Beginning with the Trade Act of 1974, as amended, Congress authorized fast-track authority, which allowed for implementing legislation for certain trade agreements that the President negotiated be subject to expedited legislative procedures (e.g., limited debate, no amendments, and guaranteed congressional consideration), if the Administration adhered to statutorily mandated procedures, including consultation with Congress. Congress has delegated additional trade policy authority to the executive branch by granting it the authority to implement a number of trade remedies and other trade programs. For example, the U.S. Department of Commerce (along with the independent U.S. International Trade Commission) is responsible for implementing the anti-dumping (AD) and countervailing duty (CVD) trade remedy programs. AD and CVD remedies are designed to offset the price advantages accrued to imports as a result of dumping (selling at below fair market value) and foreign government subsidies, respectively. Congress has also given the authority to the President and the U.S. International Trade Commission (USITC) to implement the escape clause (section 201) trade remedy, to dampen the injurious effects on domestic industries of surges in fairly traded imports. While selectively delegating trade policy authority to the President, Congress has maintained tight reins on its implementation. In the case of trade agreement authority, Congress has made trade promotion authority subject to sunset provisions requiring it to be renewed and requires the President to adhere to deadlines, negotiating objectives, and consultation with Congress in order for the implementing legislation to be eligible for the expedited legislative procedures. In the case of trade remedies, Congress sets out, in the implementing statutes, procedures and other criteria that the relevant agencies are to follow in implementing these programs (while allowing for some degree of presidential and executive branch discretion in so doing). During the past two decades or more, Congress has tightened the reins and has, thus, arguably been shifting the balance of power on trade away from the executive and back to itself. In the case of trade agreement authority, Congress has expanded the list of negotiating objectives and consultation requirements and has played an increasing activist role in the implementation process. In the case of trade remedy programs, Congress has been reducing executive discretion to increase the frequency of decisions producing the measures that benefit domestic industries. Within the executive-legislative relationship on trade policy exists inherent institutional tension even if the two branches are controlled by the same party. Congress, particularly the House, often reflects the interests of individual constituent groups. The President is generally seen as representing the interests of the country as a whole, including how trade policy relates to U.S. international economic and political concerns. At times, individual and national interests may conflict, such as when trade liberalization measures affect import-sensitive firms and industries, producing the need for bipartisan and inter-branch cooperation in order to conduct trade policy effectively. U.S. trade occurs in a rapidly changing economic environment. The role of trade in the U.S. economy has increased substantially over the years. For example, the total value of U.S. exports and imports of goods and services equaled 11% of U.S. gross domestic product (GDP) in 1970 and 25%% in 2009. World trade has grown rapidly as well. For example, in 1989, world trade in goods and services was valued at $3.7 trillion and $15.2 trillion in 2009. At the same time, the role of trade in the world economy increased, from 18% of world GDP in 1989 to 27% in 2009. The United States economy accounts for 25% of the world's GDP, yet for only 5% of the world's population, which indicates a large number of potential consumers outside U.S. borders. One of the most significant factors affecting trade policy over the next few years will be the after-effects of the global financial crisis and the resulting economic downturn. Slumping world demand caused overall U.S. trade and trade with major partners to decline sharply. U.S. exports increased 11.8% and U.S. imports increased 7.3% in 2008 over 2007 levels; however, in 2009, U.S. exports declined 17.9%, and imports declined 25.9% from 2008 levels. The decline in U.S. trade mirrored world trade trends. The WTO reported that world trade declined 12% in 2009—the largest drop since World War II. The impact of the downturn on U.S. employment will likely affect U.S. trade policy, at least indirectly. Even though U.S. economic growth has resumed, the unemployment rate has remained comparatively high at 9.8%. During some economic crises, nations have withdrawn from global commerce and raised tariffs and nontariff barriers to protect domestic producers and workers from foreign competition. Such measures in turn caused trade to contract, exacerbating the recession. The primary historical example of such policy steps in the United States was the extremely high Smoot-Hawley tariffs contained in the Trade Act of 1930, which led U.S. trading partners to retaliate with high tariffs that slowed world trade and helped deepen and prolong the Great Depression. When Congress included a "Buy American" provision in the economic stimulus bill ( H.R. 1 , the American Recovery and Reinvestment Act of 2009, signed into law by the President on February 17, 2009), major trading partners, including China and the European Union, claimed that these were protectionist measures. The bill did include provisions stipulating that no measures could violate U.S. international obligations. The WTO reported that in 2009 its 153 members, representing more than 90% of world trade, did not resort to wholesale protectionist measures in response to the crisis, although it reported increases in some trade limiting, WTO-legal measures, such as trade remedy actions. The U.S. stimulus programs and similar program by other countries have also raised the issue of to what degree are such state-funded programs targeted to certain industries, such as autos, that could become subsidies that are not acceptable under WTO rules. The emergence of developing countries, particularly emerging economies such as Brazil, China, and India as major trading powers, is affecting U.S. trade policy. In 1985, developing countries accounted for 32.8% of total U.S. exports and for 34.5% of total imports. By 2009, developing countries accounted for 51.6% of U.S. exports and 59.8% of U.S. imports. The growth of developing countries' economies and foreign trade presents the United States with opportunities and challenges. The imports from many developing economies provide U.S. consumers with an ever widening range of choices of products at lower prices, raising real incomes and contributing to a higher U.S. standard of living. They are also intermediate goods used in the production of U.S.-produced goods, lowering costs and, thereby, helping to maintain the competitiveness of U.S. firms in the global economy. A number of the developing countries have also become robust markets for U.S. exports. At the same time, many U.S. workers are competing with an expanding pool of lower-wage labor from India, China, and other developing countries. Such competition induces U.S.-based firms to reduce costs by using labor-saving technology to remain productive while reducing labor costs, moving production offshore, or shutting down operations entirely, forcing workers to adjust. Even workers in the high-end services sector are feeling the pressures of competition from some developing countries. Trade with developing countries also raises a set of issues regarding labor rights, environment protection, intellectual property rights and others that have become fixtures on the U.S. trade agenda. At the same time, developing countries are challenging U.S. policies on trade remedies, high tariffs on wearing apparel and other import-sensitive products, pricing of medicines, and the temporary entry of foreign workers. These countries have made their concerns heard in the WTO, especially during the Doha Development Agenda (DDA) round, where they make up a significant majority of the 153 WTO members, and most U.S. free trade agreements are with developing countries. U.S. trade policy must necessarily take into account the issues that result from the growing importance of the developing countries. Within the group, China has emerged as a powerful trading power and one of the top U.S. trading partners. It has become a focal point for U.S. trade policymakers and will likely continue to be so. In the past several decades, the U.S. economy has become more integrated with the rest of the world economy, a trend commonly known as "globalization." Globalization has become more prevalent in part because of technology advancements, such as the Internet, that have dramatically reduced the costs of communication, and because of more efficient modes of transportation that allow goods to be shipped more cheaply. This process has led to the formation of global production networks, or global supply chains. A global production network is an arrangement under which a firm, with its headquarters in one country (for example, the United States), has divided its production process into discrete segments that can be handled across national borders. For example, a U.S.-based computer manufacturer could locate the design and marketing functions of the computer at home in the United States, have components produced in East Asia, and locate final assembly at home or abroad for export back home to the United States or to third country markets. Furthermore, multinational corporations use them to avoid foreign trade barriers. Although anecdotal evidence suggests a rapid increase in the formation of transnational production networks, such a trend is hard to quantify. One possible indicator is the amount of trade in intermediate goods conducted within multi-national corporations (MNCs). In 2007 (latest data available), 31% of such trade was in intermediate goods, an increase from 28% in 2002. The internationalization of production has implications for trade policy. Foreign trade is traditionally viewed as one nation exporting products entirely made by producers within its borders to another nation that then applies tariffs and other border measures before importing the good within its borders. The formation of global production networks means that many of the goods that are traded might not be final products but are components shipped within the production process. If the importer is a U.S. company purchasing parts or final products from a foreign company within its production network, tariffs and non-tariff measures applied at the border add to the cost of production for the U.S. company. If, for example, the U.S. government determines that flat computer screens are being dumped in the U.S. market and those screens are used in the assembly of computers in the United States, any antidumping duties applied will affect the cost (and probably the price competitiveness of the U.S. produced computer) and will lower the profits of the U.S. company that makes the final product. Along with the development of global supply chains, the surge in free trade agreements (FTAs), customs unions, and other preferential trade arrangements has significantly altered the shape of the international trading system. According to the WTO, about 285such arrangements were in force in 2010, of which 90% are FTAs and around 10% are customs unions. The United States participates in 11 FTAs with 17 countries. Furthermore, many major U.S. trading partners are participating in this trend. For some observers, these arrangements promote global trade liberalization by creating groups of countries willing to reduce, if not eliminate, tariffs and other trade barriers in their mutual trade; in so doing, they improve economic efficiency and general economic welfare benefitting the world as a whole. The WTO permits free trade areas and customs unions under certain conditions, (for example, that the FTAs shall cover "substantially all trade" and not raise new barriers to trade with outsiders) even though they discriminate against trade with nonparticipants, violating the WTO principal of most-favored-nation (MFN), or nondiscriminatory, treatment. The WTO assumes that such agreements on a net basis will create more trade than divert trade from efficient producers. However, critics assert that these arrangements undermine trade liberalization because the estimated 285 agreements are not structured alike. Some arrangements, for example the FTAs in which the United States participates, are very comprehensive and cover not only trade in goods but also trade in services, foreign investment, intellectual property rights protection, labor rights and environment protection. Others, such as Japan's economic partnership agreements (EPAs), are more limited in scope and may exclude some sensitive sectors, such as agriculture trade. Furthermore, the arrangements will have differing sets of rules of origin—the criteria used to define eligibility for preferential treatment under the agreement. In addition, the FTAs and customs unions have overlapping memberships further fragmenting the international trading landscape. Critics charge that all of these asymmetries lead to a confusing web of trading arrangements which impede, rather than promote, the free flow of trade and undermine, the development of a strong and effective multilateral trading system. Another issue is whether these FTAs are actually used, or do the implementation costs outweigh the benefits. U.S. policymakers, in both the executive branch and in Congress, are confronted with some limitations on the scope of their ability to develop and implement trade policy. Such limitations, some of which are reflected in U.S. commitments under the WTO, regional and bilateral trade agreements, treaties, and other international agreements to conduct trade within the bounds of mutually accepted rules. For example, under the WTO and other trade agreements, the United States has agreed not to raise its tariffs above agreed-upon rates, except under special circumstances. The United States always has the option of opting out of the agreement or treaty as prescribed in the agreement, with the understanding that in doing so, the United States may be sacrificing benefits as well as obligations. In addition, successful policymakers must reflect the demands of the various economic stakeholders and their interests. They include manufacturers, services providers, labor, agriculture producers, environmental interest groups, among others. Many times the trade interests of these groups conflict, such as those of manufacturers and those of organized labor. In some cases, interests within one group of stakeholders will conflict. For example, manufacturers of exported goods largely favor trade policies that promote trade liberalization, whereas manufacturers of import-sensitive products will favor trade-restricting policies. Trade policymakers are also restricted by the limited effectiveness of trade policies. For example, most mainstream economists argue that trade policies do not affect trade balances and, therefore, would have little if any influence on U.S. trade deficits. From their perspective, trade balances are largely a product of macroeconomic factors, including domestic savings and investment balances and exchange rates. While they acknowledge that trade policy generally influences the composition of trade they believe that trade policy has little if any affect on aggregate unemployment levels, although trade can affect the composition of employment. At least one more factor will likely influence the content and implementation of U.S. trade policy—the increasing significance in trade negotiations of "behind the border" measures, such as safety regulations, internal taxes, environmental regulations, enforcement of intellectual property rights, investment regimes, and labor rights protection—and their impact on foreign commerce. In the negotiations on the U.S.-South Korea free trade agreement (KORUS FTA), for example, the United States had concerns regarding South Korean excise taxes on cars that U.S. auto manufacturers claim are applied in a discriminatory manner against foreign produced cars, particularly U.S.-made cars. These taxes are used to encourage fuel efficiency and pollution abatement but could purposely or inadvertently discriminate against imports. Also, foreign governments' restrictions on imports of U.S.-produced beef, after the December 2003 discovery of a cow infected with bovine spongiform encephalopathy (BSE) ("mad cow disease") in Washington state, have been a major trade issue. A number of U.S. trading partners, for example, Japan, Taiwan, and South Korea, imposed a ban on imported U.S. beef and then have been phasing in certain imports only after arduous negotiations and assurances on the part of U.S. agricultural officials that the beef is safe. Another example is China's fledgling indigenous innovation policy that the Chinese government is employing to move China from being a largely manufacturing economy to an innovative one. Some argue that such policies could give Chinese firms an unfair advantage over U.S. counterparts. The steady increase in U.S. trade deficits has cast a shadow on views of overall U.S. trade performance and trade policy. The United States has incurred annual merchandise trade deficits continually since 1976, when the deficit was $6.5 billion. In 2006, the deficit peaked at $828.0 billion. It decreased slightly in 2007 ($808.8 billion) and increased in 2008 to $816.2 billion. In 2009, the U.S. merchandise trade deficit decreased to $500.9 billion as a result of a drop in U.S. demand for imports due to the recession. The United States has also incurred annual deficits in its current account (which includes not only merchandise trade, but also services trade, investment income, and unilateral transfers) since 1992, when the deficit was $50.1 billion. In 2009, the current account deficit was $378.4 billion. Mainstream economic theory and economists attribute the large trade deficits mainly to the imbalances in U.S. savings and investment—thus, the United States consumes more than it produces. The corollary to this perspective is that policymakers would have to use fiscal and monetary policies to address trade deficits rather than trade policies which would affect only the composition of trade. However, some have pointed to trade deficits, including bilateral trade deficits, as a barometer of the effectiveness or ineffectiveness of U.S. trade policy and an indicator of the fairness (or unfairness) of U.S. bilateral trade relationships. The U.S. merchandise trade deficit with China, which hit $226.8 billion, was the largest U.S. bilateral trade deficit in 2009. The deficit with Mexico was the second largest—$47.5 billion. The 112 th Congress faces a number of trade issues. Some of these issues were pending from the 111 th Congress, while others are longer-term. The Bush Administration negotiated and implemented eight free trade agreements with 13 countries. These agreements entered into force after Congress passed implementing legislation. The Bush Administration also negotiated three other FTAs—with Colombia, Panama, and South Korea—which Congress has yet to approve. Differences between the Bush Administration and the Democratic leadership in the 110 th Congress over the FTAs led to a stalemate. The Bush Administration pressed Congress to act on the FTAs, even sending the draft implementing legislation for the proposed U.S.-Colombia FTA to Congress over the objections of the House Democratic leadership. However, the latter cited what it considered to be the failure of the Colombian government to ensure the safety of local trade union leaders and refused to move on the legislation. The House passed a rule on a party-line vote that disallowed the time limitations for consideration of the U.S.-Colombia FTA stipulated under TPA, effectively halting congressional action on the legislation. Concerns over alleged lax tax laws in Panama, that some members argue have allowed Panama to become a tax haven, have inhibited consideration of the U.S.-Panama FTA. Some members of Congress have also raised objections to the U.S.-South Korean FTA (KORUS FTA), claiming that it does not adequately address South Korean barriers to U.S. exports of manufactured goods, including autos, and would weaken U.S. trade remedies against dumped or subsidized imports from South Korea. In December 2010, the United States and South Korea agreed to some modifications of the KORUS FTA specifically regarding autos, that have lead to full support of the agreement by the U.S. auto industry. To date, the Administration has not indicated when it would expect to introduce draft implementing legislation for any of these agreements, although as a result of the December 2010 modifications, the Administration indicated it would be prepared to move on the KORUS FTA in 2011. In the meantime, the Administration has also entered into negotiations with participants in the Trans-Pacific Partnership (TPP) Agreement—Australia, Brunei, Chile, New Zealand, Peru, Singapore, and Vietnam. The objective is to build on U.S. trade ties in the region already established in FTAs with Australia, Chile, and Singapore and to provide a high-standard framework for expanded free trade in the region. In 2001, the members of the World Trade Organization (WTO) launched the latest round of trade negotiations called the Doha Development Agenda (DDA) round. During the more than eight years the negotiations have been underway, the negotiators have made some progress on establishing criteria for reducing barriers to trade in agricultural products, manufactured goods, and services and on reforming fundamental trade rules. However, they have at times confronted serious roadblocks that have caused negotiators to reach an impasse. The DDA negotiations are now at such a point because of disagreements between developing countries and developed countries over agricultural subsidies, modalities for the reduction of tariffs on manufactured goods, and other issues. TPA—formerly called fast-track authority—stipulates special House and Senate legislative procedures that allow implementing legislation for trade agreements to receive expedited consideration (that is, mandatory congressional consideration, limited debate and no amendments), subject to presidential adherence to consultation requirements, deadlines, and negotiating objectives set down in the TPA authorizing statute. The authority is granted for limited time periods. Congress first extended fast-track authority effective January 1, 1975, and renewed that authority in most cases, except for a nine-year period (1994-2002). The latest version was authorized under the Bipartisan Trade Promotion Authority Act (BTPAA) of 2002, which was enacted as Title XXI of The Trade Act of 2002 ( P.L. 107-210 ) and went into effect on August 6, 2002. It expired on July 1, 2007. Early incarnations of TPA, although controversial, were adopted with substantial bipartisan majorities. Over time, however, trade negotiations have become more complex, Congress has insisted on tighter oversight and consultation requirements, and the trade debate has become more partisan in nature, making congressional renewal of TPA, if anything, even more controversial. The three pending FTAs—with Colombia, Panama, and South Korea—were completed within the statutory deadlines under the previous TPA and, therefore, are not affected by its expiration. However, the lack of TPA could affect progress in pending negotiations and future negotiations. For example, some WTO members have stated that unless the President has TPA, the United States would not be able to negotiate credibly because any agreements reached could be subject to congressional amendments. The same argument could apply to initiating new bilateral FTA negotiations, including the TPP. However, others might argue that the Doha Round had not made much progress even when President Bush had TPA , and U.S. trade partners, for example, New Zealand, have expressed eagerness to begin FTA negotiations despite the absence of TPA. Any debate in Congress on renewal of TPA will likely focus on the central question of whether, when, and in what form TPA should be renewed. Some have argued that TPA should be renewed to cover, at a minimum, the Doha Round multilateral agreement, if it can be concluded, and perhaps also potential future FTAs, such as the TPP. The United States extends preferential treatment, usually duty-free treatment, to a range of imports from many developing countries to promote economic growth and encourage development. In order to be eligible for the preferential treatment, the developing country must adhere to certain political and economic criteria, including rules of origin, protection of workers' rights and protection of intellectual property rights (IPR). Certain import-sensitive products are statutorily prohibited from receiving preferential treatment. In addition, under the Generalized System of Preferences (GSP), countries having an average per capita GDP above a specified threshold are ineligible for preferential treatment as are imports of their products that exceed a specified share of total U.S. imports of that product. Most of the preference programs are subject to congressional reauthorization. The GSP is the most comprehensive U.S. program covering the largest number of developing countries. That program was renewed until December 31, 2010 ( P.L. 111-124 ) not beyond that by the 111 th Congress. Some members of Congress have questioned the effectiveness of the program, because most of its benefits go to the more advanced developing countries, while the poorest countries benefit the least. Some have suggested, for example, lowering the per capita income threshold determining eligibility. Other trade preference programs are targeted to regions and provide coverage for a wider range of products than does GSP. The Andean Trade Preferences Act (ATPA), for example, provides special treatment to imports from Colombia, Bolivia, and Ecuador. The program was renewed until February 12, 2011, by the 111 th Congress. Another regional program, the Caribbean Basin Trade Partnership Act (CBTPA), extends preferential treatment to imports from eight Caribbean countries, including some textiles and apparel, is due to expire on September 30, 2010. In addition, the African Growth and Opportunity Act (AGOA; Title I, P.L. 106-2006 ) provides tariff preferences and other economic benefits to countries in sub-Saharan Africa that meet certain criteria, including progress toward a market economy, respect for the rule of law, and human and worker rights. The Haitian Hemispheric Opportunity through Partnership Encouragement Act of 2006 (HOPE I) authorizes preferential access to U.S. imports of Haitian apparel. The Hemispheric Opportunity through Partnership Encouragement Act of 2008 (HOPE II) extends the preferences for 10 years; expands coverage of duty-free treatment to more apparel products, particularly knit articles; and simplifies the rules, making them easier to use. U.S. trade laws include provisions authorizing the government to impose remedies for domestic industries and firms against the price advantage of unfairly imported goods that have caused injury, such as imports that are dumped, that is, sold in the United States at a price determined to be less than fair value, or imports that have received a countervailable foreign government subsidy. They also include provisions dealing with surges in imports that may be fairly traded but injure or threaten to injure U.S. firms and workers. Other provisions deal with countries who do not adequately protect the intellectual property of U.S. owners. A number of members of Congress, members of the U.S. business community, and some labor groups have charged that previous administrations have not enforced these laws effectively. Some have charged, for example, that China's currency is undervalued, harming U.S. exporters, and have called for the United States to apply trade remedy laws to Chinese products that benefit from the undervalued currency. Proponents of stronger trade enforcement also argue that the United States should force trading partners who are members of the World Trade Organization (WTO), such as China, to fulfill their WTO obligations in trade with United States by exercising more aggressively their right to take those countries to the WTO under the Dispute Settlement Mechanism (DSM). However, some U.S. trading partners have charged that the United States has not been fulfilling its WTO obligations because it has not complied with some adverse decisions. These include WTO determinations that the U.S. practice of "zeroing" in calculating antidumping duties and U.S. subsidies on cotton violate WTO rules and agreements. The WTO has approved the right of trading partners to impose countermeasures in retaliation for U.S. noncompliance in those cases. In addition, Mexico has imposed tariffs under NAFTA on certain U.S. products in retaliation for U.S. noncompliance with the provision of NAFTA to allow Mexican trucks to carry cargo on U.S. highways. Foreign direct investment (FDI) refers to investments in "hard assets"—real estate, plants, factories, and companies—where the foreign investor has a controlling interest. FDI has become part of the debate and implementation of trade policy, because U.S. FDI abroad and FDI in the United States generate trade. U.S. affiliates of foreign companies import parts and services into the United States. They sell the final product in the United States and may also export it back to their home country or to a third country. Foreign affiliates of U.S. companies operate similarly. U.S.-headquartered multinational companies (MNCs) seek investment opportunities abroad to locate closer to markets, develop products according to local preferences and tastes, take advantage of lower costs, and avoid border trade restrictions. However, they often confront inhospitable investment conditions, particularly in developing countries where protection of physical property rights and IPR is not as strong as in more developed countries, or where judicial systems are not as fully formed or advanced as the U.S. system. The United States launched its bilateral investment treaty (BIT) program in 1981 to provide assurances to U.S. investors that their investments in BIT-partner countries are accorded non-discriminatory treatment by the host-country, and that they would have access to fair legal procedures in disputes with host governments. Partner countries view BITs as an indication that they are safe environments in which U.S. investors can do business. As treaties, BITs are subject to approval by a two-thirds (67) vote of the Senate. The United States has BITs in force with 40 countries, mostly developing countries, and BIT-like provisions in its FTAs. In addition, many U.S. FTAs have investment chapters that contain provisions similar to BITs. The Obama Administration is reviewing the U.S. BIT "model." This review will likely generate debate. Supporters of the current model, including the U.S. business community, want to maintain the elements of the BIT that provide for nondiscriminatory treatment of their investments. Some critics, however, charge that BITs encourage U.S. companies to re-locate production and jobs abroad rather than retain them in the United States. They also charge that BITs provide foreign investors in the United States access to more legal remedies in the United States than are available to domestic investors. Proponents argue that these provisions are largely modeled on core principles in U.S. law. The United States is at a crossroads in terms of trade policy. The Obama Administration has weighed in somewhat on trade with its National Export Initiative (NEI) to reenergize U.S. export promotion programs to increase the role small- and medium-sized companies in exporting and to contribute to the U.S. economic recovery. It also imposed high duties on imports of tires from China after the U.S. International Trade Commission (USITC) determined that the tires threatened to harm U.S. producers. However, the Administration and the 112 th Congress face a range of other trade policy issues and challenges that have not yet been addressed. The future direction of trade policy and how the issues are addressed is unclear at this time and the subject of sharp debate within Congress, the Administration, and the trade policy community at large. While a number of issues are related to trade policy, a fundamental question that is the subject of this debate is which trade policy, if any, will promote the highest possible standard of living for U.S. residents. The debate on trade is influenced by the views of three groups. One group, who might be called "trade liberalizers," asserts that on a net basis the benefits to the United States of trade liberalization are greater than the costs and, therefore, should be encouraged through the reduction of trade barriers. A second group, often labeled "fair traders," acknowledges the benefits of trade liberalization but assert that U.S. firms and workers may be forced to compete under conditions they deem unfair. They support trade agreements but only those with provisions that "level the playing field." The third group, which might be called "trade skeptics," argues that U.S. policy as structured and practiced has undermined U.S. economic interests and that trade agreements and WTO obligations have gone too far in impinging on U.S. sovereignty. Where policymakers fit on this continuum of views could help to determine how they decide to address the outstanding and emerging trade issues before Congress. In many cases, the trade policy positions of policymakers and other experts cannot be readily categorized as belonging to one group or another, but the categories provide a mechanism to analyze the major concepts in trade policy and their potential implications. Below is an examination of these views and examples of them as presented by prominent experts. This group includes many mainstream economists and representatives of world-competitive industry, services, and agriculture. They adhere to a strict interpretation of the concept of comparative advantage and free markets in economic theory. According this concept, nations should export those goods and services that they can produce relatively more efficiently and import other goods they would produce less efficiently. To this end, nations should remove tariffs and non-tariff barriers to allow each nation to trade based on its comparative advantage, which is determined by its endowments of labor, land, capital, and technology. In so doing, each nation is able to use its resources to their most efficient purposes, which increases the nation's economic welfare and that of the world as a whole. Trade has a multiplier effect on the rest of the economy. While a nation's general welfare may increase, freer trade does not necessarily distribute those benefits equally. In fact, as trade barriers are lifted, some segments of the economy, such as firms that are unable to survive enhanced competition and the workers that they employ could lose and incur adjustment costs, including worker layoffs, contraction of operations, and plant closures. However, firms and industries and their workers who are competitive would gain by increasing exports. In terms of trade policy, "trade liberalizers" support measures to eliminate trade barriers to allow countries to develop and employ their respective comparative advantages. For example, they support a strong multilateral trading system including the completion of the Doha Round. They also want Congress to renew trade promotion authority (TPA) to allow the Administration to continue to negotiate trade agreements to encourage trade liberalization. In addition, members of this group encourage the renewal and expansion of tariff preferences for developing-country imports to encourage economic development on the basis of comparative advantage. "Trade liberalizers" also promote the liberalization of foreign investment to improve the efficiency of world commerce. Trade policy views within this school are by no means homogeneous. Those in this category differ on how to accomplish trade liberalization and may occupy different positions on some of the outstanding trade issues. For example, some trade policy experts in the group continue to debate whether bilateral and regional free trade agreements are a stumbling block or building block to trade liberalization. Jagdish Bhagwati of Columbia University and some other economists oppose the use of bilateral and regional free trade agreements because, they argue, these agreements are inherently discriminatory, distort trade patterns, and divert trade from more efficient producers to less efficient ones. Bhagwati also argues that rules of origin and the phase-out schedules for tariffs and other conditions do not coincide among FTAs, especially with the proliferation of FTAs worldwide. The incongruity of these regulations across FTAs has created what he sees as a customs administration nightmare and calls it the "spaghetti-bowl" phenomenon. He has concluded that FTAs are a stumbling block to multilateralism and free trade. A more widely held view among "trade liberalizers" is that, while multilateral agreements are preferable, bilateral and regional FTAs are a "second best" solution, especially when multilateral negotiations in the WTO are proceeding slowly or are stalled. Economist Robert Z. Lawrence argues, for example, that recent FTAs involve much more economic integration than the elimination of tariffs. NAFTA, he points out, has led to the reduction in barriers on services trade, foreign investment, and other economic activities not covered by the WTO. In addition, under NAFTA, Mexico has affirmed its commitment to economic reform, making its economy more efficient. Lawrence asserts that the theory traditionally applied to FTAs (by Bhagwati and others) does not take into account these dynamic welfare-enhancing characteristics of FTAs which, he believes, are likely to outweigh any trade diversion that results from the elimination of tariffs. A CATO Institute study by economist Edward L. Hudgins argues that while it may be preferable to liberalize trade multilaterally, countries should take any available avenue, including bilateral or regional FTAs, even if they lead to some trade diversion. Furthermore, Hudgins asserts that FTAs can be more efficient vehicles for addressing difficult trade barriers than the WTO, where the large membership requires compromise to the least common denominator to achieve consensus. FTAs have also provided momentum for WTO members to move ahead with new trade rounds. Proponents of FTAs have also argued that from a commercial, strategic standpoint the United States must approve the pending FTAs and negotiate new ones because trading partners are doing so, placing U.S. exporters at a disadvantage in important markets. Some "trade liberalizers" even assert that the United States would be better off to remove its trade barriers unilaterally without waiting for reciprocal liberalization from trading partners. This position is based on the notion that the removal of tariffs and non-tariff barriers would reduce the cost of imports, increasing income and improving the standard of living. Within this group are some economic experts who have concluded that trade policy alone cannot meet the challenges that U.S. companies and workers face in U.S. economy that has increasingly become integrated with the rest of the world (i.e., "globalization"). One study suggests that globalization, among other factors, has increased U.S. productivity, but the returns on the higher productivity have not been realized by U.S. workers in the form of higher wages and salaries. This trend creates anxiety among lower wage earners about maintaining their standard of living. Advancements in communication technology, especially the Internet, have made more services, such as medical services, tradable across borders. As a result, domestic providers of those services have become increasingly vulnerable to foreign competition. These experts generally support policies that promote trade liberalization. However, they argue that U.S. policy must address those displaced by trade and prepare workers to compete in an increasingly integrated world economy. Such policies, they argue, are necessary to improve the U.S. standard of living, but also to limit if not reverse the decline in popular support for foreign trade. Such policies would include changing the personal tax structure to make it more progressive and to provide for deductions for tuition in new professions and for other expenses incurred in adjusting to career changes; unifying trade adjustment assistance programs with other worker assistance programs to make them more efficient; and revising business tax structures to allow for deductions incurred in adjusting to shifting business conditions. Trade expert Grant Aldonas expands the policy recommendations even farther. He suggests that in order to prepare the U.S. worker better for the globalized economy, U.S. policy must provide the means to improve education at the primary and secondary levels and even at the pre-K level. These experts reject using trade policy to stop the effects of globalization, by putting restrictions on imports and investment, claiming that such measures are counter-productive and because globalization cannot be halted. Some trade experts argue that globalization has made trade policy, at least it as has been structured and practiced, obsolete. This view asserts that trade policy continues to be based on the assumption that trade is conducted in goods and services that are produced entirely within a country and that producers in one country are competing with producers in another country. However, according to this view, as vertical integration of production processes across borders is becoming more predominate, measures to limit imports, such as trade remedy laws, can hurt U.S.-based firms because affected imports could be part of the transnational production process. Experts with this view assert that trade policy should be structured to remove barriers, even unilaterally, so that production within a vertical process can operate as smoothly as possible. Most "fair traders" acknowledge the benefits of trade liberalization but contend that some U.S. workers and firms are at a disadvantage when faced with foreign competition. For example, wages in developing countries are often much lower than in the United States and other developed countries, and, these observers argue, these countries do not adhere to the same labor standards, such as the right to bargain collectively, as does the United States. In addition, producers in developing countries do not adhere to the same level of environment protection as do U.S. producers. While high labor and environment standards benefit the United States, they heighten production costs, placing U.S. firms and workers at a competitive disadvantage and making them more vulnerable to competition from imports from developing countries. As these imports account for larger shares of total U.S. imports, some members of Congress, labor unions, and others have demanded that U.S. trade agreements and tariff preference programs include provisions requiring U.S. trading partners to enforce prescribed labor and environmental standards. Such requirements have been part of the eligibility criteria in the U.S. GSP program. Beginning with NAFTA, these requirements to varying degrees have been included in U.S. FTAs as a result of congressional demands. They have also been included as negotiating objectives in recent TPA. The debate over the inclusion of these provisions heightened with the change to Democratic leadership in the 110 th Congress beginning in 2007. As a result, more members demanded enforceable labor and environmental provisions before any FTA would be considered. Negotiations between a bipartisan group of congressional leaders and the Bush Administration resulted in the so-called "New Trade Policy for America," reached on May 10, 2007. This agreement incorporates important changes, some with broad social implications for the pending FTAs. The principles contained in the agreement were used to alter the language of the FTAs with Peru, Colombia, Panama, and South Korea after they had been negotiated. (Of these agreements, only the one with Peru has been approved to date by Congress and is now in force.) The understanding required that the four pending FTAs adopt as fully enforceable commitments the five basic labor rights defined in the United Nations International Labor Organization's (ILO's) Fundamental Principles and Rights at Work and its Follow-up (1998) Declaration ; adhere to numerous multilateral environmental agreements (MEAs); and accept pharmaceutical intellectual property rights (IPR) provisions that could expedite that country's access to generic drugs. An increasing number of policymakers are also insisting that in order to "level the playing field" the United States must ensure that trading partners fulfill their obligations under the WTO and other trade agreements in which they are parties with the United States. To do so, they demand that the Administration improve "trade enforcement" by using the trade policy tools in place, and/or have proposed legislation to strengthen those tools. Some would go so far as to impose restrictions on imports into United States as a way to level the playing field. "Trade skeptics" argue that U.S. trade policy as presently structured and implemented adversely affects overall U.S. economic and other national interests. Specifically, they argue trade policy is structured to favor multinational corporations and conglomerates over small businesses, workers, and small farmers. They also assert that multilateral and bilateral agreements erode the ability of national, state, and local governments to protect citizens against harmful products, promote a clean environment, and guarantee workers safe working conditions and a "living wage." Trade skeptics generally oppose launching negotiations on new bilateral and regional FTAs as well as the approval of FTAs with Colombia, Panama, and South Korea, because these agreements adhere to the traditional pattern of trade policy. Some argue that the Doha round negotiations within the WTO should cease and that the United States should reevaluate all trade agreements in which it is currently a party. Among those who share some elements of these views are representatives of the major labor unions, such as the AFL-CIO. For example, Thea Lee, the organization's policy director, asserts that the major objective of U.S. trade policy has been to increase the profitability of U.S.-based multinational corporations at the expense of U.S. workers who lose their jobs because their companies have shifted production overseas, and U.S. trade agreements have encouraged such trends as they include provisions to make it easier to invest abroad. The AFL-CIO argues that trade agreements also do not adequately protect the rights of foreign workers. Lee claims that CAFTA and NAFTA have served as models for such policies and that all of the FTAs (except for the U.S.-Jordan FTA), including those that are pending, are based on the NAFTA/CAFTA model. Instead, she argues trade agreements must be restructured to benefit all. Similar views are held by the group Public Citizen. Lori Wallach, the group's spokesperson on trade, argues that trade liberalization agreements have gone too far because, she argues, they impose restrictions on the ability of sovereign governments to regulate commercial activity within their borders by requiring them to adhere to international rules established in the WTO and other organizations as well as in bilateral and regional free trade agreements. These rules pertain to services (including health services, education, and other "public services"); foreign investment; IPR; and food products. For example, according to Wallach, the WTO's IPR rules help to protect the profits of the owners of those rights, such as pharmaceutical companies at the expense of those in poor countries who cannot afford to pay the higher prices of the products. Some nongovernment organizations (NGOs), also oppose trade liberalization as it is conducted under current rules because, they claim, it favors the rich countries, including the United States, at the expense of poorer countries. For example, the international organization, Oxfam, argues that international trade rules, and rules established in FTAs between rich countries and poorer countries, always favor the rich countries. Under these arrangements, Oxfam asserts, the richer countries use their clout to force the poorer countries to eliminate tariffs on food products driving down prices that force the farmers in the poorer countries out of business. Richer countries also maintain high tariffs on some basic manufactured goods—footwear and wearing apparel—that the developing countries are trying to produce and export. Oxfam also argues that antidumping rules permit rich countries to impose prohibitive duties on developing country imports while the EU and the United States subsidize agricultural production, undermining the competitive position of their farmers. The organization asserts that the balance needs to be shifted by changing the rules and making the WTO and other trade arrangements more favorable to developing countries. The organization calls for developing countries to combine their forces to press demands for more favorable treatment in the Doha Development Agenda (DDA). A number of members of Congress have expressed skepticism regarding the current structure of trade agreements and trade liberalization and have done so in legislation in both the House and the Senate. On June 24, 2009, H.R. 3012 , the Trade Reform, Accountability, Development, and Employment Act of 2009 (TRADE Act of 2009)(Michaud), was introduced in the House in the 111 th Congress. The bill has three main objectives: (1) Evaluate U.S. free trade agreements . The bill would have required the Government Accountability Office (GAO) to report every two years on the "the economic, environmental, national security, health, safety, and other effects" of each free trade agreement in effect. The report would include the impact of the agreement on employment, wage levels, level of exports, the competitiveness of U.S. industries; the prices and volumes of domestic food production and exports and imports of food; and exchange rates. The report would indicate progress made by trading partners' in implementing commitments under the agreements and status of outstanding disputes under the agreement and whether the trading partner has a democratic government, respects fundamental human rights and core labor standards, takes measures against corruption, and complies with multilateral environmental agreements. (2) Mandate provisions in FTAs. The bill would have required any future agreement that is to be given expedited legislative consideration to include provisions requiring trading partners to protect core labor standards under threat of sanctions for non-compliance; guarantee human rights to its citizens; protect the environment; and ensure adherence to food health and safety standards. The bill would also have restricted the applicability of trade agreements in regards to trade in services, foreign investment, government procurement, IPR protection, trade remedies, among other areas. (3) Renegotiation of trade agreements. The bill would have required the President to submit to Congress a plan to renegotiate any trade agreement already in effect that does not meet the requirements in (2). A newly established Congressional Review Committee would have been responsible for reviewing the GAO report and the presidential plan for renegotiating trade agreements and would be empowered to amend the plan. S. 2821 (Brown), a similar bill to H.R. 3012 (minus the Congressional Review Committee), was introduced on December 1, 2009. At this time, the 112 th Congress and the Obama Administration are at a crossroads on trade policy. Over the years, the general consensus on trade liberalization has frayed as evidenced by closer congressional votes on major trade legislation and ambiguous views on the value of foreign trade from the American public at large. That splintering seems to have increased recently. This trend is likely influenced by the recession and high unemployment levels following the economic downturn. It likely is associated with a longer-term trend that is linked to the various effects of international economic integration ("globalization") that have made farmers, firms, and workers perceive themselves to be more vulnerable. The direction that U.S. policymakers take trade policy will have broad implications—whether that direction is toward greater trade liberalization, as envisioned by "trade liberalizers"; conditional trade liberalization, as viewed by "fair traders"; or a restrained, if not retrenched, trade policy, as expressed by the "trade skeptics." Greater trade liberalization, whether unilateral or via trade negotiations and agreements, would promote further U.S. integration with the world economy and with it, according to many mainstream economists, a more efficient allocation of resources and economic growth. It would also encourage the development and adherence to internationally negotiated rules on trade to promote stability and to prevent the use of protectionist measures. At the same time, it would expose the already vulnerable firms and workers to increased competition, forcing them to make costly adjustments. A "fair trade" focused policy direction would address what some view as inequities in trade policy by proceeding with trade agreements that require U.S. trade partners to adhere to core labor standards, environmental protection measures, and other provisions to "level the playing field." In so doing, such trade agreements could be acceptable to larger segments of the American public and rebuild a consensus on trade. However, some trading partners have resisted what they consider to be U.S. efforts to impose its own values on them through trade policy. Many economists argue that the "playing field" will always be uneven as labor will be cheaper in some countries than others, reflecting differing stages of development. A "skeptical" policy direction would require U.S. policymakers to retrench and reevaluate trade policy as a whole to ascertain whether it has benefitted or harmed U.S. interests, for example, in employment, and would reserve the opportunity to renegotiate those trade agreements if they fail to meet the criteria. This approach would aim to protect U.S. national sovereignty over matters pertaining to the health and safety of its citizens, among other issues. Opponents of this path have argued that it is very difficult, if not impossible, to determine the impact of individual trade agreements on the level of employment and other economic trends, because so many other factors play a role. They also argue that revisiting and renegotiating trade agreements could undermine the credibility of the United States as a trading partner. In addressing trade issues, U.S. policymakers may follow different approaches depending on the issue and on other political and economic factors. While a range of trade issues lie on the collective Congress-executive plate, trade enforcement issues—particularly with China, the FTAs, and trade preference review and reform—could very well serve as near-term bellwethers for the future of trade policy. In the longer term, policymakers will face the outlook of the Doha Round negotiations and possible renewal of trade promotion authority, among other issues. They will likely also face fundamental questions, such as the future of the multilateral trade system; the role of trade policy, if any, in addressing non-trade issues, such as climate change; and the impact of globalization on the effectiveness of trade policy. | U.S. trade policy is at a cross-roads as the Obama Administration and the 112th Congress face a range of policy issues and challenges. The future direction of trade policy and how the issues will be addressed are unclear at this time and the subject of sharp debate within Congress, the Administration, and the trade policy community at large. While a number of issues are related to trade policy, the fundamental question that is the subject of this debate is which trade policy, if any, will maximize the benefits of trade and boost U.S. living standards. Among the trade issues facing Congress and the Administration are pending free trade agreements (FTAs) and negotiations on new FTAs; the stalled Doha Development Agenda (DDA) multilateral trade negotiations; the possible renewal of trade promotion authority (TPA); the review and reauthorization of trade preference programs for developing countries; the enforcement of U.S. trade laws and rights under existing trade agreements; the role of export promotion in the U.S. economic recovery; and the growing link between foreign direct investment and trade and, with it, the increasing use of bilateral investment treaties (BITs) and investment provisions in trade agreements. The current trade policy environment is affected by a number of political and economic forces. The political forces involve the opinions of the American public, including major stakeholders—business, labor, agriculture, and non-government organizations—on trade; congressional perspectives; presidential perspectives; and tension in the congressional/executive relationship as the two branches play their respective trade policy roles. The economic forces include the global economic downturn; the rise of developing countries, including the emerging markets of Brazil, China, and India as major trading powers; the growth of global production networks; the proliferation of free trade agreements and other preferential trade arrangements; the inherent limitations of trade policy as a tool in economic policy; the growth of "behind the border" trade barriers; and the long-standing U.S. trade deficits. The debate on trade is framed by three groups of views. One group, who might be called "trade liberalizers," assert that on a net basis the benefits to the United States of trade liberalization are greater than the costs and, therefore, should be encouraged through trade barrier reductions. A second group—"fair traders"—acknowledge the benefits of trade liberalization but assert that U.S. firms and workers are often forced to compete under unfair conditions. They support trade agreements, but only if the agreements provide for a "level playing field." A third group—"trade skeptics"—tends to argue that the costs of trade liberalization outweigh the benefits for the United States, and therefore, reject unrestricted trade liberalization. Where policymakers fit on this continuum of views could help to determine how they decide to address the outstanding and emerging trade issues before Congress In many cases, the trade policy positions of policymakers and other experts cannot be readily categorized as belonging to one group or another, but the categories provide a mechanism to analyze the major concepts in trade policy and their potential implications. |
In December 2008, the National Bureau of Economic Research (NBER) announced that the economy was in a recession and that the recession had begun a year earlier in December 2007. However, some economists and forecasters had been concerned that a combination of factors might make this economic contraction much worse than other post-war slowdowns. At first, economic instability seemed limited to the housing sector as housing values decreased in many markets, forcing some subprime and highly leveraged home owners into foreclosure. The problems that began in housing, quickly spread to banking and financial services and were compounded earlier in 2008 by spikes in energy prices. The solvency of automobile manufacturers rapidly deteriorated, possibly due in part to tight credit policies, rising unemployment, and high fuel costs. National unemployment rose steadily throughout 2008 reaching 7.2% in December. Due to slower economic activity caused by the recession, many states also faced large tax revenue decreases, forcing them to reduce Medicaid eligibility and spending, just when the demand for additional public sector health care was expanding to fill the gap left when unemployed individuals no longer could afford employer-based health insurance for their families. Although by themselves the problems in housing, financial services, manufacturing, and energy sectors might not have forced the economy into recession, taken together these problems had contributed to the emergence of a recession and, if the underlying fundamentals have changed as some forecasters suspect, perhaps a prolonged, global economic slow down that could have widespread impact on living standards here and abroad. In response, policymakers quickly moved to prevent the instability in housing and financial services from spilling over into the broader economy. Looking to the future, members of Congress and the Obama Administration sought additional mechanisms to stimulate economic activity. Various approaches were considered to ensure that an economic stimulus package could reach many different segments of the economy, provide a sustained economic boost, and wide spread job growth. Some economic stimulus proposals included infrastructure spending, revenue sharing with states, middle class tax cuts, business tax cuts, unemployment benefits, and food stamps. On January 22, 2009 the House Committee on Energy and Commerce marked-up selected health components and approved a stimulus bill, the American Recovery and Reinvestment Act of 2009 (ARRA, H.R. 1 ). The full House amended and approved H.R. 1 on January 28, 2009. Similar legislation to H.R. 1 was introduced in the Senate (ARRA, S. 350 ) and referred to the Committee on Finance, among others, where provisions were approved on January 27. An amendment in the nature of a substitute ( S.Amdt. 570 ) was offered as a substitute for H.R. 1 and was approved by the full Senate on February 10, 2009. The Senate version of ARRA was referred to a joint Senate and House conference committee. The conference committee reached agreement and referred ARRA to the House and Senate, where it was passed on February 13, 2009. President Obama signed ARRA ( P.L. 111-5 ) on February 17, 2009. This report is a summary the Medicaid provisions in P.L. 111-5 . For more information on the Medicaid provisions included in House and Senate versions of ARRA, see CRS Report R40158, Medicaid Provisions in the House and Senate American Recovery and Reinvestment Act of 2009 (ARRA, H.R. 1, S.Amdt. 570) , coordinated by [author name scrubbed]. For further information on implementation of the FMAP adjustments in ARRA, see CRS Report RL32950, Medicaid: The Federal Medical Assistance Percentage (FMAP) . Table 1 displays a summary of the Medicaid provisions in P.L. 111-5 . Although Table 1 displays 14 Medicaid provisions, ARRA included only eight provisions. Some provisions presented separately in the Senate or House Bills were aggregated under one provision in P.L. 111-5 . For instance, there was one provision for Medicaid Indian protections in the Conference Agreement that included five provisions from the earlier House and Senate versions (premiums and cost sharing, eligibility determinations, estate recovery, consultation with Indian health programs, and managed care protections). In addition, the nursing home prompt payment provision from the Senate bill was integrated into the Temporary Federal Medical Assistance Percentage (FMAP) Increase provision in P.L. 111-5 , but $5 million in funding to implement the FMAP provision was added to ARRA in the Conference Agreement under the OIG Oversight provision from the Senate Bill. Thus, there are eight Medicaid provisions included in Title V of the Conference Agreement. An additional provision providing funding for Medicaid Health Information Technology (HIT) is in Title IV of P.L. 111-5 . The Congressional Budget Office (CBO) estimated that ARRA's Medicaid provisions (under TITLE V—State Fiscal Relief ) would increase federal expenditures by $33.96 billion in FY2009 and $89.74 billion from FY2009 to FY2013, although one provision, a temporary FMAP increase, accounts for $87.2 billion of the five-year increase. The federal medical assistance percentage (FMAP) is the rate at which states are reimbursed for most Medicaid service expenditures. It is based on a formula that provides higher reimbursement to states with lower per capita incomes relative to the national average (and vice versa); it has a statutory minimum of 50% and maximum of 83%. Exceptions to the FMAP formula have been made for certain states and situations. For example, the District of Columbia's Medicaid FMAP is set in statute at 70%, and the territories have FMAPs set at 50% (they are also subject to federal spending caps). Under the Jobs and Growth Tax Relief Reconciliation Act of 2003 ( P.L. 108-27 ), all states received a temporary increase in Medicaid FMAPs for the last two quarters of FY2003 and the first three quarters of FY2004 as part of a fiscal relief package. In addition to Medicaid, the FMAP is used in determining the federal share of certain other programs (e.g., foster care and adoption assistance under Title IV-E of the Social Security Act) and serves as the basis for calculating an enhanced FMAP that applies to the State Children's Health Insurance Program. . During a recession adjustment period that begins with the first quarter of FY2009 and runs through the first quarter of FY2011, the provision holds all states harmless from any decline in their regular FMAPs, provides all states with an across-the-board increase of 6.2 percentage points, and provides qualifying states with an additional unemployment-related increase. It allows each territory to choose between an FMAP increase of 6.2 percentage points along with a 15% increase in its spending cap, or its regular FMAP along with a 30% increase in its spending cap. States are evaluated on a quarterly basis for the unemployment-related FMAP increase, which equals a percentage reduction in the state share. The percentage reduction is applied to the state share after the hold harmless increase and after one-half of the 6.2 percentage point increase (i.e., 3.1 percentage points). For example, after applying the across-the-board increase, a state with a regular FMAP of 50% would have an FMAP of 56.20%. If the state share (after the hold harmless and one-half of the across-the-board increase) were further reduced by 5.5%, the state would receive an additional FMAP increase of 2.58 percentage points (46.9 state share * 0.055 reduction in state share = 2.58). The state's total FMAP increase would be 8.78 points (6.2 + 2.58 = 8.78), providing an FMAP of 58.78%. The unemployment-related FMAP increase is based on a state's unemployment rate in the most recent 3-month period for which data are available (except for the first two and last two quarters of the recession adjustment period, for which the 3-month period is specified) compared to its lowest unemployment rate in any 3-month period beginning on or after January 1, 2006. The criteria are as follows: unemployment rate increase of at least 1.5 but less than 2.5 percentage points = 5.5% reduction in state share; unemployment rate increase of at least 2.5 but less than 3.5 percentage points = 8.5% reduction in state share; unemployment rate increase of at least 3.5 percentage points = 11.5% reduction in state share. If a state qualifies for the unemployment-related FMAP increase and later has a decrease in its unemployment rate, its percentage reduction in state share could not decrease until the fourth quarter of FY2010 (for most states, this corresponds with the first quarter of SFY2011). If a state qualifies for the unemployment-related FMAP increase and later has an increase in its unemployment rate, its percentage reduction in state share could increase. The full amount of the temporary FMAP increase only applies to Medicaid, excluding disproportionate share hospital payments and expenditures for individuals who are eligible for Medicaid because of an increase in a state's income eligibility standards above what was in effect on July 1, 2008. A portion of the temporary FMAP increase (hold harmless plus across-the-board) applies to Title IV-E foster care and adoption assistance. To receive the increase, states are: required to maintain their Medicaid eligibility standards, methodologies, and procedures as in effect on July 1, 2008; prohibited from receiving the increase if they are not in compliance with requirements for prompt payment of health care providers under Medicaid, and required to report to the Secretary of HHS on their compliance; prohibited from depositing or crediting the additional federal funds paid as a result of the increase to any reserve or rainy day fund; required to ensure that local governments do not pay a larger percentage of the state's nonfederal Medicaid expenditures than otherwise would have been required on September 30, 2008; and required to submit a report to the Secretary regarding how the additional federal funds paid as a result of the temporary FMAP increase were expended. CBO estimated that ARRA's FMAP provision would increase federal spending by $87.2 billon over the five-year period from FY2009-2013. Medicaid law requires states to make Medicaid payment adjustments for hospitals that serve a disproportionate number of low-income patients with special needs. Payments to these hospitals that serve a large number of low-income individuals, disproportionate share hospital (DSH) payments, are specifically defined in Medicaid law, including, aggregate annual state-specific limits on federal financial participation and hospital-specific limits on DSH payments. Under those hospital specific limits, a hospital's DSH payments may not exceed the costs incurred by that hospital in furnishing services during the year to Medicaid beneficiaries and the uninsured, less other Medicaid payments made to the hospital, and payments made by uninsured patients (''uncompensated care costs''). States are required to provide an annual report to the Secretary describing the payment adjustments made to each DSH. This provision increases states' FY2009 annual DSH allotments by 2.5% above the allotment they would have received in FY2009 (in FY2009, DSH allotments increased by 4% over FY2008 allotment levels). In addition, states' DSH allotments in FY2010 would be equal to the FY2009 DSH allotment (with the adjustment) increased by 2.5%. After FY2010, states' annual DSH allotments will return to 100% of the annual DSH allotments as determined under current law. Under this provision, if states' annual DSH allotments grew at a greater rate than what they would have received without the 2.5% adjustment, then states will receive the higher DSH allotments without the recession adjustment. CBO estimated that the temporary increase in DSH allotments would increase federal expenditures by $228 million in FY2009 and $456 million for the period FY2009-FY2013. In 2007 and 2008, the Centers for Medicare and Medicaid Services (CMS), issued seven Medicaid regulations that generated controversy during the 110 th Congress. To address concerns with the impact of the regulations, several laws passed during the 110 th Congress imposed moratoriums on six of the Medicaid regulations until April 1, 2009 (excluding a rule on outpatient hospital facility and clinic services). CBO estimated that the extension of the Medicaid moratoria would increase federal expenditures by $105 million in FY2009, but would not have an additional spending increase beyond FY2009. The seven Medicaid regulations issued during the most recent Congress covered the following areas: Graduate Medical Education Most states make Medicaid payments to help cover the costs of training new doctors in teaching programs. The proposed rule would eliminate federal reimbursement for graduate medical education and change how Medicaid upper payment limits for hospital services are calculated. For more information on GME, see CRS Report RS22842, Medicaid and Graduate Medical Education , by [author name scrubbed] and [author name scrubbed]. Cost Limit on Public Providers Intergovernmental transfers (IGTs) are used by some states to finance the non-federal share of Medicaid costs. Certain IGTs are specifically allowed for funding the state share of program costs. Some states have instituted programs where the state shares of Medicaid spending is paid by hospitals or nursing homes that are public providers, but not units of government, or are units of government, but the state share is returned to the provider sometimes through Medicaid payments. Both a proposed and final regulation were issued, however, a federal court held that the rule had been improperly promulgated and remanded the rule back to CMS for further action. This regulation would clarify the types of IGTs allowable for financing a portion of Medicaid costs, impose a limit on Medicaid reimbursement for government-owned hospitals and other institutional providers, and require certain providers to retain all Medicaid reimbursement. For more information on cost limits on public providers, see CRS Report RS22848, Medicaid Regulation of Governmental Providers , by [author name scrubbed]. Rehabilitative Services Medicaid rehabilitative services include a full range of treatments designed to reduce physical or mental disability or restore eligible beneficiaries to their best possible functional levels. There has been enough misunderstanding about when Medicaid pays for and what constitutes rehabilitative services that both the executive and legislative branches have addressed this benefit repeatedly. The proposed rule defines the scope of the rehabilitation benefit and identifies services that could be claimed under Medicaid. For more information on rehabilitative services, see CRS Report RL34432, Medicaid Rehabilitation Services , by [author name scrubbed]. Case Management Case management services assist Medicaid beneficiaries in obtaining needed medical and related services. Targeted case management (TCM) refers to case management for specific beneficiary groups or for individuals residing in state-designated geographic areas. There has been considerable ambiguity about what services are covered and what is legitimately considered TCM. The case management regulation addresses a provision of the Deficit Reduction Act of 2005 (DRA; P.L. 109-171 ) that clarifies and narrows the case management definition and directs the Secretary of HHS to issue regulations to guide states' claims for federal matching funds for case management. For more information on case management and targeted case management, see CRS Report RL34426, Medicaid Targeted Case Management (TCM) Benefits , by [author name scrubbed]. School-Based Services As a condition of accepting funds under the Individuals with Disabilities Education Act ( P.L. 108-446 , IDEA), public schools must provide special education and related services necessary for children with disabilities to benefit from public education. States can finance only a portion of these costs with federal IDEA funds. Medicaid may cover IDEA required health-related services for enrolled children as well as related administrative activities. According to federal investigations and congressional hearings, Medicaid payment to schools have sometimes been improper. To address these problems, CMS issued a regulation that would restrict federal Medicaid payments for school-based administrative activities (e.g., outreach, service coordination, referrals performed by school employees or contractors), and certain transportation services (e.g., from home to school and back for certain school-age children). For more information on school-based services under Medicaid, see CRS Report RS22397, Medicaid and Schools , by [author name scrubbed]. Provider Taxes States use provider-specific taxes to help finance their share of the Medicaid program. Under these funding methods, states collect funds (through taxes or other means) from providers and pay the money back to those providers as Medicaid payments, and claim the federal matching share of those payments. Once the state share has been subtracted, the federal matching funds may be used to raise provider payment rates, to fund other portions of the Medicaid program, or for other non-Medicaid purposes. Provider taxes must be consistent with federal laws and regulations, which may have been ambiguous or changing. CMS issued a provider tax regulation to address these issues. For more information on Medicaid provider taxes, see CRS Report RS22843, Medicaid Provider Taxes , by [author name scrubbed]. Outpatient Hospital Services Under Medicaid, outpatient hospital (OPH) services are a mandatory benefit for most beneficiaries. OPH services include preventive, diagnostic, therapeutic, rehabilitative, or palliative services provided under the direction of a physician or a dentist in the hospital. States use a number of different reimbursement methods for different types of services provided in OPH departments and clinics. CMS issued a regulation that would limit the definition and scope of Medicaid-covered OPH services. For more information on outpatient hospital services, see CRS Report RS22852, Medicaid and Outpatient Hospital Services , by [author name scrubbed] and [author name scrubbed]. P.L. 111-5 extends the existing moratoria on the final regulations on case management services, provider taxes, and school-based administrative and transportation services beyond April 1, 2009, when these moratoria expire, to July 1, 2009. In addition, this provision prohibits the Secretary of HHS from taking any action until after June 30, 2009 (through regulation, regulatory guidance, use of federal payment audit procedures, or other administrative action, policy, or practice, including Medical Assistance Manual transmittal or state Medicaid director letter) to implement the final regulation on OPH facility services (published November 7, 2008 and effective on December 8, 2008). Under current law, moratoria on further administrative action until April 1, 2009 for the regulations on cost limits for public providers, graduate medical education, and rehabilitative services. A Sense of the Congress clause in this ARRA provision indicates that the Secretary of HHS should not promulgate final regulations for rehabilitative services, cost limits on public providers, or graduate medical education. For more information on Medicaid regulations, see CRS Report RL34764, Select Bush Administration Medicaid Rulemakings: Congressional and Administrative Actions , by [author name scrubbed] and [author name scrubbed]. 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 is called transitional medical assistance (TMA). Federal law permanently requires four months of TMA for families who lose Medicaid eligibility due to increased child or spousal support collections, as well as those who lose eligibility due to an increase in earned income or hours of employment. However, Congress expanded work-related TMA under Section 1925 of the Social Security Act in 1988, requiring states to provide at least six, and up to 12, months of coverage. Since 2001, these work-related TMA requirements have been funded by a series of short-term extensions, most recently through June 30, 2009. (For more details, see CRS Report RL31698, Transitional Medical Assistance (TMA) Under Medicaid , by [author name scrubbed].) The provision extends work-related TMA under Section 1925 through December 31, 2010. States can opt to treat any reference to a 6-month period (or 6 months) as a reference to a 12-month period (or 12 months) for purposes of the initial eligibility period for work-related TMA, in which case the additional 6-month extension does not apply. States can opt to waive the requirement that a family have received Medicaid in at least three of the last six months in order to qualify. Under the TMA provision, states are required to collect and submit to the Secretary of Health and Human Services (and make publicly available) information on average monthly enrollment and participation rates for adults and children under work-related TMA, and on the number and percentage of children who become ineligible for work-related TMA and whose eligibility is continued under another Medicaid eligibility category or who are enrolled in the Children's Health Insurance Program (CHIP). CBO estimated that the TMA provision would increase federal spending by $1.3 billion over the five-year period from FY2009-2013. Certain low-income individuals who are aged or have disabilities, as defined under the Supplemental Security Income (SSI) program, and who are eligible for Medicare are also eligible to have their Medicare Part B premiums paid for by Medicaid under the Medicare Savings Program (MSP). Eligible groups include Qualified Medicare Beneficiaries (QMBs), Specified Low-Income Medicare Beneficiaries (SLMBs), and Qualifying Individuals (QI-1s). QMBs have incomes no greater than 100% of the federal poverty level (FPL) and assets no greater than $4,000 for an individual and $6,000 for a couple. SLMBs meet QMB criteria, except that their incomes are greater than 100% of FPL but do not exceed 120% FPL. QI-1s meet the QMB criteria, except that their income is between 120% and 135% of poverty and they are not otherwise eligible for Medicaid. The QI-1 program is currently slated to terminate December 2009. This provision of P.L. 111-5 extends authorization for the QI-1 program through December 2010. In general, Medicaid payments are shared between federal and state governments according to a matching formula. Unlike the QMB and SLMB programs, federal spending under the QI-1 program is subject to annual limits. Expenditures under the QI-1 program are paid 100% by the federal government (from the Part B trust fund) up to a state's allocation level. States are required to cover only the number of people which would bring their annual spending on these population groups to their allocation levels. For the period beginning on January 1, 2009, and ending on September 30, 2009, the total allocation amount was $350 million. For the period beginning on October 1, 2009 and ending on December 31, 2009, the total allocation is $150 million. This provision allocates $412.5 million for the period that begins January 1, 2010, and ends September 30, 2010; and allocates $150 million for the period that begins October 1, 2010 and ends on December 31, 2010. P.L. 111-5 combined a number of provisions presented separately or together as protections for Indians under Medicaid and the Children's Health Insurance Program (CHIP). Five provisions from either the Senate or House Bills were combined in P.L. 111-5 , including premiums and cost sharing, eligibility determinations, estate recovery, managed care protections, and consultation with Indian health providers (IHP). CBO estimated that the Indian protections under Medicaid and CHIP would increase federal expenditures by $6 million in FY2009 and by $54 million from FY2009-FY2013. Premiums and Cost-Sharing Under Medicaid, premiums and enrollment fees generally are prohibited for most beneficiaries. Nominal amounts specified in federal regulations may be imposed on selected groups (e.g., certain families qualifying for transitional Medicaid, medically needy). Service-related cost-sharing (e.g., coinsurance, copayments) is prohibited for selected groups (e.g., children under 18, pregnant women) and selected benefits (e.g., hospice care, emergency services, family planning services and supplies). For most other groups and services, states may impose nominal cost-sharing amounts specified in federal regulations at state option. Premiums and cost-sharing may exceed nominal amounts for selected groups (e.g., workers with disabilities and individuals covered under Section 1115 waivers). The Deficit Reduction Act of 2005 (DRA; P.L. 109-171 ) added a Medicaid state option for alternative premiums and cost-sharing for certain subgroups. Applicable maximum amounts vary by income level. Special rules apply to prescription drugs and non-emergency services provided in hospital emergency rooms. P.L. 111-5 specifies that no premiums, service-related cost-sharing or similar charges can be imposed on Indians who receive Medicaid services directly from the Indian Health Service (IHS), an Indian tribe (IT), a tribal organization (TO), an urban Indian organization (UIO), or through referral under the contract health service. Medicaid payments due to such providers for services rendered to a Medicaid-eligible Indian cannot be reduced by the amount of such cost-sharing that would otherwise apply to such an Indian. The new law also adds Indians receiving services through Indian entities to the list of individuals exempt from paying premiums or cost-sharing under the DRA option. The effective date of this provision is July 1, 2009. Treatment of Certain Property from Resources for Medicaid and CHIP Eligibility The federal Medicaid statute identifies more than 50 eligibility pathways. For some pathways, asset tests are required and for other pathways, such tests are optional. When asset tests apply, some pathways give states flexibility to define specific assets to be counted and which can be disregarded. For other pathways, primarily for people qualifying on the basis of a disability or who are elderly, asset tests are required. States generally follow asset guidelines specified in the Supplemental Security Income (SSI) Program. Medicaid also defines the rules for counting certain assets. Under SSI law, several types of assets related to certain Indian-related lands held in trust by the U.S., certain other Indian held lands, and certain distributions (including land or an interest in land) received by certain Alaskan Natives or their descendants are excluded. There is no similar provision in prior CHIP law. P.L. 111-5 prohibits consideration of four different classes of property from resources in determining Medicaid eligibility of an Indian. These include certain properties held in trust, certain other properties within the boundaries of a prior reservation, certain ownership interests related to natural resources, and certain other ownership interests not otherwise specified that have unique religious, traditional or cultural significance that support subsistence or a traditional lifestyle. The new law also applies this provision to CHIP in the same manner that it applies to Medicaid. The effective date of this provision is July 1, 2009. Continuation of Protections of Certain Indian Property from Medicaid Estate Recovery Under Medicaid, all states are required to recover property and assets of deceased Medicaid beneficiaries for outstanding services provided by Medicaid. At a minimum, states must seek recovery for certain services provided, including nursing home care, services provided by an intermediate care facility for the mentally retarded or other similar medical institutions, and Medicaid payments to Medicare for cost-sharing related benefits. States may grant an exemption if the recovery would place an undue hardship on the estate. The Secretary of HHS specifies the standards for a state hardship waiver for Medicaid estate recovery purposes. P.L. 111-5 stipulates that certain income, resources, and property remain exempt from Medicaid estate recovery, if they were exempted under Section 1917(b)(3) of the Social Security Act (allowing the Secretary to specify standards for a state hardship waiver of asset criteria) under instructions regarding Indian tribes and Alaskan Native Villages as of April 1, 2003. The new law also allows the Secretary to provide for additional estate recovery exemptions for Indians under Medicaid. The effective date of this provision is July 1, 2009. Rules Applicable Under Medicaid and CHIP to Managed Care Entities with Respect to Indian Enrollees and Indian Health Care Providers and Indian Managed Care Entities Under Title XIX, Section 1932(a)(2)(C) stipulates the rules regarding Indian enrollment in Medicaid managed care. A state may not require an Indian (as defined in Section 4(c) of the Indian Health Care Improvement Act or IHCIA) to enroll in a managed care entity unless the entity is one of the following (and only if such entity is participating under the plan): (1) the IHS, (2) an IHP operated by an Indian tribe or tribal organization pursuant to a contract, grant, cooperative agreement, or compact with the IHS pursuant to the Indian Self-Determination Act, or (3) an urban IHP operated by a UIO pursuant to a grant or contract with the IHS pursuant to Title V of the IHCIA. In general under Medicaid, Federally Qualified Health Centers (FQHCs) are paid on a per visit basis, using a prospective payment system that takes into account costs incurred and changes in the scope of services provided. Per visit payment rates are also adjusted annually by the Medicare Economic Index applicable to primary care services. When an FQHC is a participating provider with a Medicaid managed care entity (MCE), the state must make supplemental payments to the center in an amount equal to any difference between the rate paid by the MCE and the per visit amount determined under the prospective payment system. P.L. 111-5 requires that Indians enrolled in a non-Indian MCE with an IHP or UIO participating as a primary care provider be allowed to choose such an IHP or UIO as their primary care provider when (1) the Indian is otherwise eligible to receive services from such a provider and (2) the IHP or UIO has the capacity to provide primary care services to that Indian. Contracts between the state and such MCEs must include this requirement, and Medicaid payments to these entities would be conditional on meeting this requirement. Under P.L. 111-5 , Medicaid managed care contracts with MCEs and Primary Care Case Management (PCCMs) companies will be required to meet certain conditions to receive Medicaid payments, including: MCEs and PCCMs must demonstrate that the number of participating Indian health care providers is sufficient to ensure timely access to covered Medicaid managed care services for eligible Indian enrollees, and MCEs and PCCMs must agree to pay both participating and non-participating IHPs for services rendered to Indians at rates equal to the rates negotiated between these organizations and the provider involved, or, if such a rate has not been negotiated, at a rate that is not less than the level and amount of payment which the MCE or PCCM would make for services rendered by a participating non-Indian health care provider. In addition, P.L. 111-5 specifies that MCEs and PCCMs must agree to make prompt payment, as required under Medicaid rules for all providers, to Indian health care providers, and states would be prohibited from waiving requirements relating to assurance that payments are consistent with efficiency, economy, and quality. Further, ARRA applies special payment provisions to certain Indian health care providers that are FQHCs. For non-participating Indian FQHCs that provide covered Medicaid managed care services to Indian MCE enrollees, the MCE must pay a rate equal to the payment that would apply to a participating non-Indian FQHC. When payments to such participating and non-participating providers by an MCE for services rendered to an Indian enrollee with the MCE are less than the rate under the state plan, the state must pay such providers the difference between the rate and the MCE payment. Likewise, if the amount paid to a non-FQHC Indian provider (whether or not the provider participates with the MCE) is less than the rate that applies under the state plan, the state must pay the difference between the applicable rate and the amount paid by MCEs. Under this provision, Indian Medicaid MCEs are permitted to restrict enrollment to Indians and to members of specific tribes in the same manner as IHPs may restrict the delivery of services to such Indians and tribal members. Finally, P.L. 111-5 applies specific sections affecting Medicaid to the CHIP program, including (1) Section 1932(a)(2)(C) regarding enrollment of Indians in Medicaid managed care (e.g., states cannot require Indians to enroll in a MCE unless the entity is the IHS, certain IHPs operated by tribes or tribal organizations, or certain urban IHPs operated by Urban Indian Organizations (UIOs), and (2) the new provisions described above. The effective date of this provision is July 1, 2009. Consultation on Medicaid, CHIP and Other Health Care Programs Funded under the Social Security Act Involving Indian Health Programs and Urban Indian Organizations There are no provisions in prior Medicaid or CHIP law regarding a Tribal Technical Advisory Group (TTAG) within CMS, the federal agency that oversees the Medicare, Medicaid and CHIP programs. P.L. 111-5 requires the Secretary to maintain within CMS a TTAG, previously established in accordance with requirements of a charter dated September 30, 2003. ARRA also requires that the TTAG include a representative of a national urban Indian Health organization and the IHS. The representative of a national urban Indian Health organization will be exempt from the Federal Advisory Committee Act for certain meetings with federal officials. The P.L. 111-5 also requires certain states to establish a process for obtaining advice on a regular, on-going basis from designees of IHPs and UIOs regarding Medicaid law and its direct effects on those entities. Applicable states include those in which one or more IHPs or UIOs provide health care services. This process must include seeking advice prior to submission of state Medicaid plan amendments, waiver requests or proposed demonstrations likely to directly affect Indians, IHPs or UIOs. This process may include appointment of an advisory panel and of a designee of IHPs and UIOs to the Medicaid medical care advisory committee advising the state on its state Medicaid plan. The provision also applies this new language to CHIP in the same manner in which it applies to Medicaid. Finally, the new law prohibits construing these amendments as superseding existing advisory committees, working groups, guidance or other advisory procedures established by the Secretary or any state with respect to the provision of health care to Indians. The effective date of this provision is July 1, 2009. Oversight Under this provision, the Health and Human Services Office of the Inspector General (HHS OIG) will receive $31.25 million to ensure proper expenditure of federal Medicaid funds. These funds will be appropriated from any money in the Treasury not otherwise appropriated and are available throughout the recession period (defined as October 1, 2008-December 31, 2010). Amounts appropriated under this provision are available until September 30, 2012, without further appropriation, and are in addition to any other amounts appropriated or made available to HHS OIG.. Implementation of Increased FMAP This provision also includes a $5 million appropriation for FY2009 to be used by the Health and Human Services Secretary to implement the temporary increased FMAP provision described in the Conference Agreement under Sec. 5001. The implementation funding is available to the Secretary until the end of FY2011 (September 30, 2011). CBO estimated that the funding for the HHS Secretary for implementation of the temporary FMAP increase provision would increase federal expenditures by $5 million in FY2009, with no financial impact beyond FY2009. CBO also estimated that federal expenditures would increase by $31 million in FY2009 for the additional funds provided under this provision for the OIG to monitor the increased recession spending. There would be no financial impact beyond FY2009 for the OIG funding. Under this provision of P.L. 111-5 , the Comptroller General of the United States and the Government Accountability Office (GAO), are to study the current (on the date of enactment of the legislation) economic recession as well as previous national economic downturns since 1974. GAO is required to develop recommendations to address states' needs during economic recessions, including the past and projected effects of temporary increases in FMAP during these recessions. By April 1, 2011, GAO is required to submit a report to appropriate congressional committees that is to include the following: Recommendations for modifying the national economic downturn assistance formula for temporary Medicaid FMAP adjustments (a "countercyclical FMAP," as described in GAO report number, GAO-07-97), to improve the effectiveness of the countercyclical FMAP for addressing states' needs during national economic downturns. The report should address: what improvements are needed to identify factors to begin and end the application of a countercyclical FMAP; how to adjust the amount of a countercyclical FMAP to account for state and regional variations; and how a countercyclical FMAP could be adjusted to better account for actual Medicaid costs incurred by states during economic recessions. Analysis of the impact on states of recessions, including declines in private health insurance benefits coverage; declines in state revenues; and maintenance and growth of caseloads under Medicaid, CHIP, or any other publically funded programs that provide health benefits coverage to state residents. Identification of and recommendations for addressing the effects on states of any other specific economic indicators GAO determines appropriate. | The economy officially was considered in a recession in December 2008, but many forecasters had long recognized the downturn and some believed this economic contraction would be more severe than other post-World War II slowdowns. A combination of factors combined to present policymakers with difficult decisions on how best to stimulate the economy. Troubling instability in the housing and financial services sectors, weak auto manufacturing demand, and high energy costs earlier in 2008 had slowed growth dramatically and forced millions into unemployment. With declining tax revenue and increasing costs to provide unemployment and other benefits to unemployed workers, states were implementing measures to rein in spending, including restricting Medicaid eligibility and services. Congress considered legislation aimed at stimulating economic activity in selected industrial sectors to save existing and create new jobs, reduce taxes, invest in future technologies, and fund infrastructure improvements. In addition to reducing some taxes and funding infrastructure projects, ARRA provisions were designed to provide: temporary support to families and individuals by increasing unemployment compensation benefits; financial assistance for individuals to maintain their health coverage under provisions in the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA); temporary increases in Medicaid matching rates; and increases in disproportionate share hospital allotments. The House approved the American Recovery and Reinvestment Act of 2009 (H.R. 1) on January 28, 2009. The Senate passed an amendment (S.Amdt. 570) as a replacement for the House-approved version of ARRA on February 10, 2009. ARRA was referred to a joint House and Senate conference committee. The joint Senate and House Conference Committee reached agreement, and ARRA was passed by the House and Senate on February 13, 2009. President Obama signed ARRA (P.L. 111-5) into law on February 17, 2009. This report is a summary of ARRA's Medicaid provisions. For more information on the Medicaid provisions included in House and Senate versions of ARRA, see CRS Report R40158, Medicaid Provisions in the House and Senate American Recovery and Reinvestment Act of 2009 (ARRA, H.R. 1, S.Amdt. 570), coordinated by [author name scrubbed]. This report will not be updated. For further information on implementation of FMAP changes in ARRA, see CRS Report RL32950, Medicaid: The Federal Medical Assistance Percentage (FMAP). |
Increased terrorist activity by groups like Boko Haram in Nigeria has raised the international profile of African-based Islamist terrorist groups, but violent extremism is not a new phenomenon on the continent. In the 19 th century, local insurgent leaders fought to establish Islamic states in areas that are now in Nigeria, Guinea/Mali, and Sudan. In the 1990s, Algeria fought a decade-long war against Islamist insurgents after the military canceled election results favoring an Islamist political movement, resulting in as many as 200,000 deaths. Also in the 1990s, Sudan hosted foreign extremists, including Osama bin Laden, after an Islamist regime came to power there in a coup. Al Qaeda's bombings of the U.S. embassies in Kenya and Tanzania in 1998 and subsequent attacks demonstrated the group's reach and ability to recruit from Muslim communities in Sub-Saharan Africa. Extremist groups in Algeria and Somalia later affiliated with Al Qaeda. Religiously inspired terrorism in Africa is not limited to Sunni Islamist groups. One of Africa's oldest active terrorist groups is the Lord's Resistance Army (LRA) in Central Africa—unlike many of the violent extremist groups operating on the continent today, it originated out of a messianic, localized interpretation of Christianity and traditional beliefs. Foreign fighter flows from the continent, primarily from North Africa—first to Afghanistan and the Balkans, then to Iraq, and now to Syria, Iraq, and Libya—have long been of international concern. While a majority of these fighters have come from the Maghreb (Algeria, Tunisia, Morocco, Libya, and Mauritania), smaller numbers have come from Somalia, Sudan, and Kenya, among other countries. Foreign fighter flows to Somalia, including from the United States and other Western countries, have reportedly decreased since 2012 but remain a security challenge. U.S. federal prosecutors have brought several U.S. citizens to trial for seeking to join the Somali Al Qaeda-linked group Al Shabaab. The pace of high-profile extremist attacks on the continent has intensified in recent years. Terrorist incidents have ranged from mass casualty bombings, deadly sieges, and attacks on international facilities, to kidnappings, assassinations, and public executions. Most of the victims have been African, but several U.S. citizens have also been killed in such attacks. Assaults on prominent soft targets such as the Westgate Mall in Kenya and hotels and restaurants frequented by foreigners appear to be on the rise, heightening concerns among foreign governments about the security of their citizens traveling or working in Africa. Suicide bombings have become an increasingly common tactic, most notably for Boko Haram, which frequently uses women and children as attackers. A Somali-American man became the first known American suicide bomber in 2008, in Somalia for Al Shabaab. (Several other U.S. citizens who joined Al Shabaab have also reportedly died in Somalia.) In February 2016, Al Shabaab demonstrated its ability to conceal a bomb in a laptop computer that was detonated by a suicide bomber onboard a Somali airliner. (It detonated before the plane reached cruising altitude and thus did not destroy the aircraft.) In 2015, U.S. Director of National Intelligence (DNI) James Clapper reported to Congress that "Sunni violent extremists are gaining momentum and the number of Sunni violent extremist groups, members, and safe havens is greater than at any other point in history." He reiterated that message in 2016. U.S. officials warn of growing fragmentation within the "terrorism landscape," made up of an increasingly diverse array of groups in Africa, Asia, and the Middle East. Africa, described by Clapper in 2014 as "a hothouse for the emergence of extremist and rebel groups," has drawn increasing attention as groups in Nigeria and Somalia have expanded their reach and lethality, and as new North African groups have emerged. Some Africa-based extremists have affiliated with Al Qaeda or the Islamic State (IS, aka ISIS or ISIL), but many appear to operate autonomously. Transnational groups appear to see opportunity in Africa—the cover of Dabiq , the Islamic State's English-language magazine, proclaimed in 2015: "Shari'a Will Rule Africa." In the 2015 assessment of the DNI , most Sunni violent extremist groups "place a higher priority on local concerns than on attacking the so-called far enemy—the United States and the West." Nevertheless, some African groups have attacked Western interests in Africa, and U.S. officials view some groups, like Al Shabaab, as potentially capable of inspiring or carrying out attacks in the United States, despite a primarily regional focus. There has been comparatively greater international focus on violent Islamist extremism occurring in, and emanating from, the Middle East, South Asia, and North Africa, but in recent years the death toll from violent Islamist terrorist attacks in Sub-Saharan Africa has rivaled that of other regions. This report seeks to provide some context for current terrorism trends in Sub-Saharan Africa and a discussion of some key issues for Congress. Conflicts proliferated in Africa in the immediate aftermath of the Cold War. In the early 2000s, conflict and political instability appeared to be easing, with a landmark peace agreement in Sudan and the end of long-running conflicts in Liberia, Sierra Leone, Ethiopia, and Angola. However, in recent years political violence has again been on the rise in Africa, and violent Islamist extremist groups are among its most deadly perpetrators. Eleven groups based on the continent are now designated by the State Department as Foreign Terrorist Organizations (FTOs); nine have been listed since 2013 (see Appendix A , and see Figure 1 for the areas in which they are active). Some Africa-based groups sought to rebrand themselves as part of the Islamic State organization in 2015, while others remain independent or are affiliated with Al Qaeda. ( Appendix B provides brief group overviews.) Al Qaeda affiliates, including Al Shabaab and the Algerian-led Al Qaeda in the Islamic Maghreb, may view the Islamic State as a rival for recruits and resources, or may differ with its ideology or tactics. By some accounts, the Islamic State's audacious tactics may have spurred rival groups to conduct a recent spate of high-profile attacks in West Africa. The Global Terrorism Index 2015 (GTI), compiled by a nongovernmental organization, illustrates that violence by non-state actors, although concentrated in a small number of countries, is spreading and becoming more deadly. Nigeria's Boko Haram was identified as the world's deadliest terrorist group for civilians in 2014, outpacing the Islamic State, to which it pledged allegiance in 2015. Together, the two groups were responsible for half of the GTI-recorded global deaths from terrorist acts in 2014. That year, GTI reports that Nigeria witnessed the largest year-to-year increase in terrorist deaths ever documented in any country. Somalia has also faced a significant uptick in attacks since 2011; 2014 was its deadliest year for terrorist incidents. Most attacks were claimed by Al Shabaab, which ranks among the five deadliest terrorist groups. The rise in Islamist extremist violence coincides with an increase in the lethality of political violence generally on the continent. Overall conflict fatalities have risen since 2011, and 2014 was the deadliest year for violence in Africa since 1999. Such violence has driven mass displacement—almost 17 million people, many fleeing conflict, are currently displaced in Africa, either internally or as refugees (see Figure 2 below). While violence levels in Africa are still below post-Cold War highs, with instability increasingly limited to a small number of countries, conflict-related fatalities in those countries are surging. Civil war still plagues parts of Africa, notably Sudan, the home of the continent's largest displaced population, and South Sudan, where by some estimates more than 50,000 people have been killed since December 2013. Political protests in Africa periodically turn violent, sometimes marked by repressive responses from state security forces. Across the Sahel region, contests over resources and political representation fuel intercommunal conflict, including between herding and farming communities, notably in Nigeria and Sudan, but also in Mali and Côte d'Ivoire. Despite notable economic progress in some countries and a popular narrative in recent years of "Africa rising," African countries continue to dominate the Fund for Peace's Fragile States Index —only 6 of the top 25 most fragile states in the 2016 Index are not in Africa. The four most fragile states—Somalia, South Sudan, the Central African Republic (CAR), and Sudan—have been plagued by conflict and instability for decades. More than half of the countries in Africa have seen worsening state fragility indicators in the past decade. The Global Peace Index ranks South Sudan, Somalia, CAR, Sudan, and Libya among the top 10 least peaceful countries (the Democratic Republic of Congo or DRC ranks 12 th and Nigeria 15 th ). Religious extremism sometimes overlaps with other forms of political violence, and in some cases, armed Islamists have leveraged local insurgencies to expand their influence and establish safe havens. DNI Clapper has argued that: No single paradigm explains how terrorists become involved in insurgencies. Some groups like ISIL in Syria and al-Qa'ida in the Islamic Maghreb (AQIM) in Mali have worked with local militants to incite insurgencies. Others, like Boko Haram, are the sole instigators and represent the primary threat to their respective homeland's security. Still others, including al-Shabaab, are the primary beneficiaries of an insurgency started by others. Finally, other groups, such as core al-Qa'ida, have taken advantage of the relative safe haven in areas controlled by insurgent groups to build capabilities and alliances without taking on a primary leadership role in the local conflict. Al Qaeda operatives and other violent Islamist extremist groups have had a presence in East Africa for two decades, although the extent of their operations has varied over time. Al Shabaab emerged in predominately Sunni Muslim Somalia in the early 2000s amid a proliferation of Islamist and clan-based militias that flourished in the absence of central government authority. Al Shabaab drew support across clans, promoting a vision of uniting ethnic Somali-inhabited areas of Kenya, Ethiopia, Djibouti, and Somalia under an Islamic caliphate. Some of its founding members reportedly trained and fought with Al Qaeda in Afghanistan, and known Al Qaeda operatives in the region were associated with the group in its formative years. Al Shabaab held significant territory in south-central Somalia, including the capital Mogadishu, in the late 2000s, until a U.S.-backed African Union (AU) military force gained momentum against the insurgency in 2011-2012. Additional troop contributions have since allowed troops from the AU Mission in Somalia (AMISOM) and the nascent Somali government to reclaim further territory, though their forces remain stretched. Al Shabaab continues to wage a violent campaign against the Somali government, the AU mission, and international targets in Somalia; it has taken advantage of security gaps to reinfiltrate rural areas that AMISOM has been unable to hold. It has also threatened the countries participating in AMISOM and conducted deadly attacks in Djibouti, Kenya, and Uganda. Al Shabaab activity in Kenya has increased significantly in recent years; the group has killed hundreds of Kenyans in attacks since 2012. Al Shabaab's ability to recruit abroad and the presence in Somalia of foreign fighters, among them U.S. citizens, have been of significant concern to U.S. policymakers. Its ties with other terrorist groups, most notably Al Qaeda and its Yemen-based affiliate, and its threats against international targets also elevate its profile among extremist groups on the continent and have made it a target of direct counterterrorism operations by the United States and other Western countries. In confirming the U.S. strike that killed Al Shabaab's leader, Ahmed Godane, in September 2014, Obama Administration officials cited his oversight of "plots targeting Westerners, including U.S. persons in East Africa," and suggested that the strike responded to an "imminent threat" to U.S. interests in the region. The tempo of U.S. air strikes in Somalia, sometimes premised on protecting U.S. military advisors in the region, increased in 2015-2016. Armed Islamist groups have proliferated in North and West Africa since 2011, amid political upheaval in the Arab world, governance and security crises in Libya and Mali, and an Islamist insurgency in northern Nigeria. Many of these groups appear primarily focused on a domestic or regional agenda, but some have targeted U.S. or other foreign interests in the region and some may aspire to more international aims. North Africa is also a prominent source of foreign fighters for Al Qaeda-linked groups and the Islamic State organization in Iraq, Syria, and Libya. The oldest continuously active transnational Islamist terrorist group in the region is AQIM, which grew out of Algeria's 1990s civil conflict and began to carry out attacks in West Africa's Sahel region in the early 2000s (prior to its affiliation with Al Qaeda in 2006-2007). More recently, it has sought ties with extremist groups in Tunisia and Libya. The group, which has long exhibited internal tensions, has spawned a number of offshoots and splinter movements in recent years. These include Al Murabitoun, led by longtime AQIM cell commander Mokhtar Bel Mokhtar (who is Algerian), along with several Malian- and Mauritanian-led groups. The countries of the Sahel are among the world's poorest and face complex security challenges, including ethnic conflict and separatism, banditry, and organized crime. They also have a history of poor governance and military intervention in politics. While violent Islamist ideology does not appear to have been embraced by most Sahel residents, it likely resonates with certain marginalized populations, as do the financial resources wielded by AQIM and other groups. In North Africa, numerous reports suggest that Libya has become a hub for regional terrorist actors, and Tunisia has faced increasingly large-scale attacks by individuals who reportedly trained there. Political institutions in Algeria and Morocco have remained comparatively stable, but both countries have claimed to have broken up domestic and transnational terrorist cells and regularly express concern about spillover. Libya and Algeria are home to groups whose pledges of allegiance to the Islamic State have been publicly accepted by IS leadership. Particular conditions in northeast Nigeria gave rise to Boko Haram, which is responsible for a far higher level of deadly violence than any other violent Islamist group in Africa. Key factors include a legacy of overlapping intercommunal and Muslim-Christian tensions in Nigeria; perceived disparities in the application of laws and access to development, jobs, and investment in the north; and popular frustration with elite corruption and other state abuses. Nigerian forces' at times heavy-handed response to Boko Haram since 2009 has reportedly fueled recruitment in some areas. The reported erosion of traditional leaders' perceived legitimacy among local populations in northeast Nigeria and northern Cameroon may also have contributed to the group's ascendance. The shrinking of Lake Chad, once one of Africa's largest lakes and now described by the U.N. Food and Agriculture Organization as an "ecological catastrophe," has exacerbated tensions among communities in the area that Boko Haram has reportedly sought to exploit. Boko Haram's ideology encompasses a worldview that combines an exclusivist interpretation of Sunni Islam—one that rejects not only Western influence but also democracy, constitutionalism, and more moderate forms of Islam—with "politics of victimhood" that resonate in parts of Nigeria's underdeveloped north. Some of Boko Haram's fighters have reportedly been drawn into the group by financial incentive or under threat. The State Department has identified various dynamics limiting the Nigerian government's response to Boko Haram, including a lack of coordination and cooperation between Nigerian security agencies, security sector corruption, misallocation of resources, limited requisite databases, the slow pace of the judicial system, and lack of sufficient training for prosecutors and judges to implement anti-terrorism laws. Boko Haram has expanded its operations beyond Nigeria's borders in recent years, in part due to increased military pressure within Nigeria. Lake Chad's islands and waterways, Nigeria's vast Sambisa Forest, and the remote Mandara Mountains along the Nigeria-Cameroon border have proven effective safe havens for Boko Haram fighters. The group has drawn some of its membership from neighboring countries, though there are no reliable public estimates of the number of non-Nigerian nationals in the group. Boko Haram has operated in northern Cameroon since at least 2013, and it began a series of cross-border attacks into Chad and Niger in early 2015 when those countries deployed troops into Nigeria in an effort to roll back its territorial gains. The election of Nigerian President Muhammadu Buhari in 2015 helped ease tensions among the neighboring countries affected by Boko Haram, and donors have sought to support an integrated regional force to counter the group. Nevertheless, lingering mutual distrust, a lack of military interoperability in the region, and, possibly, an emphasis on military rather than civilian governance initiatives continue to constrain the response. The presence and strengthening of IS supporters in Libya have become matters of deep concern to regional and international security officials. By some estimates, the conflict in Syria has attracted thousands of young Libyans since 2012, and some observers link the rise of IS-affiliated groups in Libya to the return of some of those Libyan fighters in 2014. U.S. military officials estimated that the Islamic State had approximately 3,500 fighters in Libya in late 2015, but in mid-2016, senior U.S. officials estimated that figure had grown to as many as 5,000 to 8,000, among a much larger community of Libyan Salafi-jihadist activists and militia members. Reports suggest that Sub-Saharan Africans are among IS-Libya's fighters. Some have allegedly been lured by financial incentives, while others may be driven by ideological or personal motives. In February 2016, CIA Director John Brennan told the Select Senate Committee on Intelligence that Libya was "the most important theater for ISIL outside of the Syria-Iraq theater, they have several thousand members there, they have absorbed some of the groups inside of Libya, including Ansar al Sharia that was very active prior to ISIL's rise." Military operations against the Islamic State by Libyan militia forces had succeeded in reversing some of the group's gains as of mid-2016. Nevertheless, unresolved political disputes among Libyans and some Libyans' hostility to foreign military intervention limit options available to the United States and other concerned outsiders. Paths toward radicalization among Muslim communities in Africa vary. Many studies on the roots of radicalization focus on the interplay of socioeconomic factors with others, such as patterns of state and social bias, state security responses to minority groups, concerted extremist recruitment efforts, and individual psychological characteristics. The U.S. Agency for International Development (USAID), which has commissioned various studies on factors affecting conflict and violent extremism, has identified both structural "push" factors and "pull" factors in individual radicalization and recruitment, along with "enabling" environmental factors, such as weak governance. Studies furthermore point to the importance of "individual level" messaging, social networks, and person-to-person contacts. Insofar as violent Islamist extremism is a form of armed conflict, USAID posits that conflict is driven by key actors in society… who actively mobilize people and resources to engage in acts of violence on the basis of grievance, such as a group's perception that it has been excluded from political and economic life. […] Illegitimate and ineffective institutions can drive dysfunctional patterns of fragility and stress. The State Department's top Africa official has testified before Congress that violent extremist groups are "focusing their recruitment efforts where there is a lack of economic opportunity, political and social alienation, poor governance, corruption of elites, and lack of accountability for abuses by security forces," and are exploiting such weaknesses in their propaganda. If these dynamics are significant factors in extremist recruitment in Africa, they may highlight a need for more inclusive, responsive, effective, and accountable governance by local authorities, particularly those with whom international actors seek to partner to counter extremist groups. Poverty alone is not a sufficient explanation of individual recruitment or group prowess in a given location; indeed, "structural" explanations of terrorism may underestimate the power of individual decisionmaking and ideology. Extremist groups, however, often seek to exploit perceptions of disproportionate economic hardship or exclusion due to religious or ethnic identity. Groups like Al Shabaab, Boko Haram, and Mali's Ansar al Dine have successfully used victimization narratives to recruit and elicit support, manipulating perceptions of societal discrimination against Muslims or specific ethnic or regional communities. Such narratives sometimes seek to highlight disparities in access to jobs or government investments (in services and infrastructure) in areas where aggrieved communities reside. Recruits may be motivated by both grievances and the prospect of material/financial benefits from extremist group membership. Feelings of marginalization, relative deprivation, and frustrated expectations stemming from a lack of job opportunities in many African countries may make some youth more susceptible to extremist recruitment, in addition to boredom, idleness, and thrill-seeking impulses. At the macro level, impoverished countries rarely have sufficient state revenues for effective policing and border control, which may allow non-state actors to flourish. A lack of means can undermine social services and create incentives for corruption, which armed groups—including extremists but also other insurgents—can exploit as a grievance and as a means to subvert law enforcement. For example, extremist groups as well as separatists have flourished in Somalia and Mali in areas where the state has been unable or unwilling to provide security or access to justice. A lack of state services may foster a vicious cycle, fueling violence in areas that thereby become uninhabitable for government officials, deepening the local sense of isolation and deprivation. Across the continent, corruption and impunity are seen by a majority of Africans as increasing. Some extremist groups, such as Al Shabaab, deliver social services and provide justice in areas where they operate, enabling them to build support and legitimacy among locals. As elsewhere, Muslims in Africa have been increasingly exposed to extremist religious ideologies, and the concept that the West is attacking Islam may push some toward extremism. Al Qaeda and Islamic State messages play to this perception, comparing Western or Western-supported interventions in Muslim countries like Somalia and Iraq to the military campaigns of Christian crusaders in the Middle Ages or to brutal colonization campaigns in Africa by European powers in the 19 th century. Al Shabaab's narrative of fighting against America and its purported Christian "proxies" in East Africa on behalf of Islam resonates among some in the region. Some East African Muslims also perceive domestic counterterrorism efforts to be part of a Western conspiracy against Muslims. In North and West Africa, AQIM and Al Murabitoun propaganda often centers on anti-French messaging, playing to post-colonial sensitivities. France's deployment since 2013 of thousands of troops in counterterrorism operations in the region may provide fodder for the Islamist critique. Some analysts suggest that political factors, such as repression, gross human rights violations by state security forces, and public perceptions of government corruption and impunity, may fuel grievances that provide motivation to support or participate in violence. According to the USAID Guide to the Drivers of Violent Extremism , "governments that engage in gross human rights violations are particularly prone to pushing individuals into terrorist groups." Abuses by Nigerian security forces in the northeast may have played a role in driving some recruitment and initial acceptance of Boko Haram by certain local communities. Similarly, Al Shabaab has sought to foment a domestic insurgency among Kenyan Muslims against a backdrop of that community's historic grievances and a domestic anti-terrorism campaign fraught with serious human rights abuses that some describe as "collective punishment." In a survey of 95 Kenyans associated with Al Shabaab, 65% identified the Kenyan government's counterterrorism strategy as the most important factor that drove them to join the group. In some cases, including in Kenya, violent extremist groups may in fact seek to provoke violent responses from the government in order to fuel support from targeted communities. The extent to which the United States is seen by local communities as an "enabler" of government actions—potentially due to its relationship (real or perceived) with state security forces—may complicate U.S. counter-extremism efforts. In addition to various country-specific responses to terrorist threats on the continent, African countries have established several multinational mechanisms to address certain regional extremist threats, including AMISOM, the Regional Cooperation Initiative for the Elimination of the Lord's Resistance Army (RCI-LRA), an AU-led military intervention in Mali in late 2012 (subsequently re-hatted as a U.N. operation), a multinational joint operations center in southern Algeria known as the CEMOC, the Lake Chad Basin Commission's Multinational Joint Task Force (MNJTF) to counter Boko Haram, and a separate, nascent effort to create a joint military force among five West African countries known as the "G-5 Sahel." Eleven countries participate in the AU-backed Nouakchott Process on the Enhancement of Security Cooperation and the Operationalization of the African Peace and Security Architecture (APSA) in the Sahelo-Saharan Region. The AU's African Center for the Study and Research on Terrorism (ACSRT) in Algiers, which is led by an AU Special Representative for Counterterrorism Coordination, provides a forum for centralizing information on terrorist activity and supporting African counterterrorism strategies. These initiatives reflect recognition of the need for greater cooperation among affected states, although participating countries' capacities vary, sometimes significantly, as does the degree of political will for increased coordination. Overall, African-led responses to terrorist threats remain constrained by limited resources, institutional weaknesses, conflicting political agendas, corruption, sensitivities over domestic sovereignty, regional rivalries, and uneven engagement among affected states. These challenges have undermined various continental efforts, including the AU's Protocol on the Prevention and Combating of Terrorism, which did not enter into force until 2014, a decade after its adoption (several key countries, including Kenya, Nigeria, and Somalia, have yet to ratify it). Also in 2014, the African Union's Peace and Security Council issued a framework for preventing and combating terrorism and violent extremism in Africa, building on previous decisions taken by the AU to enhance cooperation and coordination against these threats and calling for a range of specific actions by AU member states and the AU Commission. As of January 2016, only nine countries had signed the AU's 2014 Convention on Cross Border Cooperation, and only one—Niger—had ratified it. Other AU efforts include a Model Anti-Terrorism Law, which provides a blueprint for domestic legislation in line with AU policy. According to the Africa-based Institute for Security Studies, only roughly one-third of African countries have counterterrorism legislation that comports with the AU recommendations, however, raising questions about the extent to which some governments rank the threat a high priority. Various donor initiatives, including multi-donor trust funds and regional or bilateral assistance, aim to address African resource and capacity constraints. The European Union's African Peace Facility (APF), for example, provides funding for AMISOM salaries and certain operational costs. The EU has also provided support for regional security responses in Mali and against the LRA. (The EU has provided more than €2 billion for such initiatives through the APF since 2004, including roughly $300 million in 2015.) The EU also fields military and police training missions in Mali, Niger, and Somalia. Some countries, including the United Kingdom (UK), France, the United States, Turkey, Morocco, and Algeria, provide training and equipment bilaterally to African partners to support counterterrorism efforts. The UK, for example, announced its intention in December 2015 to deploy up to 300 military personnel to build Nigeria's capacity to counter Boko Haram, augmenting its existing intelligence, training, and advisory support to the country. Turkey, a key donor to Somalia, has signaled its intention to establish a military training center there. And France, which launched Operation Serval in Mali in 2013, deploying more than 4,000 French forces to repulse Islamist insurgents, transitioned to a new operation, Barkhane, in mid-2014, under which some 3,500 French forces work with African counterparts to address jihadist threats across the Sahel region (see Figure 1 ). The African Union, the United Nations, and various donors are engaged in discussions to enhance the sustainability of African-led peace support operations, including those with a potential counterterrorism component. (The U.N. Support Office in Somalia is unique in its mandate to provide support to a regional operation; to date, the Security Council has been reluctant to consider support through assessed U.N. contributions for other African-led missions.) AU Member States have notionally committed to gradually covering 25% of the AU peace and security budget (largely funded by donors) by 2020, but financing details remain unclear. Donor deliberations on U.N. support for future Security Council-authorized AU missions continue. The United States engages in a range of efforts, both military and civilian, to prevent and deter terrorism and to strengthen security and stability in Africa. The Obama Administration's 2015 National Security Strategy identifies "violent extremists fighting governments in Somalia, Nigeria, and across the Sahel"—along with other ongoing conflicts in Africa—as "threats to innocent civilians, regional stability, and our national security." Consistent with the Administration's National Strategy for Counterterrorism , its Strategy for Sub-Saharan Africa (issued in 2012) indicates a goal of "disrupting, dismantling, and eventually defeating Al-Qa'ida and its affiliates and adherents in Africa," in part by strengthening the capacity of "civilian bodies to provide security for their citizens and counter violent extremism through more effective governance, development, and law enforcement efforts." Deepening security partnerships and building African military capacities is a separate, related aim under the same objective of advancing peace and security. As the President described in his 2014 foreign policy speech at West Point, while "not eliminat[ing] the need to take direct action when necessary to protect ourselves," building partner capacity has been a growing key theme in his Administration's counterterrorism strategy. In its FY2017 budget request, the Administration indicates that its regional counterterrorism partnership efforts in Africa seek to deny terrorists safe havens, operational bases, and recruitment opportunities. Current U.S.-led regional counterterrorism efforts include two multi-faceted interagency efforts: the Trans-Sahara Counter-Terrorism Partnership (TSCTP) in North-West Africa and the Partnership for Regional East Africa Counterterrorism (PREACT). TSCTP includes military and police train-and-equip programs and border security initiatives, justice sector support, counter-radicalization programs, and public diplomacy efforts. It is led by the State Department's Africa Bureau, with USAID and the Department of Defense (DOD) implementing components and playing a role in strategic guidance. PREACT, modeled on TSCTP, is a smaller initiative that is part of a broader array of counterterrorism-related assistance efforts in East Africa, many of them bilateral. Some TSCTP and PREACT programs seek to encourage regional cooperation through multinational training events, while other TSCTP and PREACT assistance is provided to individual countries. DOD, for its part, conducts regional operations in which U.S. military personnel work with their local counterparts to improve intelligence, regional coordination, logistics, border control, and targeting (see below). Other U.S. regional security initiatives, such as the State Department Bureau of Counterterrorism's Regional Strategic Initiative (RSI), overlap with these program s and seek to cover some gaps, including in the Lake Chad Basin area. A large portion of all U.S. security assistance to Africa seeks to help counter terrorism. The largest share in the past decade has supported African forces fighting Al Shabaab in Somalia. Cumulative U.S. funding for AMISOM (which has both counterterrorism and stabilization aims) has totaled almost $2 billion. More recently, the United States has allocated more than $400 million in security assistance (most of it since 2014) to the Lake Chad Basin countries to counter Boko Haram. The Peacekeeping Operations (PKO) account is the primary State Department vehicle for counterterrorism assistance for African militaries, provided under the bilateral budget for Somalia and through regional programs such as TSCTP and PREACT (respectively about $20 million and $10 million annually in PKO funding), as well as others. Training and related support for African law enforcement entities is provided through the State Department's Anti-Terrorism Assistance (ATA) program, funded under the NADR (Nonproliferation, Antiterrorism, Demining, and Related Programs) account, and through the International Narcotics Control and Law Enforcement (INCLE) account, among others. Some African partners, North African countries in particular, have also sought to enhance their counterterrorism capabilities through the Foreign Military Sales (FMS) program, and several have received U.S. excess defense articles (EDA). Congress has also granted DOD a number of authorities to conduct security cooperation activities with foreign forces. As overall DOD counterterrorism assistance spending has grown, DOD funding for security assistance in Africa surpassed that provided by the State Department for the first time in FY2014 and has continued to rise. In the past decade, DOD has notified Congress of over $1.7 billion in planned counterterrorism training and equipment for African counties, of which Kenya, Uganda, Niger, and Tunisia have been the top cumulative recipients. The Administration's new Counterterrorism Partnerships Fund (CTPF), authorized in the FY2015 National Defense Authorization Act ( P.L. 113-291 ), is contributing to a significant expansion of AFRICOM's counterterrorism capacity-building programs. In addition to almost $235 million in regular "2282" (i.e., 10 U.S.C. 2282, global train-and-equip for counterterrorism purposes) funding for AFRICOM's programs, DOD allocated almost $80 million in CTPF-funded train-and-equip assistance under 2282 in FY2015 to support efforts in the Sahel-Maghreb, Lake Chad Basin, and East Africa regions. Planned CTPF funding for Africa in FY2016 totals $375 million and the Administration has requested $450 million for FY2017. Additional DOD counterterrorism funds are likely be allocated to African countries under 10 U.S.C. 2282 and other authorities. U.S. program officers and policymakers have faced challenges in seeking to implement both State Department and DOD "partner capacity-building" programs in Africa, such as when host-government preferences for certain types of assistance do not match U.S. assessments of what is needed. Postcolonial sensitivities over sovereignty and access may inhibit the extent of host government interest in receiving U.S. training—as in Algeria and Nigeria. Many areas of Africa where extremist groups operate are marked by the absence of effective host-government counterparts with whom to partner, and in many countries political elites may be more concerned about other security threats (e.g., ethnic separatism) than violent Islamism. In some countries—such as Libya and Somalia—even central government authority is contested. The House Armed Services Committee has expressed concern (in H.Rept. 114-537 ) with the ability of some African countries to absorb, sustain, and responsibly manage the equipment provided through these train-and-equip programs. The committee has urged DOD to invest some CTPF resources in programs to build the institutional capacity of such partner forces. Such efforts could complement or be part of the Administration's new Security Governance Initiative (SGI), which also is aimed at building the capacities and addressing the shortcomings of security sector institutions and related government oversight mechanisms. Each of the six SGI partner countries (Ghana, Kenya, Mali, Niger, Nigeria, and Tunisia) faces terrorism threats, to varying degrees. The Administration's new African Peacekeeping Rapid Response Partnership (APRRP), which seeks to build rapid deployment capabilities in six key African peacekeeping troop contributors to respond to crises (with an annual budget request of $110 million), is not specifically focused on counterterrorism but could enhance the contributions of several top African counterterrorism partners, notably Uganda and Ethiopia, to stability operations in Somalia or elsewhere. U.S. Africa Command's Theater Campaign Plan for FY2016-FY2020 identifies five key lines of effort for the U.S. military in Africa: (1) neutralize Al Shabaab and transition the mandate of the AMISOM to the Somali government; (2) degrade violent extremist organizations in the Sahel-Maghreb and contain instability in Libya; (3) contain Boko Haram; (4) interdict illicit activity in the Gulf of Guinea and Central Africa; and (5) build African peacekeeping, humanitarian assistance, and disaster response capacities. Protecting U.S. personnel and facilities and securing U.S. access is characterized as an "enduring task" in the plan. The approach of U.S. Africa Command (AFRICOM), as outlined in the plan and in the command's 2016 Posture Statement, emphasizes counterterrorism cooperation with African "partners" and international allies (e.g., France and the United Kingdom), as well as with U.S. civilian agencies. The U.S. military has periodically taken direct action against terrorist threats in Africa, primarily in Somalia but also more recently in Libya, and has interdicted several suspected terrorists and extremist group interlocutors. The Administration broadened its justification for direct U.S. military action in Somalia in 2015, indicating in a notification to Congress consistent with the War Powers Resolution that its operations in Somalia were carried out not only "to counter Al Qaeda and associated elements of Al Shabaab" (as previously reported), but also "in support of Somali forces, AMISOM forces, and U.S. forces in Somalia." The United States has not deployed combat troops to Somalia, but it does have U.S. military advisors in the country providing support to African partners. The United States has also provided logistical and intelligence support to French military counterterrorism operations in the Sahel since 2013. More often, U.S. military personnel play an indirect role in regional counterterrorism efforts, providing training, equipment, logistical support, intelligence, and in some cases, advisory support to partners on the continent. DOD describes "building partner capacity" (BPC) among African states to counter terrorist threats as a critical component of its strategy in the region. A long-running contingency operation, Operation Enduring Freedom-Trans-Sahara (OEF-TS; funded annually at over $80 million), which supports TSCTP, does not limit its focus to counterterrorism, according to DOD's FY2017 budget request. Rather, it focuses on "overall security and cooperation" by "forming relationships of peace, security, and cooperation" among countries in the region. In East Africa, Operation Enduring Freedom-Horn of Africa (OEF-HOA) has a different scope, supporting activities at the U.S. military's only permanent base in Africa, in Djibouti; Special Operations Command operations in the Horn of Africa (and Afghanistan); and Intelligence, Surveillance, and Reconnaissance (ISR) operations in the region. Other ongoing operations include the deployment, since 2013, of up to 350 U.S. military personnel and surveillance assets to Niger and, since October 2015, of up to 300 U.S. military personnel and surveillance aircraft to Cameroon, to conduct ISR operations within Niger and throughout the Lake Chad Basin region, respectively. DOD has also provided logistics and advisory support to African forces, primarily from Uganda, to counter the Lord's Resistance Army in Central Africa since 2011. DOD may provide support (up to $85 million globally) to African forces (including irregular forces or non-state groups) supporting counterterrorism operations in which U.S. special operations forces are engaged via Section 1208 of the FY2005 National Defense Authorization Act ( P.L. 108-375 ), as amended. Recipients and funding levels are classified. While the bulk of U.S. development aid to Africa aims broadly to contribute to increased peace and security, good governance, and improved social and economic development, a subset of programs have a specific counter-extremism component intended to prevent radicalization and undermine the attraction of extremist ideologies and organizations. The focus of these programs ranges from building awareness among affected communities of drivers and indicators of radicalization or countering extremist narratives to promoting community-led interventions. USAID's Guide to the Drivers of Violent Extremism emphasizes the importance of distinguishing among drivers that contribute to recruitment into violent extremist organizations, to community support for or tolerance of their activities, or to an enabling environment conducive to their operations. Many studies stress that counter-extremism programs should be designed with an understanding of country and community-specific contexts in which radicalization occurs. Some relevant programs are aimed at fostering opportunities among at-risk Muslim youth for employment and positive social interaction, while others are focused on the political and economic inclusion of minorities and marginalized populations. Others aim to spread "tolerant" religious interpretation by working with imams or other community leaders. Some programs have a geographic focus (e.g., northern Nigeria or the Kenyan coast). USAID guidance stresses the need for community involvement, when possible, in identifying and implementing projects, taking into account a potential mistrust of outsiders' intentions. The State Department also seeks to encourage African governments' participation in countering violent extremism (CVE) efforts—including through a series of CVE summits, two of which have been hosted by Kenya and Mauritania—and has supported programs that aim to strengthen African law enforcement capacity to counter extremism, including in prisons. The State Department and USAID both oversee CVE programs in Africa, including those funded through TSCTP and PREACT. USAID's Office of Transition Initiatives (OTI) also implements CVE-related programming in Niger and Nigeria (having completed CVE-related programs in Tunisia and Mali) and recently launched a new Somalia program. In 2015, the White House announced its intent to provide at least $40 million in FY2015 for CVE in East Africa alone. The FY2017 State-USAID budget request includes more than $43 million for CVE efforts specifically located in Sub-Saharan Africa, more than one-quarter of which would focus on Nigeria. Africa may also benefit from some portion of the $75 million in CVE funds that the State Department has requested to be managed by its functional bureaus on a global basis. Some U.S. public diplomacy and messaging initiatives also seek to counter violent extremist organizations' recruitment and financing efforts by countering extremist narratives. Such efforts aim to undermine terrorist groups' credibility among local populations, targeting a variety of audiences, including both "key influencers" such as community and religious leaders, and vulnerable populations. They may sometimes be implemented discreetly or indirectly, aiming to counter victimization narratives and communicate U.S. or host-government respect for Islam and indigenous customs. Voice of America's Hausa, Somali, Swahili, and French-to-Africa Services provide news programming to areas affected by terrorist groups and broadcast discussions with Muslim scholars and experts. In early 2016, the Obama Administration created a new Global Engagement Center, based in the State Department's Public Diplomacy Bureau, to coordinate all U.S. government communications activities directed at foreign audiences to counter terrorist messaging and influence. The Treasury Department leads U.S. efforts to detect, track, and prosecute those involved in terrorist financing, coordinating with international partners, including those in Africa. A number of Africa-based groups and individuals are designated for financial sanctions under Executive Order 13224, pertaining to the September 11, 2001, terrorist attacks. The State Department coordinates U.S. assistance efforts to strengthen the ability of foreign partners to detect, investigate, and combat terrorist financing through its Counter-terrorism Financing (CTF) program and related initiatives. Such efforts are often conducted by or in collaboration with other federal agencies. The CTF program has supported the establishment of financial intelligence units (FIUs) across Africa. Resident Legal Advisors (RLAs) posted at several U.S. embassies in Africa provide training to prosecutors and other technical expertise to countries in the region. In congressional testimony in May 2016, State Department officials highlighted their intent to significantly increase capacity-building for law enforcement, judicial, and other criminal justice sector institutions in Africa through FY2016 CTPF funding. The U.S. government maintains a range of watch lists, including the Terrorist Screening Database and the No Fly List, to limit terrorist mobility. The State Department also provides assistance to improve foreign governments' watch listing capabilities through the Terrorist Interdiction Program (TIP), a global initiative created in the aftermath of the 1998 East Africa embassy bombings to provide countries with a system for identifying and apprehending suspects who might attempt to flee after a terrorist attack. Under this program, the U.S. government provides select partner nations with a computer system known as PISCES (Personal Identification Secure Comparison and Evaluation System) to facilitate immigration processing and to exchange information with State Department officials on suspected terrorists attempting to travel through their countries. The PISCES system is operational at seaports and airports throughout the region. As this report describes, as the level of activity by terrorist groups in Africa has increased in recent years, U.S. security assistance for counterterrorism purposes has grown significantly. Despite some increases in U.S. funding to build police and law enforcement capacity in Africa, the overall increase in security assistance has been overwhelmingly channeled through military train-and-equip programs. In examining these trends, Members of Congress may wish to examine whether the relative allocation of resources for military, law enforcement, and justice sector assistance matches the nature of the threats and gaps on the continent. With terrorist attacks on soft targets increasing, are African police, investigators, and prosecutors sufficiently trained and equipped to respond? Questions may also be raised about the balance between security and development or good governance spending in countries vulnerable to violent extremist recruitment—particularly given that terrorist groups seem to flourish in countries with serious governance shortfalls. Some critics contend that the current U.S. counterterrorism approach in Africa is "lopsided," potentially over-focusing resources on security responses that could, in some cases, further destabilize some countries and exacerbate regional instability. Members may also weigh the allocation of resources to other lines of effort in Africa, such as the enforcement of travel and financial sanctions against terrorist actors and the allocation of military intelligence-collection assets. A number of Africa-based groups and individuals are designated under U.S. and multilateral sanctions regimes, but public indications of enforcement actions are few compared to terrorist actors in other regions (who may well be more vested in the global financial system). With regard to intelligence collection, successive commanders of AFRICOM have testified to Congress that intelligence, surveillance, and reconnaissance (ISR) assets allocated to the command remain insufficient to carry out its mission. Interagency actors have reportedly disagreed at various times over whether to approach Africa-based extremist groups through direct military interdiction and targeting, or through a strategy of building African partner countries' security capacity (in the near or longer term). In select cases, the United States has applied both approaches. The Administration has described Al Qaeda's affiliates in Yemen and Syria as its "most capable" branches and the Islamic State as the "preeminent global terrorist threat"—suggesting that groups based primarily in Africa present a comparatively lower degree of threat. Still, the Administration has publicly announced the deployment of U.S. military forces to several African countries, including to the Lake Chad Basin countries to help counter Boko Haram and to Somalia as advisors. To date, the United States has acknowledged carrying out direct strikes targeting terrorist actors in Somalia and Libya, but not elsewhere on the continent. Given the U.S. military's overwhelming capacity and the existence of various obstacles to sharing intelligence with partner states, direct strikes are arguably the most dependable method of targeting specific terrorist leaders. However, they require significant resources, raise potential legal questions about the use of military force overseas, and have the potential to spark backlash among local populations. Moreover, while strikes may be successful at degrading a group's capabilities or disrupting its decisionmaking, strikes without follow-up efforts on the ground to clear and hold territory may have only a short-term impact. Some observers contend that such strikes also potentially make U.S. citizens a greater target for terrorist groups. Calculations about the threat level as well as the legal and political environment in a given country may all play out in decisionmaking on where and when to conduct strikes. Partner capacity-building activities, meanwhile, aim to empower other governments to counter terrorism with a lower expenditure of U.S. resources and risk, but they also provide less control over operations and may not be effective in the short run (or at all, in some cases). Their relative success depends on many variables, not least of which is whether U.S. and partner government interests align. In some cases, such interests may diverge over time—recent statements from Ugandan officials suggesting that they may end their involvement in the counter-LRA mission and AMISOM, for example, highlight the limits of the United States' ability to rely on partners for success. (Ugandan forces are widely viewed as the most capable in the counter-LRA effort, and they are the largest troop contributor in Somalia.) Additionally, some analyses of counterterrorism partnerships in Somalia suggest that while the United States and its partners in AMISOM may share a common foe, the objectives and actions of Somalia's neighbors (all of which are AMISOM troop contributors) may, in some cases, undermine other U.S. aims and create risks for the country's long-term stability. Various other factors can affect the impact of capacity-building efforts, including partners' domestic political situations or resource constraints. U.S. train-and-equip programs, which often involve the presence of U.S. uniformed military personnel within the host country, are also not devoid of political sensitivity or backlash potential. Further, when partner forces' counterterrorism efforts result in civilian casualties or abuses, local perceptions of state authorities may turn negative, undercutting efforts to delegitimize the extremists' cause. This may be the case in Somalia, where negative local perceptions of AMISOM have anecdotally increased in recent years, in part due to reports of misconduct and civilian casualties, but also apparently based on perceptions by some Somalis that neighboring countries are using AMISOM to further their own objectives. The Administration does not recognize any geographic limitations on its legal authority to use force in counterterrorism operations against what it considers to be Al Qaeda-linked groups, nor in its ability to deploy U.S. military forces to "work closely with host governments to help them combat extremism within their own country." Debate about the legality of U.S. counterterrorism strikes against targets not clearly linked to the terrorist attacks of September 11, 2001, nevertheless persists, and the Administration's recent justifications of strikes in Somalia for "self-defense" and "in defense of" African partner forces contribute to the debate. As the U.S. military increasingly deploys personnel as trainers and advisors to counterterrorism partner forces on the continent, questions surrounding the legal authority for strikes "in self-defense" absent explicit congressional authorization may become increasingly relevant. Congress may further seek to engage the executive branch on its determinations about the relationship between African groups nominally allied to either Al Qaeda or the Islamic State, which the Obama Administration has also interpreted as a legal target for U.S. military action under the 2001 Authorization for Use of Military Force (AUMF, P.L. 107-40 ). The range of legal authorities under which counterterrorism funding is appropriated and the many programs through which such funding is obligated may create particular challenges for both interagency coordination and congressional oversight. With regard to TSCTP, for example, the Government Accountability Office (GAO) found that shortcomings in interagency coordination may limit the program's effectiveness. In addition, country-specific spending figures are not routinely reported to Congress for regional security assistance programs, including TSCTP, PREACT, and some DOD BPC activities, and such spending is generally not reflected on a country-specific basis in State Department and DOD congressional budget justifications. Funding and responsibilities for CVE programs are also spread among multiple offices, including the State Department's Counterterrorism (CT) and Africa Bureaus and USAID, as are efforts to counter terrorist messaging. The Administration has reportedly taken steps to improve monitoring and evaluation of these efforts, but mechanisms for coordination among these offices may not be uniform. A new Department of State and USAID Joint Strategy on Countering Violent Extremism , released in May 2016, seeks to build on a pledge made in the Administration's 2015 Quadrennial Diplomacy and Development Review (QDDR) to enhance preventative efforts. The strategy identifies coordination points within the State Department and USAID, though the respective roles of the various implementing offices remain to be seen, at least publicly. The lack of country-specific funding data may inhibit congressional oversight of the scale, scope, and balance of U.S. engagement and assistance on the continent. It may also inhibit efforts to examine whether U.S. efforts to counter terrorism and extremism in Africa strike the appropriate balance between support to African militaries and law enforcement or justice sectors, between government-to-government programs and community engagement, or between programs that seek to prevent radicalization versus those that seek to contain its impact. Limited access to funding data may also obscure U.S. policy dilemmas. For example, in response to Burundi's political crisis, during which state security forces have been implicated in grave human rights abuses, the Administration has announced the suspension of some in-country security assistance programs, but Burundian military forces continue to receive U.S. equipment and logistical support as part of their deployment to AMISOM in Somalia. Funding for the latter is not reflected in the Burundi bilateral aid budget, yet many experts assert that the military's continued participation in AMISOM (which notably provides troops with increased salaries) may be the preeminent source of U.S. policy leverage vis-à-vis the Burundian government. In recent years, Congress has required the Administration to submit various reports and strategy documents related to efforts to combat terrorist groups, including in Africa. The FY2015 National Defense Authorization Act (NDAA, P.L. 113-291 ) required the Secretary of Defense to submit to congressional committees "a strategy to counter the growing threat posed by radical Islamist terrorist groups in North Africa, West Africa, and the Sahel." The FY2016 Consolidated Appropriations Act ( P.L. 114-113 ) required a report "on United States counterterrorism strategy to disrupt, dismantle, and defeat the Islamic State, al-Qa'ida, and their affiliated groups, associated groups, and adherents." The House version of the FY2017 National Defense Authorization Act ( H.R. 4909 , Subtitle E, §1249) would require the Secretary of Defense to submit a "strategy for United States defense interests in Africa." The House Armed Services Committee report on H.R. 4909 requests DOD to respond to a series of "concerns" with regard to BPC programs, including "the capacity of nations to absorb and sustain assistance"—specifically referencing U.S. support to Somali armed forces. Successive NDAAs also specify substantive requirements for executive branch congressional notifications for DOD-administered counterterrorism aid, such as global train-and-equip programs. The Senate version of the FY2017 NDAA, S. 2943 , seeks to streamline DOD's "patchwork" of security cooperation authorities and improve transparency and congressional oversight of those efforts. It does not, however, address the various authorities vested in the State Department that are used to support counterterrorism efforts, nor the relationship (and relative balance of funding) between State Department and DOD-funded programs. Several top U.S. counterterrorism partners in Africa rank "Not Free" on Freedom House's "Freedom in the World" Index, including Cameroon, Chad, Djibouti, Ethiopia, Mauritania, and Uganda. The State Department's own annual human rights reports regularly raise concerns with security force abuses in many African countries considered security cooperation "partners." Further, local militaries reportedly continue to play significant roles in politics and governance in several top U.S. security partner countries, including Ethiopia, Mauritania, and Uganda. The United States has taken measures to limit the potential for U.S. security assistance to be associated with abusive foreign governments and security forces through policy determinations and legal restrictions on aid. However, such restrictions are sometimes criticized by those who argue that continued engagement is more likely to positively influence behavior. Alternately, some argue (though not often publicly) that the overarching goals of such assistance—for example, counterterrorism, or the extension of state authority in ungoverned spaces—may in some cases outweigh certain human rights concerns. In countries where security force abuses have been identified as a possible push factor for radicalization, this debate becomes more complicated, particularly if the United States prioritizes maintaining counterterrorism cooperation based on U.S. national security concerns. Among the legal restrictions enacted by Congress are the so-called "Leahy laws," which prohibit the provision of U.S. security assistance to foreign security force units that have been credibly implicated in gross violations of human rights. Through provisions in annual appropriations measures and other legislation, Congress has also prohibited foreign assistance to governments that overthrow elected governments through military coups d'état, and has enacted various other country-specific legal provisions related to security assistance and human rights concerns. The Child Soldiers Prevention Act of 2008 (CSPA, P.L. 110-457 ), as amended, for example, restricts military assistance for certain purposes, and the licensing of Excess Defense Articles (EDA) and Direct Commercial Sales (DCS), to countries implicated in the use of child soldiers. Five of the eight countries currently implicated in the use of child soldiers are in Africa. U.S. policymakers and observers continue to debate the relationship between U.S. security assistance, state fragility, and democracy in Africa. Democratic trends in Africa have raised concerns as U.S. security cooperation on the continent has grown. From Burkina Faso to Burundi, a number of incumbent African leaders have taken steps to extend their terms in office, often prompting mass protests and, in some cases, violent responses from security forces. Executive branch officials often justify the provision of security assistance by arguing that U.S. military professionalization programs have a positive impact on democracy and human rights. Measuring this impact is challenging, however. Moreover, such a premise may be questioned, given democratic backsliding in several top African recipients of U.S. security assistance, such as Ethiopia, Rwanda, Uganda, and the Democratic Republic of Congo. Policymakers and observers regularly debate the extent to which security assistance should be wielded as a source of policy leverage—that is, whether to suspend assistance in an effort to force a change in behavior on the part of undemocratic regimes. Whether or not the withholding of U.S. assistance creates a compelling incentive for political change, however, is also debatable and may be highly case specific. In cases where U.S. security assistance is provided to Africa's fragile states, governments may face difficulties in absorbing and sustaining it. A recent RAND study suggests that U.S. officials face a major policy dilemma in Africa, where "the countries that are most in need of assistance are usually the ones least able to make positive use of it." That study, which assessed quantitative and qualitative research on the impact of security assistance in fragile states, found significant overlap between "countries of concern" in Africa (i.e., countries with low scores on indicators of state reach) and the United States' key counterterrorism partners (TSCTP and PREACT partner countries). In these countries, U.S. policymakers may face a dilemma as they seek to prioritize both near- and longer-term objectives, and may weigh whether approaches to addressing near-term goals like countering terrorism might inadvertently have a negative impact on longer-term goals like stability and development, or limit attention and resources to addressing other drivers of conflict. Given current trends, congressional attention to violent Islamist extremism in Africa appears likely to continue, along with debate over the best way to confront the phenomenon. Congress may weigh the relative merits of various tools through which it can help shape U.S. counterterrorism policies and efforts in Africa, such as the appropriation of foreign aid resources, including for programs to build security capacities, to counter violent extremist propaganda and financing, to stabilize and rebuild liberated areas, or to promote more accountable and inclusive governance. Congress may also seek to prioritize through legislation certain activities over others and may examine benchmarks or metrics for success in counterterrorism efforts, including through the possible enactment of new or altered reporting requirements or through other oversight activities. Consideration of geographic or temporal limits on or expansions of the legal authority to use military force may also factor into future congressional deliberations. Appendix A. Foreign Terrorist Organizations in Africa Appendix B. Terrorist Group Profiles | The pace of high-profile terrorist attacks in Sub-Saharan Africa has intensified in recent years, and the death toll now rivals that of other regions where violent Islamist extremist groups are active. This report provides context for these trends, including a summary of sub-regional dynamics, factors affecting radicalization, and U.S. responses. It focuses primarily on Sunni Islamist terrorism, given the ideological underpinnings of the African groups currently designated by the U.S. State Department as Foreign Terrorist Organizations. Select issues for Congress are also explored. Information on the major Africa-based groups is provided in an Appendix. Over the past two decades, Congress has appropriated increasing funding to counter terrorism in Africa and has demonstrated interest in the nature of terrorist threats and efforts to counter them. Members have raised questions regarding the threat violent extremist groups in Africa may pose to U.S. citizens and U.S. interests; the counterterrorism capacities of African countries and the impact of U.S. efforts to bolster them; the role of the U.S. military in countering violent extremist groups in Africa; the level of U.S. funding and personnel dedicated to these efforts; and the extent to which U.S. programs are successful in seeking to prevent or mitigate radicalization, recruitment, and support for violent extremist groups. Some Africa-based groups have affiliated with Al Qaeda or the self-proclaimed Islamic State, but many seem to operate autonomously. While many extremists on the continent appear to be driven primarily by local political and socioeconomic dynamics, some African groups have sought to attack Western interests in Africa, and some, like Somalia's Al Shabaab, apparently seek to inspire or carry out attacks in the United States and elsewhere. The spillover effects from areas where terrorist groups operate—most notably Libya, Mali, northeast Nigeria, and Somalia—are of increasing concern to neighboring states and the broader region. Several emerging trends in violent Islamist extremist activity on the continent are impacting how governments in the region, local communities, and international actors respond: Proliferation of African-Led Groups. Al Qaeda's first avowed African affiliate, Algerian-led Al Qaeda in the Islamic Maghreb (AQIM), was long assumed to have limited appeal among West African Muslims, and its interest in criminal activities often seemed to eclipse its ideological commitment. However, the rise of relatively potent, locally led violent Islamist groups in Somalia, Nigeria, and Mali over the past decade challenges past assumptions about the limited prospects for Islamist terrorism on the continent. Africa also appears to have become an arena for competition between Al Qaeda affiliates and the Islamic State over recruits, affiliates, and perceived legitimacy. The Push and Pull of North Africa. State collapse in Libya and political transitions in Tunisia and Egypt have provided new opportunities for armed groups to establish safe havens for training, expand their geographic reach, recruit followers, and equip themselves. Protecting and sustaining Tunisia's nascent democratic government has become a focus for U.S. policymakers in light of these trends. Contrary to some hopes, however, increased political openness has not inoculated Tunisia against domestic radicalization and recruitment. Conflict in Libya has spilled over its borders, generating new flows of arms and combatants into Tunisia and West Africa's Sahel region. Instability in North Africa has also drawn African recruits seeking to join groups based in Libya, or seeking to transit through North Africa en route to other global hotspots. Mutual distrust among North and Sub-Saharan African governments has inhibited counterterrorism cooperation, as have bureaucratic divisions within some donor governments. From Holding Territory to Asymmetric Attacks. Years before the "Islamic State" announced its caliphate in Iraq and Syria in 2014, Islamist extremist groups in Africa sought to hold, and in some cases govern, territory. Al Shabaab began to assert territorial control in Somalia in the mid-2000s, as did AQIM and two local affiliates in Mali in 2012, followed by Boko Haram in Nigeria and Islamic State-linked groups in Libya in 2014. Military offensives by regional forces (in Somalia, Nigeria, and Libya) and French forces (in Mali) have reversed this trend, but gains are fragile. In response, extremists have reverted to asymmetric tactics and expanded the scope of their targets. Attacks on Urban "Soft Targets" by a Resurgent AQIM. For much of the past decade, AQIM focused primarily on lucrative kidnap-for-ransom operations, attacks on local military and police posts, and insurgent operations in remote areas. As of 2013, the group appeared to have been weakened by internal divisions and by French military operations in Mali that killed or captured several key figures. However, three recent AQIM-linked attacks on hotels and restaurants popular with Western expatriates—in Mali (November 2015), Burkina Faso (January 2016), and Côte d'Ivoire (March 2016)—were among the group's deadliest ever, killing dozens of Western civilians and placing AQIM back at the center of regional terrorism dynamics. AQIM and its former rival splinter movement Al Murabitoun jointly claimed responsibility, signaling their apparent renewed merger. These attacks also appeared to signal a shift in tactics, piquing concerns about the vulnerability of cosmopolitan cities with large expatriate communities, such as Dakar, Accra, and Abidjan. As a result, local governments and donors, including the United States, are considering new programs to bolster West African urban crisis response capabilities, in addition to ongoing military train-and-equip counterterrorism programs. Challenges. African-led responses to terrorist threats have been constrained by limited resources and capacity, institutional weaknesses, conflicting political agendas, corruption, sensitivities over domestic sovereignty, regional rivalries, and uneven engagement among affected states. These challenges have also undermined the effectiveness of efforts by concerned international actors and donors—including the United States—to respond. U.S. policymakers face a number of dilemmas, including how to prioritize U.S. counterterrorism activities in Africa (both within the continent and compared to other regions); how to define a threshold for the use of U.S. military force against terrorist groups on the continent; whether and how to balance a large infusion of military aid to affected African countries with investments in law enforcement, development, and governance; and how to measure and assess the impact of U.S. efforts. The question of how and when to partner with authoritarian states for counterterrorism purposes—and what consequences this may have on long-term regional stability and the pursuit of other U.S. policy objectives—is particularly thorny. Further CRS Reading: CRS In Focus IF10172, Al Qaeda in the Islamic Maghreb (AQIM) and Al Murabitoun; CRS In Focus IF10170, Al Shabaab; CRS Report R43558, Nigeria's Boko Haram: Frequently Asked Questions; CRS Report RL33142, Libya: Transition and U.S. Policy; CRS In Focus IF10116, Mali: Transition from Conflict?; CRS In Focus IF10155, Somalia; CRS Report RL33964, Nigeria: Current Issues and U.S. Policy; CRS Report R42967, U.S.-Kenya Relations: Current Political and Security Issues; CRS Report R43612, The Islamic State and U.S. Policy; and CRS Report R44313, What Is "Building Partner Capacity?" Issues for Congress. |
Children in foster care are more likely to have mental health care needs than children generally. They are also more likely than other children to receive psychotropic medications, which are prescribed drugs that affect the brain chemicals related to mood and behavior. Psychotropic medications are used to treat a variety of mental health conditions including attention disorders, depression, anxiety, conduct disorders, and others. On the one hand, prescription of psychotropic medication for foster children may be appropriate, given their mental health needs. Still, the evidence on the safety and efficacy of psychotropics in children is limited. Congress has taken a strong interest in how states are monitoring and regulating use of these medications. Federal child welfare law requires states to have a plan for overseeing prescription drug use among children in foster care, including the use of psychotropic medications. This report first provides background on the mental health needs of children in foster care, and the prevalence of psychotropic medication use among these children. The next section of the report discusses congressional oversight of psychotropic medication, and efforts by the U.S. Department of Health and Human Services (HHS) to provide assistance to states in ensuring appropriate use of psychotropic medications for children in care. Following this is a brief discussion of state monitoring of the use of these medications for foster children. Child welfare agencies become involved with families when investigating abuse or neglect of children by their parents or guardians. Some children may remain in their homes following the investigation, while some are removed from their homes into foster care. Children in foster care are placed in another setting that is designed to provide round-the-clock care (e.g., foster family home, group home, child care institution). Placement in foster care means that a judge has determined that the child's removal from his or her home was necessary because the home was "contrary to the welfare" of the child and, accordingly, the judge has given responsibility for the child's "care and placement" to the state child welfare agency. Most children enter foster care because of neglect or abuse experienced at the hands of their parents, although a child's behavior problem may also be a factor in foster care placement. This is especially true for children entering care at an older age. Foster care is intended to be a temporary placement until a child can be reunited with his or her parent(s), or when this is not possible, until a permanent placement with relatives, an adopted family, or a legal guardian can be found. While working to find them permanent homes, states must attend to the safety and well-being of children in foster care, including their physical and mental health. During FY2015, some 671,000 children spent at least one day (24 hours) in foster care and 243,000 left the system, resulting in nearly 428,000 of those children remaining in care on the last day of that fiscal year. Although there is variation at the state level, the national foster care caseload has generally been in decline for more than a decade. Across the nation, there were about 77,000 fewer children in foster care on the last day of FY2015 as compared to the last day of FY2006 (when 505,000 were in care). Children in foster care have higher mental health service needs than children generally. The abuse or neglect children experience before entering foster care can have serious mental health outcomes. Maltreatment by a parent or other caregiver is stressful for children and may alter how their brains develop in ways that lead them to have more difficulty regulating their emotions and interpreting cues and communication from others. This negatively affects their socialization and may result in a tendency to violence or aggression towards others, among other problem behaviors. In a national survey conducted in 2008 and 2009, more than 4 in 10 (43%-46%) children (aged 18 months to 17 years) who were placed in a foster family home following an investigation of alleged child abuse and neglect in their families were found at risk of a behavioral or emotional problem and potentially in need of mental health services. Among children of that same age group who were placed in a foster care group home or institution, as many as 7 in 10 (61%-70%) were at such risk. These rates are much higher than those found in the general population. In separate surveys, about 7% to 11% of all children (in roughly the same age range) were identified as having emotional and behavioral problems. In recent years, children whose Medicaid eligibility is based on their "foster care" status have been increasingly more likely to be given mental health diagnoses. This is also true of children generally. Such diagnoses include attention disorders, anxiety, autism, bipolar disorders, conduct disorders, depression, and schizophrenia. Nearly all children who are in foster care are eligible for health care services funded via Medicaid, which is a means-tested entitlement program administered by the federal government in partnership with the states and authorized under Title XIX of the Social Security Act (and discussed further in the next section). From 2002 to 2007, the share of children whose Medicaid eligibility is based on their "foster care" status who were diagnosed with mental health disorders increased for most of these conditions. The most common diagnoses varied by age and older children were more likely to be given one of these diagnoses. In 2007, children ages 3 to 5 were most likely to have diagnoses of conduct disorder (7.4%) and attention disorders (6.7%); children ages 6 to 11 were most likely to be diagnosed with attention disorders (52.5%) and conduct disorders (26.8%); and children ages 12 to 18 years old were most likely to be diagnosed with conduct disorders (67.3%) and depression (44.4%). Figure 1 (below) shows, for 2002 and 2007, rates of major mental health diagnoses by age group (6 to 11 years and 12 to 18 years) among children whose Medicaid eligibility is based on their "foster care" status. The figure indicates that these rates went up across all diagnoses for both age groups, except for depression among children ages 6 to 11 and schizophrenia among both age groups. National standards for mental health care developed by leading child welfare and pediatric organizations propose that all children should receive a mental health screening when placed into foster care, a subsequent comprehensive mental health assessment by a mental health professional within a month of being placed into care, and a coordinated approach to delivery of services to meet the children's ongoing mental health needs. Such diagnostic and treatment services should currently be available to children in foster care through Medicaid. Under Medicaid, each state designs a plan for provision of medical assistance in its own state, including primary and acute medical services, as well as long-term care. The plan must be consistent with federal requirements and, if approved by HHS, entitles the state to federal reimbursement for a part of the cost of providing that medical assistance to each eligible individual in the state. Most, if not all, children in foster care are eligible for Medicaid and are generally entitled to the same set of "traditional" Medicaid state plan services available to other children enrolled in a given state's Medicaid program. Central among these benefits is a provision in the law requiring that children receive all medically necessary services authorized in federal statute through the Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) program. The EPSDT program covers health screenings and services, including assessments of each child's physical and mental health development; laboratory tests (including lead blood level assessment); appropriate immunizations; health education; and vision, dental, and hearing services. The screenings and services must be provided at regular intervals that meet "reasonable" medical or dental practice standards. Under EPSDT, states are required to provide treatment to meet children's identified health needs, including mental health needs. Medicaid financing may be used to provide services to meet children's behavioral health needs, including case management or services provided by psychiatrists, psychologists, or clinical social workers. It may also be used to pay for prescription drugs. In general, children who have mental health challenges may benefit from health care services that could include psychosocial treatment, such as counseling and case management from mental health professionals. There is a growing body of evidence on practices for responding to mental disorders in children through the use of psychosocial treatment. For example, certain psychosocial treatment interventions (i.e., behavioral and cognitive-behavioral therapy [CBT]; family-focused and group-based treatment; and treatments with multiple types of interventions) have been found to be moderately effective for children or parents of children with antisocial-related and disruptive behaviors. In addition, CBT—such as activities that include anger management, conflict resolution, and social skills training—has been found to be effective for children who experience trauma (defined as actual or threatened death or serious injury, or a threat to the physical integrity of self or others). A medical professional may prescribe psychotropic medications to children in foster care when psychosocial treatment alone is not effective or when pharmaceutical or combination treatment has been demonstrated to be more effective than psychosocial treatment. Nonetheless, psychotropics may still be prescribed without accompanying psychosocial therapies because medical professionals and other stakeholders may not have resources and support readily available to address the complex mental health needs of children in care. The Centers for Medicare and Medicaid Services, which administers the Medicaid program, has said that "an over-reliance on medication [for children in care] may reflect a lack of timely access to effective behavioral health care for Medicaid enrollees in some states, as well as fewer evidence-based psychosocial therapies for children than for adults." There is not a standard for what constitutes evidence-based therapies; however, HHS's Substance Abuse and Mental Health Administration (SAMHSA) has rated treatments based on the evidence of their effectiveness. Analysis of data from a national survey of children who come into contact with child welfare agencies due to investigation of alleged child abuse or neglect found that children entering foster care were more likely to receive supports (i.e., mental health screening, a follow-up mental health assessment by a mental health professional, and referral to services) than were children with mental health needs who remained in their own homes following such an investigation. Similarly, research on Medicaid claims data for children in 20 states whose "foster care" status makes them eligible for Medicaid shows an increased use of psychosocial mental health interventions among those taking antipsychotic medication, from 58.0% to 65.5% between 2009 and 2011. This is compared to about 28.0% to 29.0% of non-foster children in Medicaid in both 2009 and 2011. Other studies have shown that children in foster care who need mental health services do not always receive them. A national survey that collected data between 2008 and 2010 found that among children who had been in foster care for approximately 18 months or less, and who met clinical criteria for a mental health need, 3 out of 10 did not receive any specialty mental health services (e.g., counseling or residential or outpatient treatments) or psychotropics, and 9% received psychotropics without any such services. (See Figure 2 .) Between 16% and 33% of children in out-of-home care may be using psychotropic medication on any given day, although the rate of use varies significantly based on certain factors, including the child's age, placement setting, and length of involvement with the child welfare agency. Rates of psychotropic medication use among children in foster care far exceed the rates among children generally, which is about 6%. Children whose Medicaid eligibility is based on their foster care status have been found to receive psychotropic medication at three to nine times the rate of all other children served by Medicaid, and at a level that is somewhat comparable to (but still higher than) older children (ages 13 to 18) with a diagnosed mental disorder or neurodevelopmental disorder. At the same time, research based on a national study of the use of outpatient mental health services found that children living in non-relative foster family homes were no more likely than child-welfare involved children living in their own homes to be prescribed psychotropic medication. (Importantly, this study does not include children in foster care group settings or residential treatment facilities, who tend to have higher rates of psychotropic use. ) Rates of psychotropic medication use among children involved with the child welfare system, including those in foster care, vary by state and over time. Research from the early 2000s found great variation in prescription of psychotropic medication for children involved with the child welfare system, including those in foster care. Closer analysis of the differences across states led the researchers to conclude that differences in risk for mental health services was not the primary factor leading to variation, suggesting the importance of state practices in prescribing psychotropic medication. A separate study of Medicaid claims data from 2002 to 2007 showed variation in psychotropic medication use among children whose eligibility for Medicaid was based on their "foster care" status. The study found an initial increase in the use of psychotropic medications followed by some decline in most states. However, across this same time frame the study found an increase in the use of antipsychotic medications—which are a subset of psychotropic drugs generally used to treat schizophrenia and sometimes bipolar disorder—among children whose Medicaid eligibility was based on their "foster care" status. Specifically, it found that 45 states experienced a relative increase in the use of these medications from 2002 to 2007, two states experienced a relative decrease, and one state experienced no change over the period. In 2007, the annual rate of antipsychotic medication use among children in foster care ranged from 2.8% to 21.7% in each state. A more recent review examined trends in 20 states of Medicaid claims data for children whose eligibility was based on their "foster care" status. The analysis showed increases in the use of antipsychotics over the period from 2005 (8.7%) to 2008 (9.3%) and then a slight decrease by 2010 (8.9%). The study further found that non-foster care children with Medicaid coverage and children with private insurance had much lower levels of antipsychotic use; however, for privately insured children the share of those using antipsychotics increased from 2005 (0.62%) to 2009 (0.77%) and remained at a steady level through 2013 (0.75%). This section uses data primarily from the second National Survey on Child and Adolescent Well-Being (NSCAW II) to provide a more detailed discussion of psychotropic medication use among children in foster care. NSCAW was funded and administered by HHS. NSCAW II examined the outcomes of a national sample of 5,872 children who came into contact with the child welfare system through an investigation of child abuse or neglect in their homes, including the extent to which these children were prescribed psychotropic medications. The survey captured the experiences of children in this sample who remained in their homes following the investigation (including those children who stayed with their biological or adoptive parents and those who lived informally with relatives) and those who were removed from their homes and placed in foster care (including children who were placed in a non-relative foster family home, those placed formally with relatives, and those who went to live in a group home or a residential program). At the time of the initial NSCAW II Survey, 4 to 6 months after the initial investigation (in 2008-2009), these children's ages ranged from 2 months to 17.5 years. At the time of the 18-month follow-up (in 2009-2011), they were 16 months to 19 years; and at the 36-month follow-up (2011-2012), they were ages 34 months to 20 years old. Children in the sample were not necessarily in foster care for the entire 18- or 36-month period. They may have entered and re-entered care, or they could have entered care after a subsequent investigation. As discussed in the following sections, the NSCAW II data show that children living with their own parents following an investigation of child abuse or neglect were less likely to be using psychotropic medication than those living in foster care at that time. Among children who were in foster care, living in a congregate care and being school age forecast a greater chance that a child in foster care was taking psychotropic medications. Among children in the NSCAW II study, there was not a statistically significant difference in the use of psychotropic medications among those who, at four to six months following the investigation, were placed in foster care (15.9%) and those who had remained in their homes (11.6%). However, at 18 months following the investigation, children in foster care were significantly more likely to be taking psychotropic medications than those who remained in their homes (23.1% vs. 10.9%). At the 36-month follow-up, about one out of three children in care (32.8%) was taking psychotropics, compared to 12.9% of children who remained in their homes. (For more information, see Appendix A . ) Among children placed in foster care, psychotropic medication use was significantly greater for those who lived in foster group homes or residential treatment programs than among those in foster family homes and formal kin care. Prevalence among children in group foster care settings was close to one-half (48.2%) for children who had been in care for six months or less after the initial investigation of child abuse or neglect. This is compared to 11.8% to 19.5% of children in the foster care settings. Figure 3 shows the rate of psychotropic medication use by whether children lived out of home, or for children in foster care, all placement settings approximately 18 months after the initial investigation of child abuse or neglect. As with the earlier wave (six months or less after the investigation), those in group settings were most likely to be prescribed psychotropics (67.4%), compared to less than a quarter of children in other foster care settings (15.9% to 23.8%), children who remained in their own homes (10.9%), and informal kin care (11.9%). This pattern held true 36 months after the investigation for child abuse and neglect (not shown in the figure). Just over half of children in group settings were taking psychotropics (52%). The rate of use was 16.5% to 36.1% among children in other types of foster care settings; 12.5% for children who remained in their own homes; and 16.5% for those who were in informal kin care. Figure 3 also displays the frequency with which children involved in the child welfare system were taking more than one psychotropic medication, by placement setting, approximately 18 months after the initial investigation. Compared to children in other placement settings, children in foster care group homes or residential settings were most likely to be taking more than one psychotropic medication. About half of foster children in group settings (48.6%) who were prescribed psychotropics were taking two or more drugs, whereas the rate of children in other child welfare settings taking two or more drugs was 5.7% to 14.6%. At 36 months following the initial investigation (not shown in the figure), about 4 of 10 children in group settings were taking two or more psychotropic medications, followed by children in foster care (18.2%), formal kin care (11.1%), informal kin care (8.8%), and those who remained in their own homes (7.2%). Children in group settings were significantly more likely to be using three or more psychotropic medications at 36 months following the investigation than children in all other settings. In general, children in foster care were more likely to be using psychotropic medication if they were of elementary and secondary school age. Figure 4 shows that at each wave (4 to 6 months after investigation, 18-month follow-up, and 36-month follow-up), youth ages 11 to 17 were most likely to be using psychotropics. This is followed by youth ages 6 to 10, youth ages 18 and older, and youth ages 1.5 to 5 years. Notably, the oldest youth, those ages 18 and older, were not as likely to be taking psychotropic medications as children ages 6 through 17. The research literature has characterized patterns of prescribing psychotropic drugs to foster children as "too many, too much, and too young." "Too many" refers to children taking multiple psychotropic medications at a time. An analysis of national Medicaid claims data from 2002 through 2007 found that polypharmacy—defined in the analysis as concurrent use of three or more psychotropic medication classes for at least 30 days during a one-year period—was fairly consistent over that period, at about 5.2% to 5.9%, annually, among all children whose eligibility for Medicaid was based on their "foster care" status. An analysis of Medicaid claims data for 20 states shows polypharmacy with three or more antipsychotic drugs of at least 90 days in 2011 to have been comparable for children with "foster care" status (2.8%) and non-foster care status (3.1%). Data from the NSCAW II study indicate that for children in foster care who were prescribed psychotropics, the average number of psychotropics per child was 1.9 on a given day. As discussed previously, Figure 3 illustrates the percentage of children who were prescribed one, two, or three or more psychotropic medications. The difference between the shares of children in group or residential settings who are prescribed three or more psychotropics is statistically significant when compared to the other groups of children. Concerns have been raised about using certain classes of psychotropics, such as antipsychotics, concurrently. Antipsychotic polypharmacy (i.e., use of multiple antipsychotic medications) has not been well researched and has typically demonstrated "greater adverse effects with only marginal benefits." Further, "too much" refers to the prescriptions for foster children in dosages that exceed recommendations. This is of particular concern because, as discussed above, studies on the safety and efficacy of these medications for children are limited. Finally, "too young" refers to concerns that very young children are prescribed psychotropics. The NSCAW II study found that 2.2% of children under the age of 6 in out-of-home care (foster care, formal kinship care, or group home and residential programs) were prescribed psychotropics. The Government Accountability Office (GAO) examined Medicaid data from 2008 to glean insight on the use of psychotropic drugs among foster children in five states. They found that in each of these states 0.3% to 2.1% of children under age 1 were prescribed psychotropics, compared to a lower rate (0.1% to 1.2%) of infants of the same age who were not in foster care. Other research found that prescribing rates for ADHD medication and antipsychotic medication increased with each year of age among children ages 3 and 6 in foster care. Health experts have raised concerns that there are no established mental health indications for the use of psychotropic drugs in infants, and that psychotropics use by infants and young children can lead to serious health effects. Because children in foster care tend to have greater mental health service needs than other children, they may be more likely to benefit from psychotropic medications. Still, as mentioned previously, psychotropic medications may not be effective in treating the mental health needs of some individuals. Children in care may more readily receive psychotropics due to the paucity of psychosocial services available. This lack of services could be due to a number of factors, including a shortage of mental health providers generally and of those who have clinical understanding of the complex trauma many children in foster care may have experienced and/or who specialize in therapies that have proven to be effective. While the rate of prescribing psychotropics has decreased in recent years, the use of certain classes of these drugs—namely antipsychotics, used for the off-label treatment of children who have bipolar disorders and schizophrenia, and used to treat certain other behavioral conditions—has steadily grown. As discussed, the share of children in foster care prescribed antipsychotic medication increased from 2005 (8.7%) to 2008 (9.3%), with a slight decrease to 9.0% in 2010 among children in Medicaid with "foster care" status. This overall upward trend could be due to a number of factors, including more research (albeit limited) on the efficacy of these medications in children and the role of pharmaceutical companies marketing drugs to prescribers and consumers. Further, children generally have increasingly been prescribed certain psychotropic medications in recent years. The use of psychotropics by children in foster care has come under growing scrutiny by policymakers and stakeholders in the child welfare field. Although there is an expanding body of research on psychotropic use among children with mental health disorders, few studies show that they are safe and effective for this population. A review by HHS of research on one class of psychotropics, antipsychotics, found that most studies had insufficient evidence to draw a conclusion about the safety of these drugs in addressing child mental health disorders generally— not just those occurring among foster youth . Further, little to no evidence was available for certain conditions such as disruptive behavior disorders, obsessive compulsive disorders, or eating disorders (i.e., anorexia nervosa). According to the analysis, the median study duration of eight weeks was insufficient to evaluate some long-term outcomes. The analysis also found that most of the studies had a high risk of bias because missing data were not handled and reported properly, study participants were not randomly assigned to the treatment groups, and/or the studies were funded by pharmaceutical companies that manufacture the psychotropic medication. Other research has shown that antipsychotics are associated with harmful health outcomes in some children, including high cholesterol levels, weight gain, and type-2 diabetes. Despite these concerns, some children in foster care may benefit from psychotropic medication for managing symptoms and issues associated with mental health and behavior concerns stemming from their exposure to complex trauma, particularly if this treatment is coupled with psychosocial services. Stimulants for the treatment of attention deficit hyperactivity disorder (ADHD), a common childhood disorder, appear to be among the best researched of the antipsychotic classes. Multiple studies with research methodologies that used randomized control trials have found that some stimulants are very effective at reducing the core symptoms of ADHD, including hyperactivity, impulsivity, inattention, and aggression. Further, children in foster care are more likely to have a mental health diagnosis than children generally, including children who are low income. A 2011 GAO report on psychotropic medication use by children in foster care cited statements from state officials and child psychiatrists that higher levels of psychotropic drug use may be appropriate to deal with the increased prevalence and greater severity of mental health conditions among this population. In addition, multiple foster care placements and inconsistent state oversight practices for managing their care may contribute to the likelihood that psychotropics are used to respond to the mental health needs of these children. Congress has taken an interest in oversight of prescription medications used by children in foster care. In 2005, the House Ways and Means Subcommittee on Human Resources held a hearing to examine the enrollment of children in foster care in clinical drug trials. The hearing followed media reports concerning use of foster children in clinical AIDS drug trials and addressed the extent to which states properly oversee prescription drug use by children in foster care. As part of the Child and Family Services Improvement Act of 2006 ( P.L. 109-288 ), Congress required state child welfare agencies, as a condition of receiving certain child welfare funding, to describe how they actively consulted with physicians or other medical professionals in assessing the health and well-being of children in foster care and in determining appropriate medical treatment for them. The issue of oversight of psychotropic medication use for children in foster care in particular was briefly discussed at a 2007 congressional hearing on health care oversight for children in foster care, and it was the sole topic of a 2008 hearing. Both hearings were held by the Ways and Means Subcommittee on Income Security and Family Support. Subsequently, as part of the Fostering Connections to Success and Increasing Adoptions Act of 2008 ( P.L. 110-351 ), Congress expanded on the requirement that states consult with medical professionals on the health and well-being of children in foster care. Specifically, states are required through their child welfare and Medicaid agencies, and in consultation with appropriate medical professionals, to develop a coordinated strategy and oversight plan to ensure access to health care, including mental health services for each child in foster care. The 2008 law directed states to ensure this coordinated strategy provided for oversight of drugs prescribed to children in foster care. In October 2011, the Child and Family Services Improvement and Innovation Act ( P.L. 112-34 ) amended this provision to further stipulate that the coordinated strategy must include protocols for use of psychotropic medication for children in foster care. In December 2011, the Senate Homeland Security and Governmental Affairs Subcommittee on Federal Financial Management, Government Information, Federal Services and International Security held an oversight hearing that focused on the results and recommendations of the aforementioned study by the Government Accountability Office. GAO reviewed state policies and regulations for oversight of prescribing psychotropic medications in six states. The study compared state policies against best practice guidelines for prescribing psychotropics for foster children and other vulnerable child populations. These best practice guidelines were developed by the American Academy of Child and Adolescent Psychiatry (AACAP) with support and funding from HHS's SAMHSA. Overall, GAO found that each of the six state programs fell short of providing comprehensive oversight as defined by AACAP. For example, though all six states implemented some practices consistent with the guidelines for consent procedures, only one state (Texas) fully implemented these procedures. According to the report, states that do not incorporate consent procedures similar to AACAP's guidelines may increase the likelihood that caregivers are not fully aware of the risks and benefits associated with the decision to use psychotropic medications. GAO made recommendations that HHS consider endorsing guidance to state Medicaid and child welfare agencies on best practices for monitoring psychotropic medications for children in foster care. According to GAO, this recommendation was implemented (see next section on executive branch actions). Witnesses at the hearing spoke about the role of HHS and the state Medicaid programs in increasing cooperation and communication between the agencies and discussed how HHS could increase the guidance on best practices to assist states in preparing plans for psychotropic medication oversight. Further, a 12-year-old former foster youth described being given multiple mental health diagnoses and side effects he experienced from multiple psychotropic medications that were prescribed to him while in foster care. He also testified that a therapist that he saw with his adoptive parents was most helpful to him. Additionally, in April 2013 the Senate Finance Committee convened a roundtable discussion with Senate staff and child welfare stakeholders to address issues associated with the prescription of psychotropic medications for children in foster care and to highlight alternative strategies to effectively respond to trauma experienced by children and youth in foster care. At the roundtable, current and former foster youth shared their experiences with psychotropic medication and some noted that therapy ultimately helped them transition from psychotropic medications. The youths' stories sometimes highlighted the importance of an invested caregiver or other knowledgeable professional in ensuring that appropriate mental health treatment is identified and provided. Child welfare stakeholders discussed the prevalence of psychotropic medication use among subpopulations of youth; the role of the federal government in promoting alternatives to psychotropics; tools for determining whether youth should be prescribed medications; and the roles of schools, the mental health system, and foster parents in engaging with youth on whether psychotropic medications should be prescribed. In May 2014 the House Ways and Means Subcommittee on Human Resources held a hearing on the use of psychotropic medications among children in foster care and the efforts of states and the federal government to ensure that such medications are used appropriately. Witnesses included the Associate Commissioner of HHS's Children's Bureau; GAO; a researcher who focuses on psychotropic medication use among children in care; and Dr. Phil McGraw, who has sought to bring greater awareness to the issue. At the May 2014 hearing, staff from GAO focused remarks on the agency's work from 2011 to 2014 related to psychotropic medication prescription among children in care. Following their December 2011 Senate hearing testimony and report, GAO examined prescribing rates among children in foster care in five states, including the extent to which documentation supported the use of psychotropics among a sample of 24 children in care. GAO contracted with two child psychiatrists who conduct mental health research and work on issues related to foster care to examine the sample of cases. These experts found varying quality in the documentation supporting the use of psychotropics. For example, experts found that in most cases medical pediatric exams were mostly supported by documentation; however, they found that documentation was partially supported for about half to slightly more than half of the cases examined with regard to the dosage amount of medications and concurrent use of multiple medications. GAO recommended that HHS issue guidance to states regarding oversight of medication to third-party managed care organizations (MCOs), which increasingly are administering Medicaid benefits (including prescription benefits) for children in foster care. As noted in the subsequent section, HHS has since issued guidance to state child welfare and Medicaid agencies on oversight of psychotropic medication use among children in care. According to GAO, this guidance has not addressed the role of third-party MCOs in oversight of psychotropic use among foster children. GAO subsequently issued a report in January 2017 that examined how child welfare agencies and Medicaid agencies in seven states monitor psychotropic use among children in care and the results of these state efforts. State officials reported to GAO that they developed a variety of practices to better support the appropriate mental health diagnoses and treatment for children in foster care, including initial mental health screenings and monitoring children after they are prescribed medications. For example, all seven states developed guidelines on prescribing psychotropic medications and on promoting the use of psychosocial services (e.g., requiring or recommending psychosocial services prior to or concurrently with psychotropic medication). Officials in all seven states reported that several factors—strong collaboration among child welfare, Medicaid, or other partnering agencies; state outreach to stakeholders such as physicians about the requirements; and gradual rollout of new practices—were critical in implementing their oversight work. GAO did not examine the effectiveness of state practices, state compliance with state or federal policies, or whether there are controls in place to ensure that required practices are followed. State officials reported to GAO that they use a variety of measures to gauge the results of their efforts, including physician prescribing practices (e.g., type and amount prescribed); state oversight practices (e.g., reviewing case and health records); and monitoring child outcomes (e.g., placement disruptions for children on psychotropic medications). GAO also looked into the ways that HHS has supported states in their oversight work since 2014, noting that HHS has not convened meetings with stakeholders engaged in state oversight of psychotropic medication use for children in care. (Some of these efforts are described in the next section.) GAO recommended that HHS consider cost-effective ways to convene state stakeholders to share information and collaborate on psychotropic medication oversight. HHS has implemented the federal requirements that states have protocols in place for monitoring psychotropic medication use. In addition, several federal agencies have worked both together and independently to help gain a better understanding of psychotropic medication use among children (especially children in foster care). As part of their efforts to promote interagency cooperation, they have publicized best practices and successful state strategies related to the oversight of psychotropic medication use for children and the development of alternative strategies for children with mental health needs. For multiple years, the Obama Administration proposed expanding funding for oversight of psychotropic medications as part of its annual budgets, including for FY2017 (as of the date of this report, a final FY2017 appropriations law has not been enacted). As noted previously, under the Stephanie Tubbs Jones Child Welfare Services Program (Title IV-B, Subpart 1 of the Social Security Act) states must develop a coordinated strategy and oversight plan to ensure access to health care, including mental health services and dental care, for all children in foster care. This coordinated strategy and oversight plan must be developed via a collaborative effort between the state child welfare agency and the state agency that administers Medicaid, in consultation with pediatric and other health care experts, as well as experts in, or recipients of, child welfare services. The coordinated strategy must outline a schedule for initial and follow-up health screenings that meet reasonable standards of medical practice; how health needs identified through screenings, including emotional trauma associated with a child's maltreatment and removal from home, will be monitored and treated; how medical information for children in care will be updated and appropriately shared, which may include the development and implementation of an electronic health record; steps to ensure continuity of health care services, which may include the establishment of a medical home for every child in care; the oversight of prescription medicines, including protocols for the appropriate use and monitoring of psychotropic medications (italics added for emphasis); how the state actively consults with and involves physicians or other appropriate medical or nonmedical professionals in assessing the health and well-being of children in foster care and in determining appropriate medical treatment for the children; and steps to ensure that the components of the transition plan development process related to the health care needs of children aging out of foster care are met. Additionally, federal child welfare law requires that the state child welfare agency have a written plan for each child in foster care, including certain health-related records. These records must include the names and addresses of the child's health providers, a record of the child's immunizations, information about the child's medication, and any other relevant health information concerning the child. These records must be reviewed, updated, and supplied to a child's foster care parent or provider at the time of each foster care placement. Additionally, a copy of the record must be provided to a youth at the time he/she leaves care due to age. States and other jurisdictions report to HHS on their policies about oversight of psychotropic medications through the five-year Child and Family Services Plan (CFSP) and annual updates to the plan known as Annual Progress and Services Reports, or APSRs. The reports are required each year for jurisdictions seeking federal funds under a number of child welfare programs, including the Stephanie Tubbs Jones Child Welfare Services Program. Jurisdictions were first required to submit information about psychotropic oversight for the FY2013 APSR, following the 2011 enactment of the law (the Child and Family Services Improvement and Innovation Act, P.L. 112-34 ) on these requirements. As shown in the text box, the APSR instructions directed that state oversight protocols must address screening and evaluation to identify mental health needs; consent and assent to treatment and ongoing communication; medication monitoring; availability of mental health expertise; and mechanisms for sharing current information and education materials. Subsequent program instructions have not been as detailed. The most recent five-year CFSP is for FY2015-FY2019. Jurisdictions were asked to report in the CFSP on "the oversight of prescription medicines, including protocols for the appropriate use and monitoring of psychotropic medications." In the summer of 2011, HHS convened an interagency working group to address emerging research on the use of psychotropic medication among children in foster care and to support state efforts in implementing the requirements on psychotropics in P.L. 112-34 . The working group developed a plan to expand the use of evidence-based screening, diagnosis, and interventions; strengthen the oversight and monitoring of psychotropic medications; and expand the research evidence regarding medications and psychosocial treatments for children in foster care. The working group is led by the Administration for Children and Families (ACF), which administers child welfare programs, and includes representatives from other HHS agencies, including the Centers for Medicare and Medicaid Services (CMS) and the Substance Abuse and Mental Health Services Administration (SAMHSA). CMS administers Medicaid, which offers states a way to finance screenings, assessments, behavioral health services, therapy, case management for children with complex trauma needs (many of these services are mandatory for eligible children); and prescription drugs. SAMHSA administers block grant funding that may support non-Medicaid covered treatment services, and it supports other technical assistance and projects related to understanding trauma experienced by children and providing evidence-based and effective treatment. In November 2011, three agencies in the working group—ACF, SAMHSA, and CMS—released a letter addressed to the directors of each state child welfare, Medicaid, and mental health agency. The letter addressed actions being taken at the three federal agencies to "support effective management" of prescription medication use for children in foster care. According to the letter, "State Medicaid/CHIP agencies and mental health authorities play a significant role in providing continuous access to and receipt of quality mental health services for children in out-of-home care. Therefore it is essential that State child welfare, Medicaid, and mental health authorities collaborate in any efforts to improve health, including medication use and prescription monitoring structures in particular." The letter further discussed other steps the agencies would take to raise awareness about psychotropic use among children in foster care. ACF, SAMHSA, and CMS (in partnership with their training and technical assistance providers) subsequently took steps to provide guidance to states and other stakeholders on oversight of psychotropics through a series of webinars and information memoranda. In January and February 2012, they held webinars for child welfare and other stakeholders that presented data, research, and practices for monitoring and oversight of psychotropic medication use among children in foster care. In addition, the three agencies held a series of question and answer discussion sessions in March through June 2012 for state child welfare and mental health leaders who are working together on plans to enhance oversight and monitoring. In August 2012, HHS (ACF, SAMHSA, and CMS) convened state directors of child welfare, Medicaid, and mental health agencies to address the use of psychotropic medications for children in foster care and the mental health needs of children who have experienced trauma. The summit, "Because Minds Matter," was intended to provide an opportunity for state leaders to enhance their collaboration on the appropriate use of psychotropic medications. They were asked to examine what aspects of oversight needed improvement and the steps needed to implement changes. States were also asked to outline the activities they would undertake to meet their goals, the anticipated challenges, the necessary partners, and a timeline for implementation. The summit included multiple presentations from HHS staff, researchers, and selected state teams about a range of psychotropic oversight and related topics. Since the "Because Minds Matter" summit, HHS has furthered its work on oversight of psychotropic medications. This section discusses selected steps taken by ACF, SAMHSA, and CMS. In April 2012, ACF provided guidance to state child welfare agencies on implementing protocols to monitor the use of psychotropic medication. As part of this guidance, HHS synthesized information about use of psychotropics based on guidelines issued by child welfare and medical professionals. These elements address coordinated planning, informed and shared decision-making, medication monitoring, mental health expertise and consultation, and mechanisms for sharing accurate and up-to-date information. (As discussed in a subsequent section, HHS requires that states report on the extent to which these elements are in place as part of their monitoring of psychotropic drug use for children in foster care.) ACF also issued separate guidance in April 2012 to state child welfare agencies about the ways they can focus on improving the behavioral and social-emotional outcomes for children who have experienced abuse and/or neglect. The guidance discussed the emerging evidence on the impact of maltreatment in terms of its effect on brain development as it affects a child's social and emotional development. ACF has also published two guides, one on tools to help youth in foster care ask questions about medications as they meet with physicians and another for child welfare staff and foster parents on mental health issues, the impact of trauma, and psychotropic medications. Separately, ACF awarded FY2012 funds to nine entities (state and county child welfare agencies, universities, and a children's hospital) to support projects intended to provide assistance to youth in child welfare who have mental and behavioral health needs using evidence-based intervention models. ACF also awarded FY2013 funds to six entities (state child welfare agencies, universities, and a children's organization) to promote well-being after children experience trauma. As noted, SAMHSA provided partial funding to the American Academy of Child and Adolescent Psychiatry (AACAP) in developing guidelines on prescribing medications. The recommendations are focused on clinical practice, psychotropic medication monitoring and oversight, and research. The guidelines pertain to children and youth generally. SAMHSA also funds a medical director position through a contract with the Technical Assistance Network at the University of Maryland's School of Social Work. The medical director works with 55 child and adolescent psychiatrists in state and county governments to address issues regarding psychotropic medications. The network uses a community listerv to disseminate best practices to the psychiatrists and has developed webinars on medication oversight, including for children on Medicaid. The CMS Center for Medicaid and CHIP Services issued an informational bulletin in August 2012 to make states aware of resources and opportunities to address the use of psychotropic medication in vulnerable populations, including children in foster care. The informational bulletin noted that all states are required to have Drug Utilization Review programs in place to oversee the prescribing of drugs for Medicaid beneficiaries and provided examples of the way some states have used this review to provide oversight of psychotropic medication use. For example, automated system "edit checks" may be used to ensure prescriptions are consistent with accepted medical practice (e.g., special authorization must be granted for prescriptions of children younger than a given age). The bulletin alternatively noted that some states have multidisciplinary teams (drawing from public and private entities) to review cases and ensure appropriate prescription of psychotropics. In 2015, CMS helped a working group of eight state Medicaid agencies and their partners to improve appropriate use of antipsychotic medications for children who receive Medicaid. CMS also added a measure to core measures that can voluntarily be used by states to help them in improving health care delivery to children receiving Medicaid (the new measure also applies to the State Children's Health Insurance Program, a program for children and pregnant women in families that have annual income above Medicaid eligibility but have no health insurance). CMS, ACF, and SAMHSA issued joint guidance in July 2013 to convey the importance of making psychosocial interventions available to children who have experienced "complex trauma"—described in the guidance as "children's exposure to multiple or prolonged traumatic events, which are often invasive and interpersonal in nature"—and to highlight how states may use existing federal funding and authority to provide those interventions. The guidance noted that children in foster care may be more likely to receive psychotropic medication, and may not be prescribed psychotropics properly, because of the complexity of their symptoms and the lack of appropriate screening, assessment, and treatment. The guidance promoted the use of functional assessments (periodic evaluation of a child's well-being using standardized, valid, and reliable measurement tools), trauma screening (brief evaluation of potential trauma symptoms and/or history), mental health assessment (in-depth clinical evaluation of an individual's mental health status), and outcome measurement and progress monitoring (measuring success by tracking child-level well-being outcomes to ensure treatment services are achieving desired improvements in children's health and functioning). President Obama's FY2017 budget proposed a five-year joint initiative between CMS and ACF to reduce reliance on psychotropic medications for children in foster care and improve their well-being. This would be accomplished by providing performance-based incentive payments to state Medicaid agencies (total of $500 million in incentive funding across five years, FY2017-FY2021) that meet certain outcomes or other requirements related to improved care coordination and delivery of evidence-based psychosocial interventions to Medicaid-eligible children who are also served by child welfare agencies. Incentive payments would be paid annually out of the Medicaid program (Title XIX of the Social Security Act) over the five-year period. States could also apply, through the state child welfare agency, for competitive grant funding under the Title IV-E Foster Care program (total of $250 million across five years, FY2017-FY2021) to build state capacity and infrastructure to implement alternative psychosocial interventions. ACF would support activities that include child welfare funding for building the capacity to provide evidence-based psychosocial intervention for children in care and ensuring fidelity to these models, while also evaluating this work. The research literature has focused on the role of states in overseeing the use of psychotropic medication for children in foster care. For example, some research has addressed the issue of obtaining consent for using psychotropics or examining how certain states are carrying out their monitoring procedures. Researchers have also conducted surveys of states to learn about their policies related to the oversight of psychotropic medications. Some of these surveys predate the specific requirement for oversight of prescription medications and others have been conducted since then; however, none of these surveys address how states have responded to the federal provision (added to the law in September 2011) on oversight of psychotropic medications specifically. In 2009 and 2010, researchers surveyed states to learn about the status of policies and guidelines for overseeing the use of psychotropic medication by children in foster care, as well as related challenges and solutions that were identified by states. Researchers collected information from 48 states, including the District of Columbia. Of the states surveyed, more than half (58.7%) rated psychotropic medication use to be of high concern (a rating of 8 to 10 on a scale of 1 to 10). About a quarter of the states rated the issue of moderate concern (a rating of 5 to 7), and about 13% rated it of low concern (a rating of 1 to 4). At the time of the survey, 26 of the 48 states had a written policy or guideline regarding psychotropic medication use; 13 states were currently developing a policy or guideline; and 9 states had no policy or guideline. Slightly more than half of states used at least a "red flag" marker to identify problems with the safety and quality of psychotropic drug use. Red flags that states described using included the use of psychotropic medications in young children, the use of multiple medications before the use of a single medication, use of multiple psychotropic medications simultaneously, use of multiple medications within the same class for longer than 30 days, and dosage exceeding current maximum recommendations. Researchers concluded that states were implementing a wide variety of approaches, and that there was little evidence that these approaches were being implemented or studied in a systematic way to identify which approaches helped improve outcomes for children in foster care. Researchers have more recently raised concerns about the availability of policies and procedures that respond to psychotropic medication use. As reported in a 2014 study, researchers reviewed the statutes, rules, and statements of policies on oversight of psychotropic drug use among children in care from 16 states (which have 72% of all children in care nationally). They were unable to locate many of the policies that had been reported in other studies, and when they did exist, the policies were "extremely underdeveloped and failed to include many of the 'red flag' criteria that both experts and states identified as essential to protecting children, such as the use of psychotropic medication for young children, dosage level, and whether multiple psychotropic medications were prescribed simultaneously." Still, states have taken steps to more systematically address oversight of psychotropic medication use among children in foster care. As noted, state representatives from child welfare, Medicaid, and mental health agencies convened working groups as part of an HHS summit. Further, some states are working collaboratively to improve oversight. For example, the Center for Health Care Strategies, a policy organization, worked with six states from 2012 to 2015 as part of the Psychotropic Medication Quality Improvement Collaborative. This collaborative included representatives of state child welfare, mental health, and Medicaid agencies. They worked together to define common terms and common measures on data about the utilization of psychotropic medication among foster youth, including sub-groups of foster youth. They also developed best practices in psychotropic medication oversight and monitoring, with each state establishing a set of individual goals. The states have implemented protocols in four areas: gaining consent, obtaining real-time data on psychotropic utilization, developing a protocol for reviewing "red flags," and developing monitoring processes that are tailored to the needs of localities. With support from SAMSHA, the Center for Health Care Strategies is providing technical assistance to states generally on oversight of psychotropic medications. Appendix A. Use of Psychotropics Among Children in Families Investigated for Abuse or Neglect The National Survey of Child and Adolescent Wellbeing (NSCAW) II looked at rates of psychotropic medication use among a sample of children (5,873) who came into contact with the child welfare agency because of an investigation of child abuse or neglect in their families. Initial (baseline) survey data were collected in 2008-2009 approximately four to six months after that investigation. With regard to use of psychotropic medication, data cover children who at the time of the initial survey were at least 18 months of age and up to 17 years old. A follow-up survey looked at psychotropic medication use among these same children at approximately 18 months after the investigation of abuse or neglect, and a third survey looked at those children at 36 months following the investigation. (Some of the children followed had reached age 18 or older by the second or third collection of data.) Table A-1 shows psychotropic medication use by age, and whether or not the child was in a foster care setting for the initial survey and for the follow-up at 18 months and 36 months. For purposes of this analysis, a foster care setting includes children who were placed in a non-relative foster family home, children placed with kin on a formal basis, and children placed in a group or residential setting. By contrast, children included in the "in home" category includes children living with their biological or adoptive parents, as well as children who were in informal kinship care settings. Statistical Significance The percentage differences shown by the initial survey in use of psychotropic medication (between children in foster care and those who were not in foster care) were not statistically significant overall or for any specific age group shown in Table A-1 . However, the differences shown for these groups at the 18-month and 36-month follow-up were statistically significant, with children in foster care more likely to be using psychotropic medications. For children under age 6, there was no statistical significance found in the percentage differences shown for children in foster care versus those living at home in any of the surveys (initial, 18-month or 36-month). For children ages 6 to 10, the percentage difference shown between the in-home and foster care groups at the 18-month follow-up was found to be statistically significant but not those shown at the initial survey or at the 36-month follow-up. For children ages 11 through 17 years, there was not statistical significance found between the in-home and foster care groups at the initial survey but the differences shown at the 18-month and 36-month follow-up were significant. | Children in foster care are children that the state has removed from their homes and placed in another setting designed to provide round-the-clock care (e.g., foster family home, group home, child care institution). The large majority of children enter foster care because of neglect or abuse at the hands of their parents. Maltreatment by a caregiver is often traumatic for children, and may lead to children having challenges regulating their emotions and interpreting cues and communication from others, among other problem behaviors. Children in foster care are more likely to have mental health care needs than children generally. Children in foster care who have mental health needs may receive psychosocial services such as individual or group counseling and case management to improve their health. Alternatively, or in addition, a medical professional may prescribe psychotropic medications. These are prescribed drugs that affect the brain chemicals related to mood and behavior. They are used to treat a variety of mental health conditions including attention disorders, depression, anxiety, conduct disorders, and others. While psychotropic medication alone is not necessarily advised, children in foster care may more readily receive psychotropics to treat their mental health needs due to the complexity of their symptoms and the lack of appropriate screening and assessment and/or the limited availability of health care professionals trained to provide effective therapies (e.g., cognitive behavioral therapy). Between 16% and 33% of children in out-of-home care may be using psychotropic medication on any given day, although the rate of use varies significantly based on certain factors, including the child's age, placement setting, and length of involvement with the child welfare agency. Among children generally, about 6% are taking psychotropic medications at some point during a given year. Some of the difference in prevalence of use may be explained by the higher levels of mental health risk factors among children in foster care. The use of psychotropics by children in foster care has come under increased scrutiny by policymakers and stakeholders in the child welfare field. Little research has been conducted to show whether psychotropics are effective and safe for children who need mental health services. Despite these concerns, some children may benefit from specific psychotropic medication for managing mental and behavioral symptoms associated with their exposure to traumatic events. President Obama's FY2017 budget proposed a five-year initiative to reduce reliance on psychotropic medications for children in foster care by encouraging the use of evidence-based screening, assessment, and treatment of trauma and mental health disorders. Congress has also taken a strong interest in oversight of prescription medications used by children in care, addressing the issue in oversight hearings and other fact-finding forums. Further, federal law (Title IV-B, Subpart 1 of the Social Security Act) requires states and other jurisdictions to describe their oversight of prescription medications for children in foster care, including specific protocols used with regard to psychotropic medication. The Department of Health and Human Services (HHS) has issued guidance about these provisions and requires jurisdictions to submit annual reports to the department that describe this oversight. |
Division abbreviations: ALD = American Law Division; G&F = Government and Finance Division; RSI = Resources, Science, and Industry Division, DSP =Domestic Social Policy Division; FDT = Foreign Affairs, Defense, and Trade Division. Congress passed the conference report ( H.Rept. 108-10 ) for H.J.Res. 2 , the omnibus funding bill, onFebruary 12, 2003. The President signed it intolaw February 20, 2003 -- 5 months into the budget year. The consolidated funding package included a 0.65%across-the-board rescission. The Senate had passedits omnibus appropriation on January 23rd. Although the House never passed a CJS appropriation forFY2003, on January 8th Congressman Frank Wolf, Chairmanof the House Appropriations Subcommittee on Commerce, Justice, State, introduced H.R. 247 as a point ofreference for CJS accounts during theconference on the omnibus appropriation package. The Administration's Commerce, Justice, State and Related Agencies (CJS) request for FY2003 totaled $44,019million. The 107th Congress did not completeCJS FY2003 appropriations, but passed numerous continuing resolutions authorizing short-term funding into the108th congressional term. The 108th Congress passed the consolidated appropriation package ( H.J.Res. 2 ; H.Rept. 108-10 ), which included 11 out of the 13 appropriations. Signed into law ( P.L. 108-7 ) on February 20, 2003, it contains $44,773.7 million for Commerce, Justice, State,Judiciary and Related Agencies. This number andothers in this report do not reflect the 0.65% across-the-board rescission which was also in the consolidated funding. The Senate passed an omnibus spending package which included the CJS appropriations. The total CJS Senate level amounted to $44,939.6 million. The Housebill ( H.R. 247 ) set total CJS appropriations at $44,352.9 million. Neither House nor Senate numbers includedrescissions. For FY2002 and after the September 11th terrorist attacks, Congress reconsidered funding allocations in the conference of H.R. 2500 to bolstercounter-terrorism activities within each agency's title in the bill. Congress enacted its FY2002 CJS appropriation( P.L. 107-77 ) totaling $41,706.6 million forFY2002 ($44,601.9 million including supplementals -- P.L. 107-38 , P.L. 107-117 ). In addition to the President's regular FY2003 budget request, the Administration submitted an FY2002 supplemental funding request on March 21, 2002. Out ofthe total $28.4 billion supplemental request, $427.7 million was for agencies within the CJS appropriation bill. TheHouse passed $753.6 million; the Senatepassed $1,280.2 million for the CJS supplemental funds. The final supplemental for CJS-related agencies, whichwas signed on August 2, 2002 ( P.L. 107-206 ),totaled about $900 million, some of which was designated as contingent emergency funds. (For more detail, seeCRS report RL31406, SupplementalAppropriations for FY2002: Combating Terrorism and Other Issues, by [author name scrubbed] and [author name scrubbed].) On November 14, 2001, Congress approved total FY2002 CJS funding of $41.6 billion. The President signed this measure into law on November 28th. Althoughthe CJS funding legislation was at the conference stage on September 11th, Congress scrutinizedsecurity and anti-terrorism funding at the conference level andreallocated funding because of the terrorist attacks. In addition, the FY2002 budget levels for the Departments ofCommerce, Justice, State and the Judiciaryinclude the emergency supplemental funding passed by Congress September 18, 2001. The table below shows funding trends for the major agencies included in CJS appropriations over the period FY1998-FY2002, including supplementalappropriations. As seen in the table below, funding increased, in current dollars, for the Department of Justice by$2,658 million (12.6%); for the Department ofCommerce by $651 million (12.6%); for the Judiciary by $465 million (10.9%); and for the Department of Stateby $1,049 million (15.9%). Every agency exceptthe Department of Commerce has seen a continual increase in funds between FY1998 and FY2002. The Departmentof Commerce budget generally increasedover these years, with a greater than $3.5 billion increase in FY2000, largely due to funding the cost of the 2000decennial census. Its FY2001 level is comparableto its pre-census level. The Department of State had a significant increase in its funding level every year fromFY1999 to FY2002, reflecting the increase in costsassociated with the FY1999 reorganization and terrorism. Of the four primary agencies within the CJSappropriations, the Department of Justice received thegreatest nominal increase of $5,943 million from FY1998 to FY2002. The Department of State funding changesince FY1998 shows the greatest percent increaseof 89.5%; the Justice budget grew by 33.4%, Commerce by 36.5%, and the Judiciary by 36.3%. Much of the StateDepartment increase has been attributable toincreases in embassy security funding and improvements in technology and staffing, along with the consolidationof the U.S. Information Agency (USIA) and theArms Control and Disarmament Agency (ACDA) into the Department of State in 1999. Table 1. Funding Trends for Departments of Commerce, Justice, and State, and the Judiciary (inmillions of current dollars) Sources: Funding totals provided by Budget Offices of CJS and Judiciary agencies, and U.S.House of Representatives, Committee on Appropriations. President Bush's FY2003 budget request for new budget authority totaled $44,019 million for Commerce, Justice, State, Judiciary, and Related Agency mandatoryand discretionary spending, slightly above the FY2002 enacted level including the enacted supplementals. Table 2 presents appropriations for the four majoragencies within the CJS appropriation bill. Table 2. Departments of Commerce, Justice, and State, and the Judiciary Appropriations (in millions ofdollars) Note: Figures for FY2002 enacted include supplemental appropriations. This table does not include funds for related agencies in the CJS legislation. Sources : House Appropriations Committee and the Congressional Record on February 14, 2003 (H572-H587). In addition to heightened interest in counter-terrorism and security-related activities since the September 11th attacks, some other contentious issues and proposalsthat surfaced in the FY2003 CJS appropriations debate include: Restructuring the Federal Bureau of Investigation to improve counter terrorism, intelligence collection and analysis, and internal agencysecurity. Restructuring the Immigration and Naturalization Service, by separating the agency's services and enforcement functions, to improveapplication processing and increase border security. Reassessing the Department of Justice's role in providing domestic preparedness training and assistance to state and local first responders,and shifting related programs to the new Department of Homeland Security. Streamlining community policing and crime prevention programs administered by the Department of Justice's Office of JusticePrograms. Other issues or concerns receiving attention included the following: Department of Justice: Reducing firearms-related violence through enforcement of existing laws. Reducing the supply and use of illicit drugs. Improving juvenile justice, reducing violence against women, and providing legal assistance to victims of crime. Addressing civil rights violations, including racial profiling and infringement of voter rights. Establishing new efforts and capacities to fight cybercrime. More efficiently managing contract detention space. Establishing an entry/exit control system to track non-citizens admitted temporarily to the United States. Department of Commerce: The Administration's proposal to eliminate National Telecommunications and Information Administration's (NTIA's) TechnologyOpportunities Program (TOP), as well as significantly reduce funding for NTIA's program to support constructionof public broadcast facilities. The extent to which federal funds should be used to support industrial technology development programs at the National Institute ofStandards and Technology (NIST), particularly the Advanced Technology Program (ATP) and the ManufacturingExtension Partnership(MEP). The Administration's proposal to transfer the National Sea Grant Program from the National Oceanic and Atmospheric Administration(NOAA) to the National Science Foundation, amid opposition from state Sea Grant partners andinstitutions. Funding for full implementation of the Census Bureau's American Community Survey, with which the Bureau plans to replace the decennialcensus long form, and for improved quality and timeliness of economic statistics collected by the Bureau. Increasing funding for the Bureau of Export Administration (to be renamed the Bureau of Industry and Security) to better enforce U.S. exportregulations, specifically with regard to strategically-sensitive information. Department of State: Visa issuance policies and the Homeland Security proposals. Expanded public diplomacy activities focusing on Muslim/Arab populations. Increased hiring of foreign, civil service, and security experts. Improved information/communication technology. The Judiciary: Whether to increase the hourly rate of pay to court-appointed "panel attorneys" representing indigent defendants in federal criminalcases. Whether, as the Judiciary contended, federal judges and justices should receive a cost-of-living salary increase. What extent to provide emergency supplemental funding for court security. Other Agencies: Adequacy of funding for the Securities and Exchange Commission (SEC) to investigate corporate fraud. Whether to end federal funding for the State Justice Institute. Adequacy of funding for the Equal Employment Opportunity Commission. Adequacy of funding for programs of the Small Business Administration (SBA). As part of the budget process, the Government Performance and Results Act (GPRA) enacted by Congress in 1993 ( P.L.103-62 ; 107 Stat 285) requires thatagencies develop strategic plans that contain goals, objectives, and performance measures for all major programs.The GPRA requirements apply to nearly allexecutive branch agencies, including independent regulatory commissions, but not the judicial branch. Briefdescriptions of the latest versions of the strategicplans of the major agencies covered by CJS appropriations are contained in the discussions of the individualagencies within this report. On February 4, 2002, President Bush submitted the FY2003 budget request for appropriations for the Departments of Commerce, Justice, and State, the Judiciaryand related agencies. The House and Senate CJS Appropriations Subcommittees held hearings throughout March,April, and May. The Senate AppropriationsCommittee reported out S. 2778 on July 24, 2002. No other congressional action occurred on the CJSappropriation during the 107th Congress. In the108th Congress, the Senate passed an omnibus budget package ( H.J.Res. 2 ) which includes theCJS appropriations. The House funding levels for CJSwere contained in H.R. 247 ,which received no congressional action. The table below shows the keylegislative steps that have occurred for theenactment of FY2003 CJS appropriations thus far. Table 3. Status of CJS Appropriations, FY2003 Title I of the CJS bill typically covers appropriations for the Department of Justice (DOJ). Established by an Act of 1870 (28 U.S.C. 501) with the AttorneyGeneral at its head, DOJ provides counsel for citizens and protects them through effective law enforcement. Itrepresents the federal government in allproceedings, civil and criminal, before the Supreme Court. And in legal matters generally, the Department provideslegal advice and opinions, upon request, tothe President and executive branch department heads. Notwithstanding the transfer of the Immigration andNaturalization Service to the Department of HomelandSecurity and the transfer of the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATFE) (1) to DOJ, the agencies and major functions funded inthe FY2003DOJ appropriation are as follows: United States Attorneys prosecute criminal offenses against the United States, represent the federal government in civil actions, and initiateproceedings for the collection of fines, penalties, and forfeitures owed to the United States. United States Marshals Service provides security for the federal judiciary, protects witnesses, executes warrants and court orders, managesseized assets, and detains and transports unsentenced prisoners. Federal Bureau of Investigation (FBI) investigates violations of federal criminal law; protects the United States from terrorism and hostileintelligence efforts; provides assistance to other federal, state and local law enforcement agencies; and sharesjurisdiction with Drug Enforcement Administration(DEA) over federal drug violations. Drug Enforcement Administration (DEA) investigates federal drug law violations; coordinates its efforts with state, local, and other federallaw enforcement agencies; develops and maintains drug intelligence systems; regulates legitimate controlledsubstances activities, and conducts jointintelligence-gathering activities with foreign governments. Immigration and Naturalization Service (INS) administers and enforces immigration law by admitting or excluding aliens at the border,investigating immigration law violations, apprehending and processing for removal aliens illegally residing in theUnited States, and processing immigration- andnaturalization-related applications. Federal Prison System provides for the custody and care of the federal prison population, the maintenance of prison-related facilities, and theboarding of sentenced federal prisoners incarcerated in state and local institutions. Office of Justice Programs (OJP) manages and coordinates the activities of the Bureau of Justice Assistance, Bureau of Justice Statistics,National Institute of Justice, Office of Juvenile Justice and Delinquency Prevention, Community Oriented PolicingServices (COPS), and the Office of Victims ofCrime. Defending the Nation against future terrorist attacks is currently the principal focus of the Department of Justice. To this end, the Department is increasing itsefforts to disrupt and dismantle terrorist organizations, and bring to justice those persons who carry out terroristattacks against American interests at home andabroad. With the encouragement of the Attorney General, the Federal Bureau of Investigation is reorganizing,realigning and centralizing FBI assets to moreeffectively counter terrorism and foreign intelligence services, and provide greater internal security. The Immigration and Naturalization Service (INS), meanwhile, has been transferred to the Department of Homeland Security (DHS). Prior to the homelandsecurity debate, the Administration had sought to reorganize INS and separate the agency's service and enforcementfunctions as separate bureaus with DOJ. Such a separation was proposed to improve the processing of immigration-related applications and provide enhancedborder security and prevent terrorists fromentering the United States. Along these lines, the Homeland Security Act of 2002 ( P.L. 107-296 ) dismantled INS,splitting the service and enforcement functions,and transferring former INS activities and programs to DHS. Other DOJ programs were also transferred to DHS. Most notably, they included the Office ofDomestic Preparedness (ODP), formerly under the Office of Justice Programs, and the National InfrastructureProtection Center (NIPC), formerly part of theFederal Bureau of Investigation. Nonetheless, these activities and programs, although transferred to the DHS, arefunded for FY2003 in the Commerce, Justice,State (CJS) appropriations act under DOJ. Crime control has traditionally been viewed as a state and local responsibility. Beginning with the passage of the Crime Control Act of 1968 (P.L. 90-351), thefederal role in the administration of criminal justice has increased incrementally. Since 1984, Congress has enactedfive major omnibus crime control bills,establishing new crimes, penalties, and additional law enforcement assistance programs for state and localgovernments. Crime control is one of the few areas ofthe federal budget where discretionary spending has increased over the past two decades. FY2003 Budget Request and Authorization. For the Department of Justice (DOJ), Congress appropriatednearly $24 billion, a 1% increase over the department's FY2002 enacted budget of $23.7 billion, and a 5% increaseover the Administration's request of $22.8billion. The last year appropriations for DOJ were authorized was FY1980 ( P.L. 96-132 ). Congress passed the21st Century Department of Justice AppropriationsAuthorization Act ( P.L. 107-273 ), authorizing the appropriation of specific amounts for DOJ agencies, activities,and programs for FY2002 and FY2003. ThisAct includes many other provisions that, among other things, establish a Violence Against Women Office, addressdrug treatment and prevention, increasepenalties for witness tampering, authorize forensic sciences improvement and other justice-related grants, maketechnical immigration amendments to the investorvisa program, and reauthorize and amend juvenile justice programs. Department of Justice Accounts. The DOJ budget account structure roughly mirrors the departmentalorganizational structure. Congress appropriates funding for each account. The activity, agency, and programaccount structure, however, is not uniform. Someaccounts represent a single agency, e.g., the Drug Enforcement Administration account. The Legal Activitiesaccount, by comparison, includes multiple activity,agency, and program accounts. The Office of Justice Programs account includes a series of law enforcementassistance grant programs, in addition todepartmental office and bureau accounts. The table below displays the DOJ account structure. Amounts in thistable and in the text are taken from a table printedin the February 13, Congressional Record on 2003 (H572-H576). Where possible comparisons aremade to the Administration's amended FY2003 request. Inregard to the Administration's request, some major requested budget increases over the activity or agency basebudgets are also given. (2) Finally, last year's(FY2002) enacted funding level or appropriation is also given in the table. Title I. Department of Justice Budget Accounts (millions of dollars) Source: Congressional Record , February 14, 2003, H572-H576. a The increase in funding for General Administration from $432.9 million in FY2002 to $1,824million in FY2003 reflects the consolidation of contract detentionspace acquisition in the Detention Trustee's Office. Such a consolidation is also reflected in the lack of moneyappropriated for prisoner detention under the LegalActivities account, since such funding is now consolidated in the Detention Trustee's Office. b FY2003 conference agreement amounts do not reflect an across-the-board rescission of 0.65%,nor do they reflect other rescissions included in the conferenceagreement ($78 million from the DOJ Working Capital Fund, $51 million from the Legal Activities account, and$580 thousand from the Immigration EmergencyFund). For General Administration , Congress appropriated $1.824 billion, as compared to the Administration's FY2003 amended request of nearly $1.934 billion. As inthe Administration's request, the bulk of this funding goes to the Detention Trustee account to better managedepartmental acquisition of contracted detentionspace. Besides the Detention Trustee, the General Administration account funds the Attorney General's office,senior departmental management, a counterterrorism fund, and the Inspector General's office. Conference report language designates increased funding to: 1)continue development of the Joint AutomatedBooking System (JABS), 2) integrate the FBI and INS biometric fingerprint identifications systems (IAFIS andIDENT), and 3) increase narrowbandcommunications, among other things. For the Federal Detention Trustee's Office , Congress appropriated $1.367 billion for FY2003, nearly the same amount as requested by the Administration. TheDetention Trustee's Office was established in FY2001, with a $1 million appropriation, to manage contractualdetention funding for the Department. For FY2003,the contractual detention resources of the Immigration and Naturalization Service ($593 million) and the U.S.Marshals Service ($774 million) are consolidatedunder this office. Although these agencies would remain responsible for daily detention operations, the DetentionTrustee's Office would manage thedisbursement of funds, which were previously carried under separate accounts. Conference report language directsthe Trustee to report to the Appropriationscommittees as to the appropriateness of transferring certain personnel responsible for procuring detention space fromthe Marshals Service and the former INS tothe Trustee's office. For the counter terrorism fund , Congress appropriated $1 million to "cover extraordinary costs associated with a terrorist threat or incident." Conference reportlanguage noted that this amount, along with unobligated balances and recoveries, provides $50 million for FY2003. The Administration's amended requestincluded no dollars for this fund. The Office of the Inspector General (OIG) is responsible for investigating departmental misconduct. In FY2001, the Attorney General ordered the OIG toinvestigate allegations of misconduct at the Federal Bureau of Investigation and the Drug Enforcement Agency. Previously such responsibility resided with therespective agency offices of professional responsibility. (3) The Senate Committee on the Judiciary reported a measure, the Federal Bureau of InvestigationReformAct of 2002 ( S. 1974 ), that included a provision to make such oversight statutory. To assume these newresponsibilities, the FY2003 amendedrequest included $59 million for the OIG; Congress appropriated $58 million. The U.S. Parole Commission adjudicates parole requests by federal and D.C. Code prisoners who are serving felony sentences. For the commission, the FY2003request was $11 million. The authorization for the parole commission was due to expire in November 2002, butthe 21st Century Department of JusticeAppropriations Authorization Act ( P.L. 107-273 ) authorized to be appropriated $10 and $11 million for the commission for FY2002 and FY2003, respectively. For FY2003, Congress appropriated nearly $11 million for the parole commission. The Legal Activities account includes several accounts: (1) general legal activities, (2) U.S. Attorneys, (3) the U.S. Marshals Service, (4) prisoner detention, and(5) other legal activities. Among other things, the general legal activities account funds the SolicitorGeneral's supervision of the department's conduct inproceedings before the Supreme Court. It also funds several departmental divisions (tax, criminal, civil,environment and natural resources, legal counsel, civilrights, and antitrust). For FY2003, Congress appropriated $3.039 billion for the legal activities account, ascompared to the Administration's request of $3.068billion. Also, the FY2003 appropriation reflects in part a $774 million transfer from the Marshals Service's prisonerdetention account to the Detention Trustee'sOffice (discussed above). The general legal activities account funds the Solicitor General's supervision of the department's conduct in proceedings before the Supreme Court. It also fundsseveral departmental divisions (tax, criminal, civil, environment and natural resources, legal counsel, civil rights,and antitrust). For FY2003, Congressappropriated $611 million, as compared to the Administration's request of $645 million. The U.S. Attorneys and the U.S. Marshals Service are present in all of the 94 federal judicial districts. The U.S. Attorneys prosecute criminal cases and representthe federal government in civil actions. For the U.S. Attorneys, Congress appropriated $1.504 billion, as comparedto the Administration's request of $1.506billion. For the U.S. Attorneys, conference report language designates increases to more aggressively prosecutecorporate fraud ($13 million), coordinate anintermodal transportation security pilot project ($5 million), provide additional legal training from the NationalAdvocacy Center ($25 million), increase violentcrime task force activities ($1.5 million), and prosecute federal copyright and counterfeit software crimes ($10million). The U.S. Marshals are responsible for theprotection of the Federal Judiciary, protection of witnesses, execution of warrants and court orders, and custody andtransportation of unsentenced federalprisoners. For FY2003, Congress appropriated $696 million for the Marshals Service, as compared to theAdministration's amended request of $707 million. Conference report language designated funding increases to improve the warrant information network (nearly $3million), increase security for the judicial process(nearly $16 million), acquire additional courthouse security equipment ($12 million), continue funding two existingfugitive task forces and related efforts ($8million), and provide for new construction ($15 million), among other things. For other legal activities . e.g., the Community Relations Service, the Independent Counsel, the U.S. Trustee Fund, and the Asset Forfeiture program, the FY2003amended request included $210 million. Congress appropriated $228 million for these purposes. The Radiation Exposure Compensation (RECA) account funds a program to compensate individuals exposed to radiation during atmospheric nuclear tests oruranium production. To administer programs under this account, the FY2003 request included $2 million, the sameamount as appropriated for FY2002, for theCivil Division in the Legal Activities account rather than the RECA account. The Interagency Law Enforcement account reimburses departmental agencies for their participation in the Organized Crime Drug Enforcement Task Force(OCDETF) program. Organized into 9 regional task forces, this program combines the expertise of federalagencies (4) with the efforts of state and local lawenforcement to disrupt and dismantle major narcotics trafficking and money laundering organizations. The FY2003request included $362 million for OCDETF;Congress appropriated $372 million. Conference report language designated funding increases to step up DEAparticipation in task force operations ($15 million),enhance wiretap investigations ($6 million), establish a U.S. Attorneys electronic surveillance tactical group ($724thousand), and further investigate linksbetween drug traffickers and terrorists ($3 million). The Federal Bureau of Investigation (FBI), as the lead federal investigative agency, recently reorganized to focus on counter terrorism. For FY2003, Congressappropriated nearly $4.298 billion for the FBI, as compared to the Administration's amended FY2003 request of$4.253 billion. The FY2003 appropriationincluded $491 million in programmatic increases; this amount included increases to step up counterterrorism andcounterintelligence investigations ($181million), improve technology as part of the Trilogy program ($127 million), enhance internal agency securitythrough an enterprise security operations center ($30million), increase aviation support ($19 million), bolster agency capabilities to handle hazardous materials anddevices ($13 million), provide for better qualitylanguage translations ($5 million), among other amounts. In addition, Congress appropriated an additional $62million -- the full amount requested -- toimprove the operations of the Foreign Terrorist Tracking Task Force. It is also significant to note that the Homeland Security Act of 2002 ( P.L. 107-296 ) transferred the National Infrastructure Protection Center (NIPC), the NationalDomestic Preparedness Office (NDPO), and the Domestic Emergency Support Teams (DEST) from the FBI to theDHS. NIPC was formed to detect, deter,assess, and warn computer users about cyber threats and to investigate and prosecute unlawful computer intrusions. For a time, NDPO served as a single point ofcontact for state and local authorities seeking interagency assistance in the areas of planning, training, equipment,and exercises to prepare for domestic terroristincidents, but NDPO activities were largely absorbed by the OJP's Office of Domestic Preparedness. DEST wasan interagency team of experts that could bequickly assembled by the FBI to provide an on-scene commander (Special Agent in Charge) with advice andguidance in situations involving weapons of masseffect (WME). According the DOJ FY2004 Budget Summary, NIPC's transfer to DHS's Information Analysis andInfrastructure Protection Directorate includedabout $51 million and 307 positions. Meanwhile, the NDPO and DEST transfers to DHS's Emergency Preparednessand Response Directorate included neitherdollars nor positions. The Drug Enforcement Administration (DEA) is the lead federal agency tasked with reducing the illicit supply and abuse of dangerous narcotics and drugs. ForFY2003, Congress appropriated $1.561 billion for the DEA, as compared to the Administration's amended requestof $1.546 billion. In addition to appropriatedfunding, conference report language noted that an additional $89 million was anticipated to be available to DEAfor FY2003 from the Drug Diversion Control FeeAccount, (5) bringing FY2003 anticipated new budgetauthority for the DEA to $1.650 billion. Conference report language included designated increases to hire anadditional 133 agents to partially offset the shift of 567 FBI agents away from organized crime and related narcoticstrafficking investigations to counterterrorism($15 million), improve physical security ($18 million), bolster the agency's data security infrastructure ($6.7million), and better monitor the financial holdingsand transactions of drug trafficking organizations. For the former Immigration and Naturalization Service (INS) , Congress directly appropriated $3.848 billion for FY2003, as compared to the Administration'samended request of $4.027 billion. Direct appropriations included $2.881 billion for immigration enforcement andborder affairs, $709 million for immigrationsservices, and nearly $259 million for new border patrol construction (stations, check points, and barriers). Inaddition, Congress appropriated an additional $2.311billion in anticipated offsetting receipts, bringing net obligational budget authority for bureaus of the former INS(currently located in the DHS) to nearly $6.160billion, as compared to the Administration's amended FY2003 request of $6.339. For immigration enforcement and border affairs, conference report language designated funding increases to establish an efficient entry/exit control mechanism torecord noncitizens traveling to and from the United States ($362 million), hire an additional 570 border patrol agents($57 million) and 460 land border inspectors($25 million), advance the journey level for immigration enforcement officers from GS-9 to GS-11 ($58.5 million),conduct interior enforcement ($10 million),increase INS participation on joint terrorism task forces ($6 million), bolster human trafficking investigations ($3.7million), explore alternatives to immigrationdetention ($3 million), and provide legal orientation to immigration detainees ($1 million). By comparison, theAdministration's FY2003 request included thesame amount for entry exit control, but greater amounts for hiring the same number of additional border patrolagents ($75 million) and inspectors ($34 million). Concerning offsetting receipts, conference report language noted that additional user fees would provide funding to hire an additional 615 airport inspectors and85 seaport inspectors. As requested by the Administration, report language designated an additional $50 millionin exam fee receipts to reduce the averageprocessing time for all immigration-related applications to 6 months. Furthermore, section 108 of the DOJ generalprovisions of the FY2003 CJS appropriationsact amended the Immigration and Nationality Act to authorize a $3 cruise line inspection fee. Report language issilent as to the Administration's requested $83million for electronic information management upgrades. The Homeland Security Act of 2002 ( P.L. 107-296 ) dismantled INS, splitting the agency's service and enforcement functions, transferring them to theDepartment of Homeland Security (DHS) as separate bureaus. Immigration service programs were reconstitutedas a Bureau of Citizenship and ImmigrationServices under the DHS Office of the Deputy Secretary. (6) Immigration enforcement programs were transferred to DHS's Directorate of Border andTransportation Security. Under this directorate, the Administration established the Bureau of Customs and BorderProtection by merging immigration inspectionsand the Border Patrol with U.S. Customs Service commercial operations and inspections, along with agriculturalquarantine and inspections. Under the samedirectorate, the Administration established a Bureau of Immigration and Customs Enforcement by consolidatingCustoms and immigration investigations, theCustoms air and marine drug interdiction program, the immigration detention and removal program, and the FederalProtective Service. (7) The Federal Prison System maintains 106 penal institutions nationwide, and contracts with state, local, and private concerns for additional detention space. TheAdministration projected that this system will house an average daily population of 143,197 sentenced offendersin federal institutions, and another 28,043 incontract facilities, in FY2003. For FY2003, the Administration requested $4.480 billion; Congress appropriated$4.474 billion. Conference report language notedthat the FY2003 appropriation included over $101 million to activate a new medium security facility in Glenville,West Virginia, and new high security facilitiesin Big Sandy and McCreary Kentucky, and Victorville, California, which will provide an additional 4,400 beds. In addition, another $10 million is provided toexpand the Marion, Illinois and Stafford, Arizona facilities, which will provide an additional 764 new beds. The Office of Justice Programs (OJP) manages and coordinates the National Institute of Justice, Bureau of Justice Statistics, Office of Juvenile Justice andDelinquency Prevention, Office of Victims of Crimes, Bureau of Justice Assistance, and several grant programs. For the Office of Justice programs and relatedoffices, bureaus, and programs, Congress appropriated $4.562 billion, as compared to the Administration's $3.117billion request. The Administration's requestincluded a proposal to zero out Byrne and Local Law Enforcement Block grant programs, replacing them with aconsolidated justice assistance grants program. Inaddition, the request included another proposal to transfer $1.2 billion in funding from OJP to the FederalEmergency Management Agency (FEMA) to fund andconsolidate domestic preparedness programs by eliminating about $1.8 billion in state and local assistance grantprograms. Congress rejected the first proposaland the second proposal was overtaken by events, as the Office of Domestic Preparedness (ODP) was transferredto the DHS Directorate of Border andTransportation Security. Notwithstanding this transfer, Congress appropriated for ODP $1.0 billion for FY2003in the CJS appropriation act. Congress fundedthe Byrne grant programs at $651 million and Local Law Enforcement Block grants at $400 million, but cut theState Criminal Alien Assistance Program by $315million, funding that program at $250 million. The Justice Assistance account funds the operations of OJP bureaus and offices. Besides funding OJP management and administration, this account fundsresearch, evaluation, and demonstration programs; technology centers; criminal justice statistical programs; andother cooperative efforts that address missingchildren, regional drug intelligence, and white collar crime. For this account, Congress appropriated $1.201 billion,as compared to the Administration's requestof $214 million. The FY2003 appropriation included $1.0 billion for ODP. (8) The Office of Justice Programs administers a number of grant programs to assist state and local governments with law enforcement and other justice-relatedissues. As part of the FY2003 request, these programs include (1) State and Local Law Enforcement Assistance,(2) Weed and Seed crime prevention efforts, (3)Community Oriented Policing Services (COPS), (4) Juvenile Justice Formula Grants, (5) a proposed ElectionProcess Improvement Program, and (6) PublicSafety Officers Benefits. Under State and Local Law Enforcement Assistance , Congress appropriated $2.044 billion for FY2003, as compared to the Administration's request of $752million. Although the Administration's FY2003 request included no funding for the Byrne Grants and Local LawEnforcement Block Grants, Congressappropriated $500 million for the Byrne formula grants and $151 million for Byrne discretionary grants, as well as$400 million for Local Law Enforcement BlockGrants. As requested by the Administration, however, Congress reduced funding for Indian Country Tribal PrisonConstruction and State Criminal AliensAssistance Program, appropriating $5 million for the former -- a reduction of $30 million, and $250 million for thelatter -- a reduction of $315 million. Inaddition, Congress appropriated $390 million for the Violence Against Women Program, $65 million for the StatePrison Drug Treatment, $45 million for DrugCourts, and lesser amounts for victims of trafficking, prescription drug monitoring, prison rape prevention, andterrorism prevention and response training. The Weed and Seed program was designed to "weed out" crime in selected neighborhoods, and "seed" them with coordinated crime prevention and human serviceprograms. For FY2003, Congress appropriated $59 million for Weed and Seed, the same amount as requested bythe Administration. To enhance public safety, the Community Oriented Policing Services (COPS) provides grants to state, local, and Indian Tribal governments to expand communitypolicing and cooperation between law enforcement agencies and members of the community. The authority for theCOPS grant programs lapsed at the end ofFY2000. Congress, however, has continued to appropriate funding for these programs. (9) For FY2003, Congress appropriated nearly $929 million, as compared tothe Administration's request of $1.381 billion. The reduction in funding for the Public Safety and CommunityPolicing Grants program accounted for the largestdifference between the appropriation and request -- $143 million. In addition, the community prosecutors programappropriated $85 million -- a nearly $15million reduction. Congress, however, appropriated $401 million for crime fighting technologies, an increase of$49 million. The Administration had proposedthat a COPS justice assistance grant program be established to replace the Byrne and Local Law Enforcement Blockgrants, but Congress rejected this proposal(see discussion above). Under the Juvenile Justice Formula Grants program , OJP provides funding to improve juvenile justice and corrections. Under this program, the Administration'sFY2003 budget proposed funding Project ChildSafe ($75 million), to advance the goal of ensuring that child safetylocks are available for every handgun in theUnited States; Congress appropriated $25 million. The overall FY2003 request for juvenile justice grants included$258 million. For FY2003, Congressappropriated $275 million for the Juvenile Justice Formula Grants Program. The authorization to makeappropriations for this program had lapsed six years ago atthe end of FY1996. The 21st Century Department of Justice Appropriations Reauthorization Act ( P.L.107-273 ), however, authorized the appropriation of "suchsums as may be appropriate" for these programs for fiscal years 2003 through 2007. (10) The FY2003 request included $400 million to establish a new Election Process Improvement Grant program . Based on recommendations made by the NationalCommission on Federal Electoral Reform, this program provided state and local governments with annual grantsto fund improvements in voting administration,machines, registration, education, and poll worker training. Although the Senate-approved CJS appropriations actwould have provided $31 million for thisprogram, the enacted appropriation provides no funding for this program. In addition, the FY2003 request included$53 million for Public Safety Officer Benefits(PSOB) -- the same amount as appropriated by Congress. The PSOB program provides death benefits tosurvivors of public safety officers who die in the line ofduty, and disability benefits to those officers injured and disabled in the line of duty. Benefits provided by thisprogram were increased by the USA Patriot Act of2001 ( P.L. 107-56 ). The Government Performance and Results Act (GPRA) required the Department of Justice, along with other federal agencies, to prepare a 5-year strategic plan,including a mission statement, long-range goals, and program assessment measures. In September 2000, theDepartment submitted its Strategic Plan for2000-2005 to Congress. Building upon the strategic plan, the Department's FY2003 performance plan includedeight goals: protect the United States from the threat of terrorism; enforce federal criminal laws; prevent and reduce crime and violence by assisting state, tribal, local, and community-basedprograms; defend and protect the rights and interests of the American people by providing legal representationand enforcement of federallaws; administer immigration and naturalization laws fairly and effectively; protect American society by providing for the safe, secure, and humane confinement of persons infederal custody; protect the federal judiciary and support the federal justice system; and ensure professionalism, excellence, accountability, and integrity in the management and conduct ofthe Department ofJustice. (11) Detailed performance plans for individual activities, agency, and program accounts were included in the departmental budget submission to Congress as well. P.L. 107-273 ( H.R. 2215 ; S. 1319 ) 21st Century Department of Justice Appropriations Authorization Act. Authorizes appropriationsfor the Department of Justice, among other things. Amendedand ordered reported by the Committee on the Judiciary on June 20, 2001. Passed the House on July 23, 2001. Amended in the Senate with the text of S. 1319 and passed on December 20, 2001. Conference agreement reported on September 25, 2002. Housepassed the conference agreement onSeptember 25, and the Senate on October 3, 2001. Signed into law ( P.L. 107-273 ) on November 2, 2002. P.L. 107-296 ( H.R. 5005 ) Homeland Security Act of 2002. Establishes a cabinet level Department of Homeland Security. H.R. 5005 was amended and reported ( H.Rept. 107-609 ) by the Select Committee on Homeland Security on July 19, 2002, which was amended and passed by the Houseon July 26, 2002. A similar measure( H.R. 5710 ) on November 12, 2002. Amended and passed in Senate on November 19, 2002. Signed intolaw ( P.L. 107-296 ) on November 25, 2002. S. 924 (Biden) Protection Act of 2002. Reauthorizes the Community Oriented Policing Services (COPS) programs, amongother things. Amended and reported without awritten report by the Committee on the Judiciary on April 11, 2002. No further action was taken. S. 1974 (Leahy) Federal Bureau of Investigation Reform Act of 2002. Includes provisions to reform and improve oversight ofthe FBI. Ordered reported by the Committee on theJudiciary on April 25, 2002. Report filed on May 10, 2002 ( S.Rept. 107-148 ). No further action was taken. CRS Report 97-196. Community Oriented Policing Services (COPS) Program: An Overview , by [author name scrubbed]. CRS Issue Brief IB10095. Crime Control: The Federal Response , by [author name scrubbed]. CRS Report RL31549 . Department of Homeland Security: Consolidation of Border and Transportation Security Agencies , coordinated by [author name scrubbed]. CRS Report RS21400. FY2003 Appropriations for First Responders: Fact Sheet , by Ben Canada and [author name scrubbed]. CRS Report RS20576, Juvenile Justice: Legislative Activity and Funding Trends for Selected Programs , by [author name scrubbed], [author name scrubbed], and DavidTeasley. CRS Report RS20539. Federal Crime Control Assistance to State and Local Governments , by [author name scrubbed]. CRS Report RS20944. Statutory Inspector General for the FBI: Overview and Issues , by [author name scrubbed] and [author name scrubbed]. Title II typically includes the appropriations for the Department of Commerce and related agencies. The origins of the Department date back to 1903 with theestablishment of the Department of Commerce and Labor (32 Stat. 825). The separate Department of Commercewas established on March 4, 1913 (37 Stat.7365; 15 U.S.C. 1501). The Department's responsibilities are numerous and quite varied, but its activities center around five basic missions: 1) promoting the development of Americanbusiness and increasing foreign trade; 2) improving the nation's technological competitiveness; 3) encouragingeconomic development; 4) fostering environmentalstewardship and assessment; and 5) compiling, analyzing and disseminating statistical information on the U.S.economy and population. The following agencies within the Commerce Department carry out these missions: Economic Development Administration (EDA) provides grants for economic development projects in economically distressed communitiesand regions. Minority Business Development Agency (MBDA) seeks to promote private and public sector investment in minority businesses. Bureau of the Census collects, compiles, and publishes a broad range of economic, demographic, and social data. Economic and Statistical Analysis Programs provide 1) timely information on the state of the economy through preparation, development,and interpretation of economic data; and 2) analytical support to department officials in meeting their policyresponsibilities. Much of the analysis is conducted bythe Bureau of Economic Analysis (BEA). International Trade Administration (ITA) seeks to develop the export potential of U.S. firms and to improve the trade performance of U.S.industry. Bureau of Export Administration (BXA) enforces U.S. export control laws consistent with national security, foreign policy, and short-supplyobjectives (to be renamed the Bureau of Industry and Security). National Oceanic and Atmospheric Administration (NOAA) provides scientific, technical, and management expertise to 1) promote safe andefficient marine and air navigation; 2) assess the health of coastal and marine resources; 3) monitor and predict thecoastal, ocean, and global environments(including weather forecasting); and 4) protect and manage the nation's coastal resources. Patent and Trademark Office (PTO) examines and approves applications for patents for claimed inventions and registration oftrademarks. Technology Administration , through the Office of Technology Policy, advocates integrated policies that seek to maximize the impact oftechnology on economic growth, conducts technology development and deployment programs, and disseminatestechnological information. National Institute of Standards and Technology (NIST) assists industry in developing technology to improve product quality, modernizemanufacturing processes, ensure product reliability, and facilitate rapid commercialization of products based on newscientific discoveries. National Telecommunications and Information Administration (NTIA) advises the President on domestic and international communicationspolicy, manages the federal government's use of the radio frequency spectrum, and performs research intelecommunications sciences. The total appropriation for the Department of Commerce in FY2002 was $5.43 billion (not including supplementals), which was about $341 million above thePresident's request. The enacted amount was also about $322 million above the House-passed bill and about $166million below the Senate-passed bill. (Formore information on funding of individual agencies, see the Appendix.) In his FY2003 budget request to Congress, the President requested $5.64 billion in total funding for Title II, which includes the Department of Commerce andrelated agencies. This amount was approximately $160 million (2.8%) less than the $5.80 billion (after addingsupplementals) that Congress appropriated inFY2002. The 107th Senate Appropriations Committee recommended $5.92 billion, roughly $320 million abovethe Administration request. The FY2003omnibus appropriations bill provided $5.78 billion for Title II, which is roughly $280 million above theAdministration amended request. For the Department of Commerce alone, the President requested $5.55 billion, which was about $170 million below the FY2002 appropriation of $5.72 billion. The 107th Senate Appropriations Committee recommended $5.83, roughly $280 million above the Administrationrequest. For FY2003, the omnibus billprovided $5.69 billion, which is roughly $140 million above the Administration request. The President's budget request called for $70.9 million for Departmental Management . This amount would have been $8.3 million (14.3%) more than the $62.6million appropriated for FY2002. The 107th Senate Appropriations Committee recommended $62.1for departmental management, roughly $8.8 million below thePresident's request. The Senate bill allocated $41.5 million to salaries and expenses, and $20.6 million to theInspector General's office. The omnibusappropriations bill provided a total of $65.6 million, which was $5.3 million below the President's request, but $3million more than the FY2002 amount. Of thisamount, roughly $45 million was for salaries and expenses and $20.6 million for the Inspector General's office. The Department's Economic and Statistical Analysis programs are conducted by the Bureau of Economic Analysis (BEA) and the Bureau of the Census. ThePresident requested $73.2 million for these programs, which was about $10.7 million (17.1%) above the $62.5million appropriated in FY2002. TheAdministration believed that the BEA's timely and accurate statistical reports were essential for providing reliabledata to policymakers, industry leaders, andconsumers. The 107th Senate Appropriations Committee recommended $63.8 million, roughly $10million below the Administration request. The omnibus billprovided $72.2 million, which was one million below the Administration request, but roughly $9.7 million abovethe FY2002 amount. For the Bureau of the Census , the President requested an FY2003 total of $705.3 million, $225.8 million higher than the $479.5 million appropriated for FY2002. (The $479.5 million took into account an $11.3 million rescission.) The Conference Committee approved $554.5million, $150.8 million less than the FY2003request but $75 million more than the FY2002 appropriation. The conferees included $1 million to have the Bureau study the response rates in a test of voluntary versus mandatory answers to the American CommunitySurvey, the intended replacement for the decennial census long-form questionnaire, and directed the Secretary ofCommerce to report the study results to theAppropriations Committees as soon as they are available. Filling out the census long form has been mandatory, andthe Bureau maintained that the ACS responserates will drop if answering the survey becomes optional. Some in Congress believe, however, that the mandatoryapproach is too burdensome and intrusive forrespondents. The President's request for the International Trade Administration was $377.2 million, a $31.7 million increase over the FY2002 levels ($345.5 million,including the FY2002 supplemental). The Senate provided $350.2 million and the Conference agreed on $362.2million, a $16.7 million increase over theFY2002 level. ITA is divided into four policy units and an Executive and Administrative Directorate, which theConference appropriated $25.1 million. The Administration requested $58.3 million for the Trade Development Unit . In FY2002, Congress appropriated $67.7 million, includingseveral textile related initiatives not incorporated into the President's FY2002 request of $52.3 million. Althoughthese initiatives are not funded in the President'sFY2003 request, the Senate Appropriations Committee restored approximately $13 million for the National TextileCenter and the Textile/Clothing TechnologyCorporation. The Senate's provision for Trade Development was $68.1 million. The Conference trimmed thisamount to $67.7 million. The Administration requested $37.2 million for the Market Access and Compliance Unit (MAC) . This request included approximately $5million for increased compliance monitoring and enforcement, and support for World Trade Organization and FreeTrade of the Americas negotiations. TheSenate appropriated $28.2 million. The Senate Appropriations Committee recommended that $23.5 million of thesefunds be used for compliance efforts and $1.5million for field officers to monitors compliance in China, Japan, the European Union and other markets. TheConference appropriated $31.2 million: $3.5million more than MAC's $27.7 million appropriation in FY2002. In the President's FY2003 budget, the Import Administration (IA) unit received a $7.6 million increase to $53.6 million in FY2003 -- upfrom $46 million in FY2002, including an additional $5.9 million request for anti-dumping and countervailing dutyenforcement. The Senate appropriated $44million. The Senate Appropriations Committee specified $1.5 million of this amount for overseas anti-dumpingand countervailing subsidy monitoring andcompliance efforts; $3.5 for the agency to monitor import surges in key sectors and to take expedited action torespond to such surges; and $2.5 to review andevaluate the compliance of China and Japan with regard to their existing World Trade Organization (WTO)commitments on anti-dumping and countervailingsubsidies. The Conference appropriated $44.2 million, a $1.8 million cut from FY2002. The Administration requested $201.8 million for the U.S. and Foreign Commercial Service (USFCS) , an increase of $6 million from the$195.8 million appropriated in FY2002. In part, this increase was designed to fund trade compliance-related trainingfor U.S. Export Assistance Center employeesand seminars for U.S. exporters. The Senate provided $199.6 million for USFCS. The Conference appropriated$202 million, a $6.2 million increase fromFY2002. The agency had reviewed its fee based programs with an intent to recoup more of its costs through fees.ITA's FY2003 budget justification cautionedthat increased funding for several programs were dependent on receiving at least $10 million in additional feecollections. The President's FY2003 request for the Bureau of Industry and Security(BIS) (formerly the Bureau of Export Administration ) was$103.3 million, a $34.4million increase from the level Congress enacted in 2002 ( $68.9 million). This figure represents a $14.4 millionincrease for BXA's principal activities includingadministering and enforcing the Export Administration Regulations, ensuring U.S. compliance with multilateralproliferation control regimes, and managing theCritical Infrastructure Assurance Office (CIAO). An additional $20 million was requested to fund the HomelandSecurity Information and Technology EvaluationProgram within CIAO to coordinate information technology policy with the Office of Homeland Security and OMBand better utilize federal information systemsfor homeland security purposes. The CIAO was transferred to the Information Analysis and Infrastructure ProtectionUnit of the Department of HomelandSecurity. The Senate recommended $100.2 million, a $3.1 million reduction from the President's FY2003 request. The Senate language directed that industry developmentprograms of BIS be transferred to the International Trade Administration. These programs are located with theBureau's Office of Strategic Industry andEconomic Security. The Conference approved $74.7 million, a $5.8 million increase from FY2002, and directedthat $7.3 million of that figure be used to fundChemical Weapons Convention compliance activity. The Economic Development Administration (EDA) has experienced an unsettled appropriations history over the past several Congresses. (12) Last year wastypical. For FY2002, the Administration requested a substantial reduction ($76 million, or 17%) in EDA's overallfunding. The House set funding for FY2002 atthe Administration's requested level, i.e., $30.6 million for Salaries and Expenses (S&E) and $335 million forEconomic Development Assistance Programs(EDAP), for a total EDA appropriation of $365.6 million. The Senate Appropriations Committee recommendedslightly more -- $371.6 million. The conferenceagreement provided $30.6 million for S&E and $335 million for EDAP, for a total FY2002 appropriation of$365.6 million. For FY2003, the Administration requested a total appropriation of $348 million for EDA. The conference agreement provides a total EDA appropriation of$320.8 million -- $290 million for EDAP and $30.8 million for S&E. More specifically, $205 million is forPublic Works and Economic Development, $40.9million is for Economic Adjustment Assistance, $24 million is for planning, $9.1 million is for technical assistance(including university centers), $10.5 million isfor trade adjustment assistance, and $500,000 is for research. For the Minority Business Development Agency (MBDA), the Bush Administration request was $28.9 million for FY2003, about $.5 million (1.7%) above the$28.4 million appropriated in FY2002. The 107th Senate Appropriations Committee recommended$28.6 million, roughly $200,000 above the FY2002appropriation. The FY2003 enacted funding was $28.9 million, which matched the Administration request. The U.S. Patent and Trademark Office (USPTO) is funded by user fees collected from customers. After a series of Continuing Resolutions that funded theOffice at FY2002 levels, the Omnibus Budget Act ( P.L. 108-7 ) provided the USPTO with the budget authority tospend $1,182.6 million for FY2003. Of thisamount, $1,015.2 million is to be derived from offsetting collections and $166.8 million is from fees collected inprevious years. The budget authority is 5% morethan the previous fiscal year, but is less than the $1,527 million expected to be collected in patent and trademarkfees in FY2003. The Administration's FY2004 budget would provide the USPTO with the authority to spend $1,203 million from fees collected in that fiscal year. In addition, theAdministration is proposing legislation to change the statutory fee structure to raise an additional $201 million tobe spent by the Office. The expected $1,404million in budget authority is $100 million less than the anticipated $1,504 million fee collection for FY2004. Since 1990, appropriation measures have limited the Patent and Trademark Office's use of the full amount of fees collected in each fiscal year. This is an area ofcontroversy. Opponents argue that since agency operations are supported by payments for services, the total amountof these collections should be available toprovide for those services in the year the expenses are incurred. Proponents of the current approach maintain thatthe fees are necessary to balance the budget andthat the level of fees appropriated back to the USPTO are sufficient to cover operating expenses. (13) For FY2003, President Bush requested a total of $3.21 billion in appropriations for the National Oceanic and Atmospheric Administration (NOAA) . Of thisamount, $2.28 billion was requested for NOAA's Operations, Research and Facilities (ORF) account; $811.4 millionfor the Procurement, Acquisitions, andConstruction (PAC) account; and $114.1 million for NOAA's Other Accounts. Additional budget authority of $75million would be transferred from the Promoteand Develop Fishery Products and Research Pertaining to American Fisheries (PDAF) account, and $3 million incollected fees would be transferred to ORF fromthe Coastal Zone Management Fund (CZMF). Total Budget Authority requested for NOAA for FY2003 would be$3.33 billion. NOAA's Office of FinancialAdministration (OFA) reported that $574.8 million was requested for research and development (R&D)spending for FY2003. The FY2003 request was 5.65% greater than the President's FY2002 request, and 1.35% less than FY2002 appropriations of $3.38 billion. Of the total ORFfunding requested, $385.3 million was for the National Ocean Service (NOS); $603.5 million for the NationalMarine Fisheries Service (NMFS); $296.9 millionfor Oceanic and Atmospheric Research (OAR); $725.3 million for the National Weather Service (NWS); $151.9million for the National Environmental SatelliteData and Information Service (NESDIS); and $213.2 million for Program Support. Program Support wassubsequently divided as follows: $79.8 million forCorporate Services (NOAA Administration), $108 million for the Office of Marine and Aviation Operation(OMAO), and $24.6 million for NOAA Facilities(FAC). NOAA's Other Accounts include Pacific Coastal Salmon Funding (PCSF) for which $110 million wasrequested; $3 million from the CZMF, which istransferred to NOS; and $1.1 million for other fishery-related funds. Highlights of the FY2003 President's request included significant changes to base funding for all NOAA programs for Civil Service Retirement System expenses(CSRS). These new obligations totaled $92.2 million in discretionary funding, expenses which were originallyfunded by the federal Office of PersonnelManagement (OPM). The OMAO request included $815,000 for new hires for NOAA's uniformed CORPS, and$36.7 million for the CORPS Officer'sretirement fund (mandatory). Another significant change to base funding for OAR was a reduction of $62.4 millionfor the Ocean and Great Lakes ResearchPrograms, which was premised on the President's proposal to transfer the National Sea Grant College Program tothe National Science Foundation (NSF). Thistransfer was supported by the NOAA Administrator, who is also Undersecretary of Commerce for Oceans andAtmosphere. In addition, the President requested atotal of $348.5 million for coastal conservation spending for FY2003, authorized under the Coastal and EstuarineLands Conservation Program (CELCP) in TitleVIII of Department of Interior Appropriations for FY2001 ( P.L. 106-552 ). That funding was proposed to be dividedas follows: NOS, $184.5 million; NMFS,$52.8 million; OAR and NESDIS, $1.2 million; and PCSF, $110.0 million. In the Defense Appropriations Act for FY2002 ( P.L. 107-117 ), NOAA received additional funding of $2.75 million for NESDIS for satellite control operationssecurity, and $0.75 million for oversight and enforcement of the licencing program for satellite data and imagery. Funding was also restored under that same Actfor DOD/USAF, a partner of NOAA in NPOESS, a program to consolidate all federal polar orbiting environmentalobservation satellites systems under oneprogram. This funding raised total appropriations for NPOESS to levels requested for FY2002; similar levels wererequested for FY2003. The President'srequest for Homeland Security activities at NOAA for FY2003 was $24.6 million. New for FY2003, $8.7 millionwas requested for an "Energy Initiative" underOAR which would both manage the agency's research facilities energy use and assist the entire nation with weatheradvice to help conserve energy nation-wide. The President also proposed legislation to establish a Business Management Fund to manage NOAA's operatingcosts. For information on NOAA funding forFY2002, see CRS Report RL31117(pdf) , National Oceanic and Atmospheric Administration: a Review of theFY2002 Budget Request and Appropriations . The FY2003 CJS appropriations bill, reported by the Senate Committee on Appropriations ( S. 2778 , S.Rept. 107-218 ) on July 24, 2002, wouldprovide total appropriations of $3.350 billion for NOAA, which is $216.7 million, or about 4.4%, more than thePresident's request of $3.210 billion for FY2002,and almost 7.0% more than the FY2002 funding level of $3.133 billion. FY2003 ORF funding levels approved bythe Committee would be $2.337 billion,including $78.2 million in transfers from Other Accounts, and ORF funding would be divided as follows: $403.5million for NOS; $587.9 million for NMFS;$395.7 million for OAR; $682.0 million for NWS; $133.8 million for NESDIS; and $202.9 million for ProgramSupport, including $89.5 million for CorporateServices, $95.9 million for the Office of Marine Aviation Operations, and $17.5 million for FAC. Total PACappropriations approved for FY2003 would be$903.4 million, and include $102.4 million for NOS, $24.0 million for NMFS, $17.1 million for OAR, $66.8million for NWS, $608.6 million for NESDIS, and$84.5 million total for Program Support. Further, the Committee approved $110.1 million for NOAA's OtherAccounts including, $95 million for the PacificCoastal Salmon Recovery Fund, an increase of $5.0 million above the President's FY2003 request; $20 million forPacific Salmon Treaty obligations; $1.4million for various fishery accounts. Further, $3.0 million would be transferred to ORF from CZMF; and therewould be a $3.0 million reduction from fisheriesfinancing. S. 2778 requires the National Sea Grant College Program to remain in NOAA, where it would be funded at $63.4 million for FY2003. In addition,the bill would provide $20.0 million for exploration of the world's oceans, $6.0 million more than FY2002 levels;create a new initiative, "Ocean Health," whichit would fund at $10 million; provide $1 million to establish a NEPA office in NMFS and to encourage NOAA toimprove its fisheries management capabilities;provide $4.0 million for NOAA responsibilities under the National Invasive Species Act; and encourage NOAAto develop plans for a national system of oceanobservation platforms, including a relocatable underwater laboratory/habitat. The Committee further approved $2.0million for Arctic Research; would provide$14 million for minority colleges and universities to train future scientists; would provide $3.5 million for fisheriesand shellfish restoration in the ChesapeakeBay; and would establish a Business Management Fund in NOAA. Conservation spending approved for FY2003is $480 million, with $264.5 million of thatintended for ORF; $100.5 million for PAC, and $115 million for PCSF. The Committee did not approve $18 million requested for NOAA's part in the President's Climate Change Research Initiative (CCRI), but instead it noted itssupport for climate research activities being conducted under the U.S. Global Change Research Program. The reportdid not address the proposed NOAA "EnergyInitiative," but would provide a $23.2 million increase for homeland security programs, and would include fundingfor a NWS weather and climatesupercomputing backup, and backup for other programs in NESDIS recommended under the President's CriticalInfrastructure Protection Initiative. Further, thereport addresses the President's proposal to transfer financial responsibilities for CSRS and retiree health benefitsfor all civilian employees to federal agencies. The Senate Appropriations Committee noted that because the Senate Government Affairs Committee -- which hasauthorizing jurisdiction over such matters --had not considered the proposal, funding tables in S.Rept. 107-218 exclude amounts proposed for funding thosebenefits. S. 2778 is underconsideration by the Senate. On July 19, 2002, Conferees reported out H.R. 4775 , the Homeland Security Emergency Supplemental Appropriations Act for FY2002 ( H.Rept.107-593 ). Appropriations for NOAA under this Act would total $33.5 million, including $4.8 million in ORFfunding for homeland security expenses incurred bythe agency in FY2002. Of this amount, $2.0 million is for NOS to address critical mapping and charting backlogrequirements, and $2.8 million is for NESDIS todevelop backup capability for NOAA's critical satellite products and services. $2.5 million is provided for a coralreef mapping program and some $25.1 millionwould be slated for various fishery programs. In addition, $7.2 million is for a NWS supercomputer backup, whichwould be funded under NOAA's PAC account.Under the original Senate bill ( S. 2551 ), an $8.1 million rescission was proposed from funding provided forNPOESS in FY2002; however, H.R. 4775 (amended) rescinds $8.1 million from funding provided by Section 817 of P.L. 106-78 (NortonSound Fisheries agriculture transfer),instead. The President signed H.R. 4775 into law as P.L. 107-206 on August 2, 2002. On January 8, 2003, Rep. Wolf introduced H.R. 247 , which recommended House funding for CJS Appropriations for FY2003. It was subsequentlyreferred to the House Appropriations Committee. H.R. 247 proposed a total of $2.97 billion for NOAA, andreduced funding for most of NOAA'sline offices below the President's request, except for NWS. Of total appropriations proposed, $2.14 billion was forORF. Some $701.3 million was for PAC, and$133.3 million was for NOAA's Other Accounts. Additional budget authority of $92 million would be providedfrom transfers and deobligations. H.R. 247 also provided additional funding of $40 million for a final payment for U.S. requirements underthe 1999 Pacific Salmon Treaty. A total of$305 million was for NOAA conservation programs. In addition, $7 million was rescinded from unobligated"Coastal Impact Assistance" funds. H.R. 247 also authorized "such sums as necessary," for new mandatory funding for NOAA retirees' pay andother expenses. Costs were estimated tobe around $52 million. On January 13, the Senate Appropriations Committee reported H.J.Res. 2 (amended), its version of FY2003 CJS Appropriations. S.Amdt. 1 was a new bill in the nature of a substitute, which recommended a total of $3.35 billion for NOAA. Of that sum, $2.35 billion would befor ORF; $903.4 million would be for PAC; and $93.8 million for NOAA's Other Accounts. Overall funding levelswere slightly greater than those proposed in S. 2778 , because of proposed increases for NOS and NMFS; however, there would be a decrease for NOAA'sOther Accounts. The amendmentauthorized $52.3 million in mandatory spending for NOAA retirees' pay and health benefits. In most cases, fundingrecommendations were greater than thoserequested by the President for NOAA for FY2003, except for NWS, NESDIS, and Program Support. Funding levelswere greater than those proposed in H.R. 247 , except for NWS, NESDIS and Other Accounts. Further, as in S. 2778 , the Sea Grantprogram was funded within NOAA(OAR) at $63 million, rather than in NSF. The Senate passed H.J.Res. 2 (amended) by unanimous consenton January 13, 2003. Overall spendinglevels for NOAA did not change from Committee-recommended levels, except funding for Other Accountsincreased by $0.7 million. Senate floor amendments to H.J.Res. 2 , which affected NMFS funding, called for the transfer of $20 million from the PDAF account tocreate an "Alaska Fisheries MarketingBoard," and $3 million for Louisiana oyster industry disaster assistance. On January 13, conferees on H.J.Res. 2 approved the FY2003 Consolidated Appropriations Resolution, Section K of which funded NOAA. OnFebruary 15, 2003, conferees reported the resolution ( H.Rept.108-10 ). Appropriations for NOAA were $3,194.6million, with $2,316.5 million of that for ORF,$759 million for PAC, and $59 million for Other Accounts. Additional spending authority of $75 million wouldbe derived from transfers and deobligations. NOS, NWS, and NESDIS received funding levels greater than any approved previously; however, NMFS, OARand Program Support received decreases. Funding for PAC was reduced, but funding for Other Accounts increased, owing to an additional $40 millionauthorized as a final payment for the 1999 PacificCoastal Salmon Treaty. The conferees also approved a transfer of $10 million for Alaskan seafood marketingprogram from the PDAF account (Section 209), and$3 million for Louisiana oyster industry relief from NMFS funding. Further, $7 million was rescinded fromunobligated balances under "Coastal ImpactAssessment." Conferees appropriated $50.9 million for fisheries replacement vessel (FRV) #2 under ProgramSupport. NOAA's Administrative expenses forFY2003 were capped at $243 million. Notable funding for FY2003 also included $574 million for the weathersatellites system (NESDIS), and $760 million forthe National Weather Service "to ensure better weather forecasting." The National Institute of Standards and Technology (NIST) received $712.1 million in appropriations for FY2003, an increase of almost 5% above FY2002.Included in this figure is $359.4 million for intramural R&D performed under the Scientific and TechnicalResearch and Services (STRS) account, $180 millionfor the Advanced Technology Program (ATP), $106.6 million for the Manufacturing Extension Partnership (MEP),and $66.1 million for construction. Fundingfor activities under the STRS account is 12% above the previous fiscal year while support for ATP and MEP remainfairly constant. The Bush Administration's FY2004 budget request includes $496.8 million for NIST, 30% less than the FY2003 appropriation. The major portion of thisdecreased funding is due to significant cuts in support for the Advanced Technology Program and the ManufacturingExtension Partnership, two extramuralprograms operated by NIST. The $27 million requested for ATP is to cover on-going commitments; no new projectswould be funded. The $12.6 million forMEP is to finance the operation of centers that have not reached 6 years of federal support. (14) Internal agency R&D under the STRSaccount would receive$387.6 million, an increase of 8% over the previous fiscal year. The construction budget would be $69.6 million. (15) Continued support for the Advanced Technology Program has been a major funding issue. (16) ATP provides "seed financing," matched byprivate sectorinvestment, to businesses or consortia (including universities and government laboratories) for development ofgeneric technologies that have broad applicationsacross industries. Opponents of the program cite it as a prime example of "corporate welfare," whereby the federalgovernment invests in applied researchactivities that, they maintain, should be conducted by the private sector. The Clinton Administration defended ATP,arguing it assisted businesses (and smallmanufacturers) develop technologies that, while crucial to industrial competitiveness, would not or could not bedeveloped by the private sector alone. SinceFY2000, the initial appropriation bills passed by the House have contained no further funding for ATP, althoughthe program has continued to receive funding inthe final versions of the appropriations bills. The Bush Administration's FY2004 budget proposal once again wouldeliminate the program. The Office of the Undersecretary for Technology and the Office of Technology Policy (OTP) was funded at $9.9 million in FY2003, a 21% increase over theprevious fiscal year. The Bush Administration's FY2004 budget calls for funding OTP at $8 million. For FY2003, the National Telecommunications and Information Administration (NTIA) received $73.7 million, including $15.5 million for the TechnologyOpportunities Program (TOP) grants (the Administration had requested the elimination of the TOP grants inFY2003), $43.6 million for the PublicTelecommunications Facilities, Planning and Construction (PTFPC) program, and $14.7 million for salaries andexpenses. For FY2004, the Bush Administrationhas proposed that NTIA receive $21.4 million, down from $73.7 million appropriated for FY2003. Much of thischange would come from the BushAdministration's intent to eliminate funding in FY2004 for TOP, and to suspend the PTFPC program by giving it$3 million to finish ongoing projects. Whilecritics of the TOP grants contend that the program has achieved its objectives of funding pilot programs in areasthat do not have easy or direct access to theInternet or high-speed telecommunications, supporters maintain that the program is very important to closing the"digital divide." For PTFPC, the BushAdministration would like the Corporation for Public Broadcasting to pick up responsibility of this program, whichin recent years has supported conversion ofpublic broadcast transmission to digital. Finally, the Bush Administration has proposed that salaries and expensesfor NTIA, the third part of the administration'sbudget, be $18.8 million for FY2004. The Government Performance and Results Act (GPRA) enacted by Congress in 1993 ( P.L. 103-62 ; 107 Stat 285) required that agencies develop strategic plansthat contain goals, objectives, and performance measures for all major programs. The latest Strategic Plan issuedby the Department of Commerce for yearsFY2000- FY2005 listed three strategic goals: Strategic Goal l. Provide the information and the framework to enable the economy to operate efficiently andequitably. Strategic Goal 2. Provide infrastructure for innovation to enhance American competitiveness. Strategic Goal 3. Observe and manage the Earth's environment to promote sustainable growth. As mandated by GPRA, the Department's FY2001 Annual Program Performance Report and FY2003 Annual Performance Plan were released with the FY2002budget proposal. Both the program plan and report are available at: http://www.doc.gov/bmi/budget/ . Title II. Department of Commerce and Related Agencies (millions of dollars) a The Patent and Trademark Office (PTO) is fully funded by user fees. The fees collected, but not obligated during the current year, are available for obligation inthe following fiscal year. The prior-year carryover funds count against the FY2003 total appropriationfor the Dept. of Commerce. For example, in the enactedFY2002 amount, $282.3 million in prior-year carry over funds (plus $1.5 in emergency supplemental funds) countedtoward the Commerce Department total, butcurrent year fee funding does not. S. 149 (Enzi et al.); H.R. 2581 (Gilman) Export Administration Act of 2001. A bill to provide authority for national security and foreign policy exportcontrols. S. 149 introduced January 23,2001; reported from the Senate Banking Committee with amendments, March 22, 2001; passed the Senate onSeptember 6, 2001; H.R. 2581 introduced, July 20, 2001; reported by the House International Relations Committee with amendments, August 1,2001; reported by the House Armed ServicesCommittee with amendments, March 6, 2002. H.R. 4687 (Boehlert) National Construction Safety Team Act. Bill provided for the establishment of investigative teams to assessbuilding performance and emergency response andevacuation procedures in the wake of any building failure that has resulted in substantial loss of life or that posedsignificant potential loss of life. S. 2862 (McCain) Firefighting Research and Coordination Act. Bill provided for the development of standards for firefighterequipment and improve intergovernmentalcoordination of first responder training programs. The bill was reported by the Senate Committee on Commerce,Science, and Transportation on November 18,2002. CRS Report 95-36 . The Advanced Technology Program , by [author name scrubbed]. CRS Report RL31680, Homeland Security: Standards for State and Local Preparedness , by Ben Canada. CRS Report 97-104 . Manufacturing Extension Partnership: An Overview , by [author name scrubbed]. CRS Report 95-30 . The National Institute of Standards and Technology: An Overview , by [author name scrubbed]. CRS Report RL31117(pdf) . National Oceanic and Atmospheric Administration (NOAA): Review of FY2002 Budget Request and Appropriations , by Wayne A.Morrissey. CRS Report RL30169. Reauthorization of the Export Administration Act , coordinated by [author name scrubbed]. CRS Report RS20906(pdf) . U.S. Patent and Trademark Office Appropriations Process: A Brief Explanation , by [author name scrubbed]. Typically, Title III of the CJS appropriation covers funding for the Judiciary. By statute (31 U.S.C. 1105 (b)) the judicial branch's budget is accorded protectionfrom presidential alteration. Thus, when the President transmits a proposed federal budget to Congress, he mustforward the judicial branch's proposed budget toCongress unchanged. That process has been in operation since 1939. The total appropriation for the Judiciary inFY2002 was $4.71 billion. The Judiciary budget consists of more than 10 separate accounts. Two of these accounts fund the Supreme Court of the United States -- one covering the Court'ssalary and operational expenses and the other covering expenditures for the care of its building and grounds. Traditionally, in a practice dating back to the 1920s,one or more of the Court's Justices appear before either a House or Senate appropriations subcommittee to addressthe budget requirements of the Supreme Courtfor the upcoming fiscal year, focusing primarily on the Court's salary and operational expenses. Subsequent to theirtestimony, the Architect of the Capitolsubmits a request for the Court's building and grounds account. (17) Although it is at the apex of the federal judicial system, the Supreme Court represents only avery small share of the Judiciary's overall funding. For FY2002, the total appropriations enacted for the SupremeCourt's two accounts, $107.5 million, were lessthan 2.3% of the Judiciary's overall appropriation of $4.71 billion. The rest of the Judiciary's budget provides funding for the "lower" federal courts and for related judicial services. Among the lower court accounts, one dwarfs allothers -- the Salaries and Expenses account for the U.S. Courts of Appeals and District Courts. The account,however, covers not only the salaries of circuit anddistrict judges (including judges of the territorial courts of the United States), but also those of retired justices andjudges, U.S. Court of Federal Claims,bankruptcy and magistrate judges, and all other officers and employees of the federal Judiciary not specificallyprovided for by other accounts. Other accounts for the lower courts include Defender Services (for compensation and reimbursement of expenses of attorneys appointed to represent criminaldefendants), Fees of Jurors, the U.S. Court of International Trade, the Administrative Office of the U.S. Courts, theFederal Judicial Center (charged withfurthering the development of improved judicial administration), and the U.S. Sentencing Commission (anindependent commission in the judicial branch, whichestablishes sentencing policies and practices for the courts). The annual Judiciary budget request for the courts is presented to the House and Senate appropriations subcommittees after being reviewed and cleared by theJudicial Conference, the federal court system's governing body. These presentations, typically made by the chairmanof the Conference's budget committee, areseparate from subcommittee appearances a Justice makes on behalf of the Supreme Court's budget request. The Judiciary budget does not appropriate funds for three "special courts" in the U.S. court system: the U.S. Court of Appeals for the Armed Forces (funded inthe Department of Defense appropriations bill), the U.S. Tax Court (funded in the Treasury, Postal Serviceappropriations bill), and the U.S. Court of Appeals forVeterans Claims (funded in the Department of Veteran Affairs and Housing and Urban Development appropriationsbill). Construction of federal courthousesalso is not funded within the Judiciary's budget. The usual legislative vehicle for funding federal courthouseconstruction is the Treasury, Postal Serviceappropriations bill. (For more details on individual appropriations for Judiciary functions, see the appendix.) Overview of the Judiciary's Budget Request for FY2003. The FY2003 appropriations bill ( H.Rept. 108-10 )provided $4.92 billion for the Judiciary -- roughly $324 million below the requested level, but $197 million abovethe FY2002 amount. Earlier in the 108thCongress, the Senate had set total funding for the Judiciary at $4.95 billion, compared with $4.97 billion in aHouse-introduced bill. For more detail on 108thHouse and Senate funding levels, see table at the end of this section and in the appendix. For FY2003, the Judiciary had requested $5.24 billion in total funding. More than three quarters of this amount, $4 billion, was to be in the Judiciary's largestaccount, Salaries and Expenses for the Courts of Appeals, District Courts and Other Judicial Services. The FY2003omnibus appropriations bill provided $3.8billion for this account, a 5.6% increase over FY2002 funding of $3.6 billion. In keeping with the Judiciary's request, the omnibus FY2003 appropriations bill provided increases for all of the other Judiciary accounts, except for two -- theSupreme Court's Building and Grounds account and Judicial Retirement Funds. (18) In a separate bill, Congress also agreed to the Judiciary's request for acost-of-living salary adjustment for federal judges and justices. That request, as well as those for the SupremeCourt, and for two of the Judiciary's other largeraccounts, Court Security and Defender Services, are discussed in the following paragraphs. (19) Supreme Court. The budget request of the Supreme Court for FY2003, as customary, was in two parts. For its firstaccount, Salaries and Expenses, the Court had requested $46.3 million -- 15.8% over FY2002 budget authority. (20) The enacted FY2003 appropriations billprovided $45.7 million, roughly $600,000 below the requested level, but $5.7 million above the FY2002 amount. For the Court's second account, Care of the Building and Grounds, the FY2003 omnibus bill provided $41.6 million, roughly $12 million below the requestedlevel (21) and $26 million below the FY2002 amount. However, House and Senate conferees (p. 734 of H.Rept. 108-10 ) said that they understood that "theseadditional obligations [of $12 million] will occur in subsequent fiscal years and therefore may be budgeted in thosefiscal years." Court Security. The enacted FY2003 omnibus appropriation bill provided $268.4 million for this account, which isroughly $29.8 million below the requested level and $47.7 million above the FY2002 level. Conferees for theFY2003 bill (p. 736 of H.Rept. 108-10 ) noted thatCourt Security "is a unique account appropriated to the Judiciary but primarily managed by the Department ofJustice." The conferees said they expected theDirector of the U.S. Marshals Service "to provide the same level of budgetary and program oversight to this programas programs appropriated directly to the U.S.Marshals Service." The Judiciary had requested $298.2 million, a 7.2% increase, which, it explained, included $45.6 million for the annualized, recurring costs associated withincreased court security officer hours, additional deputy U.S. marshals, and enhanced screening (all of which wereimplemented subsequent to the September 11,2001 terrorist attacks in New York City and Washington, D.C.) The largest requested program increase, of $5.4million, would fund perimeter securityimprovements at federal court courthouses. Besides seeking funding for Court Security in its regular annual appropriation, the Judiciary, since September 11, 2001, had obtained emergency supplementalfunding. Of $278.2 million appropriated for Court Security in FY2002, $77.2 million came from emergencysupplemental funding to enhance security at federalcourt facilities nationwide. Of the $77.2 million, $19.7 million was provided by the President through an emergencyallocation on October 17, 2001, and $57.5million came from the supplemental signed by the President on January 10, 2002, P.L. 107-117 . Subsequently, on July 19, 2002, another emergency supplemental bill, H.R. 4775 , was approved by House-Senate conferees, which includedadditional funding for court security measures, though not in the Judiciary's Court Security account. (Followingits approval in conference, H.R. 4775 was passed by the House and Senate on July 23 and 24, 2002, respectively, and signed into law ( P.L. 107-206 )on August 2, 2002.) As noted above, H.R. 4775 included $10.0 million to address the Supreme Court building's perimeter security needs. Inaddition, the supplemental bill included $7.1million for increased costs associated with terrorist-related trials in Alexandria, VA; Boston; and New York City. (The $7.1 million appropriation was to go to theJudiciary's Courts of Appeals, District Courts, and Other Judicial Services -- Salaries and Expenses account.) Ofthe $7.1 million, $5.2 million was for perimetersecurity enhancements such as protective window film for courts with terrorist trials, and $1.9 million for costsassociated with the closed circuit transmission ofthe criminal trial of Zacarias Moussaoui to victims of the September 11, 2001 attacks. (22) Defender Services. This account funds the operations of the federal public defender and community defenderorganizations, and the compensation, reimbursement and expenses of private practice "panel attorneys" appointedby the courts to serve as defense counsel toindigent individuals accused of federal crimes. The FY2003 omnibus bill provided $538.5 million, which is roughly$50.2 million below the request, but $37.8million above the FY2002 amount. Earlier, the Judiciary had sought $588.8 million, a 17.6% increase. Nearly all of the requested increase, $87.5 million, according to the Judiciary, consisted of adjustments to base to maintain current services. Specifically, of that overall amount, $30.1 million would"annualize" in FY2003 the hourly increase in the payrate of panel attorneys approved by Congress in the FY2002 CJS-Judiciary bill. (23) Another $17.1 million in requested funding would increase the hourly panelattorney rate from $90 to $113 effective April 1, 2003. In its FY2003 budget submission to Congress, the Judiciarytermed the requested $17.1 million increase asan adjustment to base "rate adjustment" rather than a program increase. The Judiciary explained that under theCriminal Justice Act, as revised in 1986, theJudicial Conference is authorized to make annual adjustments to the panel attorney hourly pay rate. Accordingly,funding to increase the hourly rate to $113, theJudiciary said, would ensure that it would not be "further eroded by inflation." Conferees for the FY2003 omnibus bill explained (in H.Rept. 108-10 , p. 735) that their agreement included an increase, as requested by the Judiciary, of $30.1million to annualize the panel attorney rate increase provided in FY2002. They noted, however, that their agreementdid not include the requested additionalfunding for an increase in the pay rate for panel attorneys to $113 an hour. (24) Cost-of-Living Increase in Judges' and Justices' Salaries. The Ethics Reform Act of 1989 ( P.L. 101-194 , Sec. 704)created a statutory mechanism under which judges and other federal officials are to receive an annual salaryadjustment, based on the Employment Cost Index(ECI), effective January 1. However, under the provisions of P.L. 97-92 , Sec. 140, such annual adjustments for thejudiciary must be specifically approved byCongress. Because the 107th Congress adjourned without enacting the permissive language, theJanuary 2003 salary adjustment of 3.1%, which went into effectfor Members of Congress and other legislative and executive branch officials, did not go into effect for the Judiciary. Subsequently, however, P.L. 108-6 ( H.R. 16 , 108th Congress) was enacted, providing that the judges would receive the payincrease, retroactive to January 1, 2003. (25) Earlier, in July 2002, the Senate Appropriations Committee had recommended, and provided $8 million in funding for, a 4.1% cost-of-living increase in thesalaries of lower federal court judges and Supreme Court justices ( S. 2778 , Sec. 304). Prior to the Senatecommittee action, the Judiciary, in itsFY2003 budget submission, had requested $7.0 million to fund a 2.6% cost-of-living increase for judges andjustices, consistent with the expected 2003 salaryadjustment for federal employees. (26) The FY2003 pay adjustment follows similar upward adjustments in judges' and justices' salaries which Congress approved in fiscal years 2002, 2001, 2000,1998, and 1993. Congress, however, declined to authorize such adjustments for FY1999 or for fiscal years 1994through 1997. As part of the budget process, the Government Performance and Results Act (GPRA) enacted by Congress in 1993 ( P.L. 103-62 ; 107 Stat. 285) requires thatagencies develop strategic plans that contain goals, objectives, and performance measures for all major programs. However, as noted earlier, the judicial branch isnot subject to the requirements of this Act. Title III. Judiciary (millions of dollars) P.L. 107-273 ( H.R. 2215 ) 21st Century Department of Justice Appropriations Authorization Act. Includes provision foreight new permanent district judgeships, seven new temporarydistrict judgeships, and conversion of four temporary district judgeships to permanent judgeships. Introduced inHouse, June 19, 2001; reported by JudiciaryCommittee ( H.Rept. 107-125 ), July 10, 2001; passed House on voice vote, July 23, 2001. Reported by SenateJudiciary Committee with an amendment in natureof a substitute (without written report), October 30, 2001; passed Senate with amendments by Unanimous Consent,December 20, 2001. Conference report( H.Rept. 107-685 ) filed, September 25, 2002; report agreed to in House, September 25, 2002, by 400-4 vote; reportagreed to in Senate by Unanimous Consent,October 3, 2002. Bill signed into law by President ( P.L. 107-273 ). H.R. 272 (Gonzalez) Companion bill to S. 147 . Introduced and referred to Judiciary Committee, January 30, 2001; referredto Subcommittee on Courts, the Internet, andIntellectual Property, February 12, 2001. H.R. 570 (Biggert) Federal Judicial Fairness Act of 2001. Repeals Federal statute limiting salary increases for Federal judges orSupreme Court Justices to those specificallyauthorized by Act of Congress, increases judicial pay immediately by 9.6%, and provides for automatic annualcost-of-living increases in judicial salaries. Introduced, and referred to Judiciary Committee, February 13, 2001; referred to Subcommittee on Courts, theInternet and Intellectual Property, February 23,2001. H.R. 2522 (Coble) Federal Courts Improvement Act of 2001. Sets forth or modifies various provisions regarding judicial process(including bankruptcy administrator authority toappoint trustees) and judicial personnel administration, benefits, and protections, (including provisions concerningdisability retirement and cost-of-livingadjustments of annuities for territorial judges, compensation for Federal Judicial Center employees; annual leavelimit for judicial branch executives; andsupplemental benefits for judicial branch employees). Introduced, and jointly referred to Judiciary Committee andCommittee on Education and the Workforce,July 17, 2001. Referred to Judiciary Subcommittee on Courts, the Internet, and Intellectual Property, July 20, 2001;subcommittee hearings held, July 26, 2001. Jointly referred to Education and Workforce Subcommittee on Employer-Employee Relations and Subcommitteeon 21st Century Competitiveness, October 9,2001. H.R. 4125 (Coble) Federal Courts Improvement Act of 2002. Makes various administrative changes to federal judiciary proceduresand allows for the establishment of asupplemental benefits program for officers and employees of the judicial branch. Introduced and referred toJudiciary Committee, April 10, 2002; referred toJudiciary Subcommittee on Courts, the Internet, and Intellectual Property, April 26, 2002; approved and reportedto full Judiciary Committee, May 1, 2002;reported as amended by full Judiciary Committee ( H.Rept. 107-700 ), September 30, 2002; passed House by 370-21vote, October 1, 2002. Received in Senate,Oct. 2, 2002. S. 147 (Feinstein) Southwest Border Judgeship Act of 20001. Creates, in federal judicial districts in four southwest border States,nine permanent district judgeships and ninetemporary district judgeships. Introduced, and referred to Judiciary Committee, January 23, 2001. S. 1162 (Feinstein) Companion bill to H.R. 570 (below). Introduced, and referred to Judiciary Committee, July 11, 2001. CRS Report 98-527 . Federal Courthouse Construction, by [author name scrubbed]. CRS Report RS20278. Judicial Salary-Setting Policy , by [author name scrubbed]. U.S. Administrative Office of the United States Courts. "[Chief Justice's] 2002 Year-End Report on the Federal Judiciary," The Third Branch , vol. 34, January2002, pp. 1-8, available at http://www.uscourts.gov/ttb/jan03ttb/jan03.html , visited March 17, 2003. The State Department, established July 27, 1789 (1 Stat.28; 22 U.S.C. 2651), has a mission to advance and protect the worldwide interests of the United Statesand its citizens. Currently, the State Department supports the activities of more than 50 U.S. agencies andorganizations operating at 257 posts in 180 countries. As covered in Title IV, the State Department funding categories include administration of foreignaffairs , international operations , international commissions ,and related appropriations . The enacted FY2002 State Departmentappropriation was $7.9 billion. Typically, more than half of State's budget (about 71%allocated for FY2002) is for Administration of Foreign Affairs, which consists of salaries and expenses, diplomaticsecurity, diplomatic and consular programs,technology, and security/maintenance of overseas buildings. The Foreign Relations Authorization for FY1998-1999 ( P.L. 105-277 ) provided for the consolidation of the foreign policy agencies. As of the end of FY1999, theArms Control and Disarmament Agency (ACDA) and the United States Information Agency (USIA) were abolished,and their budgets and functions were mergedinto the Department of State. Security issues have remained a top priority since the August 7, 1998 terrorist attacks on two U.S. embassies in Africa. An immediate response was a $1.56billion supplemental enacted by the end of that year. In November 1999, the Overseas Presence Advisory Panelreported its findings on embassy security needsand recommendations. Also in November 1999, Congress authorized ( P.L. 106-113 ) $900 million annually forFY2000 through FY2004 for embassy securityspending within the embassy security, construction and maintenance (ESCM) account, in addition to worldwide security funds in the diplomatic and consularprograms (D&CP) account. After the September 11, 2001 terrorist attack, Congress passed emergency supplemental funds ( P.L. 107-38 and P.L. 107-117 ) which included a total of $254.9million for counter-terrorist and emergency response activities within the Department of State and $47.9 millionfor international broadcasting. In addition,Congress passed an FY2002 supplemental ( H.R. 4775 ; H.Rept. 107-593 ) which provided $303 million forthe Department of State and $15.1 millionfor international broadcasting. (For an account-by-account presentation, see CRS Report RL31370 , StateDepartment and Related Agencies: FY2003Appropriations .) The United States contributes in two ways to the United Nations and other international organizations: (1) voluntary payments funded in the Foreign OperationsAppropriations bill and (2) assessed contributions included in the Commerce, Justice, and State Appropriationsmeasure. Assessed contributions are provided intwo accounts, international peacekeeping (CIPA) and contributions to international organizations (CIO) . Following a periodof dramatic growth in the numberand costs of U.N. peacekeeping missions during the early 1990s, a trend that peaked in FY1994 with a $1.1 billionappropriation, funding requirements havedeclined in recent years. The FY2000 enacted appropriation for CIO was $885 million, $500 million forinternational peacekeeping, and $351 million for U.S.arrearage payments to the U.N. if certain reform criteria were met. Only $100 million of the appropriated arrearagepayments had been released because thereforms had not been implemented. After the United States lost its seat on the U.N. Human Rights Commissionin 2001, the Foreign Relations Authorization billadded a provision (Sec. 601, H.R. 1646 ) that would have restricted payment of $244 million of U.S. arrearagepayments to the U.N. until the UnitedStates regained its seat. After the September 11th attacks, however, Congress passed S. 248 ( P.L.107-46 ) which authorized arrearage payments to theU.N. (For more detail, see CRS Issue Brief IB86116, U.N. System Funding: Congressional Issues , by[author name scrubbed]). International broadcasting , which had been a primary function of the USIA prior to 1999, is now carried out by an independent agency referred to as theBroadcasting Board of Governors (BBG). The BBG includes the Voice of America (VOA), Radio FreeEurope/Radio Liberty (RFE/RL), Cuba Broadcasting,Radio Free Asia (RFA), Radio Free Iraq, Radio Free Iran and the newly-authorized Radio Free Afghanistan. TheBBG's FY2002 appropriation was $498.2million including funds for over 3,400 staff positions. In FY2002 the BBG began a pilot project to create a newMiddle East Radio Network (MERN) byreallocating base funds. The emergency supplementals passed in 2001 and 2002 included funding for expandedbroadcasting by VOA and RFE/RL to Muslimaudiences in and around Afghanistan and the creation of Radio Free Afghanistan. The Administration's FY2003 budget request for the Department of State and international broadcasting totaled $8.1 billion, 3.5% above the FY2002 enactedlevel of $7.9 billion ($8.16 billion including supplementals). The request was comparable to the FY1999 enactedlevel which also included the $1.56 billionemergency supplemental appropriation for overseas security and Y2K computer compliance. Secretary of StateColin Powell testified before House and Senatecommittees in February, March, and April, 2002, that the Administration's State Department budget request forFY2003 continued to have the same three toppriorities as the previous year: 1) embassy construction and security; 2) information technology; and 3) hiringadditional Foreign and Civil Service staff. The House FY2003 funding for State Department and broadcasting ( H.R. 247 ) totaled $7.9 billion while the Senate level was set at $7.7 billion by H.J.Res. 2 . The enacted total was $7.9 billion. In early summer 2002, Congress debated whether to keep the authority of overseas visa issuance within the Department of State or move it into a new Departmentof Homeland Security. The Homeland Security Act ( P.L. 107-296 ), signed November 25, 2002, provided for theSecretary of Homeland Security to haveauthority over visa issuance policies and regulations, while the activities and funding of visa issuance will continueto be through the Department of State. (Formore detail the State Department budget, see CRS Report RL31370 , State Department and Related Agencies:FY2003 Appropriations and FY2004 Request , by[author name scrubbed].) The Administration sent a supplemental request to Congress on March 21, 2002, seeking an additional $51.05 million for D&CP, $2.5 million for CIF, $10million for educational and cultural exchanges, $200.516 million for ESCM and $8 million for emergencies indiplomatic and consular service. Congress passed H.R. 4775 ( H.Rept. 107-593 ) which provided FY2002 supplemental funding of $47.5 million for diplomaticand consular programs; $15 million foreducational and cultural exchanges; $210.5 million for ESCM security; $7 million for U.S. contributions tointernational organizations; $23 million for U.S.contributions to international peacekeeping; and $15.1 million to international broadcasting accounts. The President's FY2003 request of $5,886.9 million for State's administration of foreign affairs was slightly above the FY2002 enacted level, includingsupplemental funds. The administration of foreign affairs requestincluded: $3,937 million for D&CP , $177 million for the capitalinvestment fund (CIF) ; $245million for educational and cultural exchanges account; $1,305 million for ESCM ; and $15 million for emergencies in the diplomaticand consular services account. In the 108th Congress, the House recommended $5,719.7 million for the administration of foreign affairs : $3,822.3 million for D&CP ; $177 million for CIF ;$250.3 million for educational and cultural exchanges ; $1,255 millionfor ESCM ; and $10.5 million for emergencies in the diplomatic andconsular services . The Senate set $5,534.5 million for administration of foreign affairs ,$3,621.2 for D&CP ; $210 million for CIF , $237.7 million for educational and culturalexchanges ; $1,255.7 million for ESCM ; and $6.5 million for emergencies in the diplomatic and consular services. The final enacted amounts were$3,822.3million for D&CP; $183 million for CIF; $245.3 million for exchanges; $1,263.5 million for ESCM; and $6.5million for emergencies in diplomatic and consularservices. Continuing an emphasis on overseas security particularly after the September 11th attacks, the Administration requested a total of $1,308 million for worldwidesecurity upgrades, similar to last year's funding. Of this total, $553 million was within D&CP , primarily for ongoing expenses of past actions such assalaries formore guards, maintenance of security technology, and hiring of 134 additional security professionals. In addition,the Administration requested $755 millionwithin ESCM , largely for upgrading overseas facilities, improving perimeter security,and meeting the needs of the most urgent embassy security projects. TheHouse level was the same as the Administration for both worldwide security upgrades accounts, while the Senateset $579 million for worldwide security upgradesunder the D&CP account and $732.7 million for worldwide securityupgrades under ESCM . The enacted levels were those of the House andthe Administration. (For more detail, see CRS Report RL30662 , Embassy Security: Background, Funding, and the Budget, by [author name scrubbed].) The nonsecurity-related funding request of $3,383.8 million within D&CP was primarily for salaries and expenses of personnel, as wellas support for U.S.diplomatic activities around the world. Secretary Powell testified that, while the Department did get congressionalapproval and funding last year to increasehiring by 360 general staff, 186 security professionals, and technical experts in 2002, staffing gaps continue to exist. The FY2003 State Department requestincluded funding for 631 new positions. That would amount to an increase in new hires of more than 1,100 withintwo years. The House level for nonsecurityDC&P funding equaled $3,269.3 million and the Senate level was $3,042.1 million. Congress passed theHouse level in the omnibus budget bill. The capital investment fund (CIF) , which was established in 1994, provides for purchasing information technology and capital equipment to ensure efficientmanagement, coordination, operation, and utilization of State's resources. For many years, State Departmentofficials have testified that the Department'stechnology problems -- ranging from archaic telephones and copy machines to lack of computers and Internet access-- have received inadequate funding. Thispoint was evident after the September 11th terrorist attacks when the embassies did not have the abilityworldwide to communicate with each other or with StateDepartment headquarters in Washington, D.C. The FY2003 request equaled $177 million. The House set the samelevel as the Administration request, while theSenate recommended a higher level of $210 million. Congress enacted $183 million for CIF in the final bill. Educational and cultural exchange programs include programs such as the Fulbright, Muskie, and Humphrey academic exchanges, as well as the internationalvisitor exchanges and some Freedom Support Act programs. Secretary of State Powell testified on Capitol Hill thathe believes exchange programs are critical topromoting American ideals and democracy abroad. The Administration requested $245.3 million for the FY2003exchange account, an increase of about $8million (3.3%) over the FY2002 level. This amount would be the highest level for exchanges since the mid-1990swhen the Freedom Support and the Support forEast European Democracy (SEED) programs were first funded. The supplemental ( P.L. 107-206 ) provided anadditional $15 million to increase exchanges withMuslim populations. The House set its funding level for exchanges at $250.3 million; the Senate recommended$237.7 million, lower because of thesupplemental funding. The final funding level amounted to $245.3 million, as the Administration had requested. The Bush Administration requested $891.4 million for contributions to international organizations (CIO) . The request provided full funding of U.S. assessedcontributions to 43 international organizations including the World Health Organization, the North Atlantic TreatyOrganization, the International Atomic EnergyAgency, and the Organization for Economic Cooperation and Development. In addition, the Administrationrequested (and received) $7 million within thesupplemental request to meet U.S. assessed obligations of costs of the U.N. Special Representative's operation inAfghanistan. The House bill set funding at $858million while the Senate bill put it at $866 million. The Senate level was enacted by Congress. The Administration requested $726 million for international peacekeeping ($118.2 million less than the FY2002 level) which would provide fundingfor ongoingpeacekeeping activities in Kosovo, East Timor, Africa, and the Middle East. Funds would also support War CrimesTribunals for Yugoslavia and Rwanda. Thelower request reflected a lower peacekeeping assessment rate, and project terminations or reduction of operationsin specified areas. The Administration requestedthat 15% of CIPA funds be provided as two-year funding because of the unpredictability of requirements for thisaccount from year-to-year. Within thesupplemental request, the Administration sought an additional $43 million for CIPA to meet the U.S. share ofprojected increases in U.N. peacekeepingoperations. Congress provided $23 million for the supplemental request for this account. The House funding levelwas identical to the Administration's request. The Senate recommended $673.7 million, which was the amount enacted. The Administration's FY2003 request for international broadcasting totaled $507 million or about 2% above the FY2002 level including the emergencysupplemental. The request included $25.4 million for Cuba Broadcasting and $13.7 million for capitalimprovements. The request sought funding for surgebroadcasting to South/Central Asia and the Middle East, AM transmitting facilities in Egypt and Djibouti, andbroadcasting in Arabic and other languages amongMuslim populations. The capital improvements funding request of $13.7 millionwould provide continued financial support for technical improvements andmaintenance of existing facilities, as well as medium wave transmission capability in the Middle East. In addition,the Administration requested supplementalfunding of $7.4 million for expanding broadcasting services in the Dari and Pashto languages; Congress provided15.1 million for expanding those services andfor infrastructure-related needs in the supplemental. The House set total internationalbroadcasting funds at $509.5 million, with $13.7 million for capitalimprovements and nothing designated for CubaBroadcasting . The Senate passed $470.2 million for the total broadcasting package, including $13.7million for capital improvements and $25 million for CubaBroadcasting. Congress finally enacted a total of $506.6 million for international broadcasting which included$12.7 million for capital improvements and $25 million for CubaBroadcasting. The Government Performance and Results Act (GPRA) enacted by Congress in 1993 ( P.L. 103-62 ; 107Stat 285) required that agencies develop strategic plansthat contain goals, objectives, and performance measures for all major programs. State's most recent GPRA report: U.S. Department of State Performance Plan,Fiscal Years 2001 - 2002 , September 2001, established the following 8 categories of performance goals: 1)National Security, including weapons of massdestruction and regional stability; 2) Economic prosperity, such as open markets, U.S. exports, global economicgrowth, and economic development; 3) Americancitizens and U.S. borders with subcategories -- American citizens, and travel and migration; 4) Law enforcementwith emphasis on international crime, illegaldrugs, and countering terrorism; 5) Democracy; 6) Humanitarian response; 7) Global issues including environment,population, and health; 8) Diplomaticreadiness -- mutual understanding, human resources, information resources, and infrastructure and operations. Title IV. Department of State and International Broadcasting (millions of dollars) a Figures do not include across-the-board rescissions. b In addition to appropriations, State has authority to spend certain collected fees from machinereadable visas, expedited export fees, etc. The amount for suchfees for FY2002 is $516.9 million; for FY2003 the estimate is $739.6 million. P.L. 107-228 ( H.R. 1646 , S. 1401 , S. 1803 ) The Foreign Relations Authorization Act, Fiscal Years 2002 and 2003. Would authorize State Departmentspending of appropriations and other foreign relationsactivities. Introduced April 27, 2001. Committee reported bill to House ( H.Rept. 107-57 ). Passed by the House(352-73) May 16, 2001. Referred to SenateForeign Relations Committee May 17, 2001. Senate Foreign Relations Committee markup held July 26. Committeereported bill to the Senate ( S.Rept. 107-60 )on September 4. Senate added S. 1803 as an amendment to H.R. 1646 and passed it May 1, 2002. Conference was held September 18;the House passed the conference report by voice vote on September 25; the Senate passed it by unanimous consenton September 26. It was signed into law ( P.L.107-228 ) on September 30, 2002. H.R. 3969 (Hyde) The Freedom Promotion Act of 2002. Would promote U.S. public diplomacy activities, exchange programswith predominately Muslim countries, and reorganizeinternational broadcasting. Introduced March14, 2002. Committee markup and ordered reported April 25, 2002.Passed in the House by voice vote on July 22,2002. CRS Report RL30662 . Embassy Security: Background, Funding, and the Budget , by [author name scrubbed]. CRS Report RL31046 . Foreign Relations Authorization, FY2002/2003: An Overview , by [author name scrubbed]. CRS Report RL31370 . State Department and Related Agencies FY2003 Appropriations , by [author name scrubbed]. CRS Issue Brief IB86116. U.N. System Funding: Congressional Issues , by [author name scrubbed]. This section includes all other related agencies covered by Title V of the CJS appropriations bill whose FY2003 appropriations exceeded $1.8 million. (27) The CJSappropriations also cover funding for several relatively small governmental functions, including several specialgovernment commissions. (See table below and inthe appendix for 108th House and Senate funding levels.) (For additional information on the fundingof other related agencies covered by this legislation, see Budget of the United States Government, Fiscal Year 2003 -- Appendix, 107th Cong.) Maritime Administration (MARAD). MARAD administers programs that aid in the development, promotion,and operation of the nation's merchant marine (including programs that benefit vessel owners, shipyards, and shipcrews). The Administration requested $207million for MARAD for FY2003, $17.6 million less than Congress appropriated in FY2002. The President's budgetrequest included $93 million for operationsand training and $98.7 million for the Maritime Security Program (MSP). MSP is a fleet of 47 privately-owned U.S.flag commercial vessels engaged ininternational trade that are available to support the Department of Defense in a contingency. The Administrationrequested $11 million for the disposal of fourobsolete ships in the National Defense Reserve Fleet. Congress appropriated no funds for ship disposal in FY2002. Title XI, the Maritime Guaranteed LoanProgram, provides guaranteed loans for purchasing ships from U.S. shipyards and for the modernization of U.S.shipyards. The President requested no additionalfunds for loan guarantees for FY2003. In FY2002, Congress appropriated $33 million for Title XI loan guarantees. P.L. 108-7 provided $206.7 million, nearly the same level of funding for the Maritime Administration as the Administration's budget request. This includes noadditional funds for loan guarantees in the Title XI ship financing program. The Small Business Administration (SBA). The SBA is an independent federal agency created by the SmallBusiness Act of 1953. While the agency administers a number of programs intended to assist small firms, arguablyits three most important functions are toguarantee -- principally through the agency's 7(a) general business loan program -- business loans made by banksand other financial institutions; to makelong-term, low-interest loans to victims of hurricanes, earthquakes, other physical disasters, and acts of terrorism;and to serve as an advocate for small businesswithin the federal government. (28) For FY2003, the President requested a total appropriation of $783 million for SBA, including $352 million for S&E. The conference agreement provides SBAwith a total appropriation of $736.5 million, including $314 million for S&E. Legal Services Corporation (LSC). LSC is a private, non-profit, federally-funded corporation that providesgrants to local offices that, in turn, provide legal assistance to low-income people in civil (non-criminal) cases. TheLSC has been controversial since its inceptionin the early 1970s, and has been operating without authorizing legislation since 1980. There have been ongoingdebates over the adequacy of funding for theagency, and the extent to which certain types of activities are appropriate for federally funded legal aid attorneysto undertake. In annual appropriations laws,Congress traditionally has included legislative provisions restricting the activities of LSC-funded grantees, such asprohibiting representation in certain types ofcases or conducting any lobbying activities. Congress appropriated $329.3 million for LSC for FY2002. This was identical to the FY2001 appropriation for LSC (after the rescission) and the BushAdministration's FY2002 budget request for LSC. The LSC appropriation for FY2002 included $310 million forbasic field programs, $12.4 million formanagement and administration, $4.4 million for client self-help and information technology, and $2.5 million forthe inspector general. P.L. 107-77 alsoincluded existing provisions restricting the activities of LSC grantees. ( For more detail, see CRS Report 95-178. Legal Services Corporation: Basic Facts andCurrent Status , by [author name scrubbed].) For FY2003, the Bush Administration requested $329.3 million for the LSC, which included $310 million for basic field programs, $13.3 million formanagement and administration, $3.4 million for client self-help and information technology, and $2.6 million forthe inspector general. The budget request alsocontinued all restrictions on LSC-funded activities currently in effect. The Administration's FY2003 request forLSC ($329.3 million) was the same as theamount currently obligated for the program for FY2002. Historically, the Corporation's highest level of fundingwas $400 million in FY1994 and FY1995. For FY2003, the 107th Senate Appropriations Committee recommended a total of $329.4 million for the LSC for FY2003 ( S. 2778 ; S.Rept. 107-218 ). This is $97,000 above the FY2002 appropriation for LSC and the Bush Administration's FY2003 budget requestfor the LSC (it included funds for a 4.1% payadjustment). The FY2003 Senate Committee budget request included $310 million for basic field programs, $13.3million for management and administration,$3.4 million for client self-help and information technology, and $2.6 million for the inspector general. The SenateAppropriations Committee's FY2003 budgetrequest also would have continued all restrictions on LSC-funded activities currently in effect. The conferenceagreement increases LSC funding by $9.5 millionto $338.8 million for FY2003 to offset decennial Census funding reallocations. This final appropriation level wasa compromise between the 108th House andSenate levels. Equal Employment Opportunity Commission (EEOC). The Commission enforces laws banning employmentdiscrimination based on race, color, national origin, sex, age or disability. The EEOC's workload has increaseddramatically since the agency was created underTitle VII of the Civil Rights Act of 1964. Passage of the Americans with Disabilities Act of 1990 and the CivilRights Act of 1991, as well as employees'growing awareness of their rights, have made it difficult for the agency's budget and staffing resources to keep pacewith its heightened caseload. Congress approved $279 million for the agency's FY1999 budget, an increase of $37 million. The following year the appropriation rose minimally to $282million, but the Commission received a $21 million increase for FY2001 ($303 million). Despite this fundingpattern, the EEOC was able to reduce by about 70%the backlog of private sector charges from a high of 111,000 in mid-1995 and to reduce the average processing timefor private sector charges to 216 days. (Thelatter was largely due to the Commission's expanded use of alternative dispute resolution, ADR, procedures, e.g.mediation). The Congress complied with President Bush's request for $310.4 million for FY2002 -- an increase of $7.2 million -- to allow the agency to further enhance itsrecord in its private sector program and to make improvements in its federal sector program, among other things. The Commission was directed to continuereducing the backlog of private sector discrimination charges (32,481 in FY2001); it expressed concern about thestill high level of these charges and expected theagency to exceed the small (6%) backlog reduction assumed in the Administration's budget request. The Bush Administration's budget request of $323.5 million for the EEOC for FY2003 included $14.7 millionto fund the agency's full share of federal employeeretirement costs as part of the Administration's government-wide proposal; without this cost, the FY2003 budgetrequest was $308.8 million. The Commissionhad anticipated achieving a 12.1% reduction in the backlog of private sector charges and had expected to deal withthe $1.6 million decrease from its FY2002appropriation through efficiencies realized from workforce restructuring. The 108th Congress approved a $308.8 million budget for the EEOC for FY2003, or $1.6 million less than for FY2002. The conferees expressed concern about abudget shortfall for the year, unless the Commission is able to realize savings in salaries, expenses, and otheroperational costs. Toward that end, the EEOC mustsubmit to the Appropriations Committees, within 60 days of the bill's enactment, a financial plan that includes stepsthe Commission will take to stay within itsFY2003 appropriation level. As a continuing reflection of the importance Congress places on the work of state andlocal fair employment practice agencies(FEPAs), $33.0 million of the Commission's appropriation is to go toward their funding and permit a contract rateof $500 per charge. The conferees encouragedthe EEOC to use the FEPA experience with mediation as the Commission expands its ADR programs. Commission on Civil Rights. The Commission collects and studies information on discrimination or denials ofequal protection of the laws. It received an appropriation of $8.9 million in FY2000 and FY2001. The FY2002enacted level is $9.1 million. The President'srequest for FY2003 was to continue funding at $9.1 million. Federal Communications Commission (FCC). The FCC is an independent agency charged with regulation ofinterstate and foreign communication by means of radio, television, wire, cable and satellite. The FY2003 omnibusfunding bill has provided total budgetauthority of $271 million for the FCC, with $269 million to be derived from offsetting collections, resulting in adirect appropriation of $2 million. TheCommission had requested $268.3 million, consisting of a direct appropriation of $20.1 million and $248.2 millionin offsetting regulatory fees (compared with adirect appropriation of $26.3 million and $218.8 million in regulatory fees for FY2002). In H.Rept. 108-10 , conferees for the FY2003 bill expressed their concern about "the declining standards of broadcast television and the impact this decline ishaving on America's children." The conferees directed the Commission to "continue to report to Congress on theissues associated with resurrecting a broadcastindustry code of conduct" for television program content. In keeping with the requirements of the Government Performance and Results Act, the FCC, as part of its FY2003 budget request, set forth its overall mission andgeneral and specific goals. (29) Federal Maritime Commission (FMC). The FMC regulates the international waterborne commerce of theUnited States and has responsibility for licensing and bonding ocean transportation intermediaries. TheAdministration requested $17.4 million for the FMC forFY2003, about $1 million more than Congress appropriated in FY2002. The Consolidated AppropriationsResolution 2003, H.J.Res. 2 , provided$16.7 million for the FMC. The Federal Trade Commission (FTC). The FTC, an independent agency, is responsible for enforcing anumber of federal antitrust and consumer protection laws. In recent years the FTC has used pre-merger filing feescollected under the Hart-Scott-Rodino Act toentirely fund its operations; Zero ($0) direct appropriations have been required. For FY2002 the Administration requested a program level of $156.3 million for the FTC, an increase of $9.1 million over the previous appropriation. All of thefunding came from offsetting collections derived from fees collected for pre-merger filings during FY2002, so asto result in a final direct appropriation of zero($0). The conference agreement provided the FTC with $156 million for FY2002. This action resulted in a finaldirect appropriation of zero ($0). For FY2003, the President's requested $171.6 million for the FTC, an increase of approximately $15.6 million over the agency's current appropriation. Theconference agreement provides the FTC with an FY2003 program level of $176.6 million; with offsetting feecollections, the agency received a final directappropriation of $8.5 million. Securities and Exchange Commission (SEC). The SEC administers and enforces federal securities laws inorder to protect investors and to maintain fair and orderly stock and bond markets. The SEC collects fees on varioussecurities market transactions. During thestock market boom of the 1990s, these collections exceeded the agency's budget by a wide margin. Legislationpassed by the 107th Congress ( H.R. 1088 , P.L. 107-123 ) reduced these fees. In 2001, Congress approved a total FY2002 operating level of $437.9 million for the SEC, an increase of $15.1 million over FY2001. Of the total, $109.5 millionwas to come from fees collected in FY2002 and the remaining $324.4 million from prior-year fees. As was the casein FY2001, no direct appropriations wereneeded -- the SEC was funded entirely by current and prior year fee collections. Under P.L. 107-206 , the SECreceived a supplemental appropriation of $40.2million for FY2002. For FY2003, the Administration requested $466.9 million for the SEC, an increase of 6.6% over FY2002. In the wake of Enron and other corporate accountingscandals, there was broad support in Congress for a much larger increase in the SEC's budget. The Sarbanes-Oxleyaccounting reform legislation ( P.L. 107-204 )authorized FY2003 appropriations of $776.0 million. The 107th Congress Senate AppropriationsCommittee approved $750.5 million, 60% more than requested. The conference report approved $716.35 million. The State Justice Institute (SJI). The Institute is a private, non-profit corporation that makes grants to statecourts and conducts other activities to further the development of judicial administration in state courts throughoutthe United States. The FY2003 omnibusfunding bill has provided $3 million for SJI, the same as the FY2002 funding level. Although the Institute hadrequested an appropriation of $13.55 million forFY2003, the President had proposed nothing for SJI in his FY2003 budget, in accord with congressional language,in a FY2002 conference committee report,stating an intent that federal funding for the Institute not go beyond FY2002. (Under the terms of its enablinglegislation, SJI is authorized to present its requestdirectly to Congress, apart from the President's budget.) In the previous annual appropriations cycle, Congress scaled back the Institute's funding significantly, approving $3.0 million for FY2002, instead of $6.835million and $6.2 million approved earlier by the House and Senate respectively. The action to reduce SJI fundingoccurred at the FY2002 conference committeestage. In their report, the FY2002 conferees stated that the $3.0 million appropriated for the SJI was "available forfiscal year 2002 only" and that the confereesdid not recommend continued federal support for the Institute beyond FY2002. "The termination of funding for thisprogram," the report explained, "does notnecessarily mean the dissolution of the Institute." The conferees encouraged the Institute to solicit private donationsand resources from State and localagencies. (30) Conferees for the FY2003 omnibus funding bill, however, noted (in H.Rept. 108-10 , p. 703) that "SJI has not been successful in its efforts to obtain non-Federalfunds" and had therefore included $3 million "to keep SJI operating." At the same time, the conferees encouragedSJI to continue to solicit donations from State,local, and national bar associations. Office of the U.S. Trade Representative (USTR). USTR is the chief trade negotiator for the United States andis located in the Executive Office of the President (EOP). It is responsible for developing and coordinating U.S.international trade and direct investment policies. The President's FY2003 request was $32.3 million, $2.2 million above the amount ($30.1 million) approved byCongress in FY2002. The Senate bill provides $33million to USTR and the Conference appropriated $35 million, a $4.9 million increase over FY2002. U.S. International Trade Commission (ITC). ITC is an independent, quasi-judicial agency that advises thePresident and Congress on the impact of U.S. foreign economic policies on U.S. industries and is charged withimplementing various U.S. trade remedy laws. Itssix commissioners are appointed by the President for 9-year terms. As a matter of policy, its budget request issubmitted to Congress by the President withoutrevision. For FY2003, ITC requested $54 million (excluding full funding of Federal retiree costs), an approximately$2.6 million increase over the FY2002request ($51.4 million). The Senate appropriated $54.6 million, but the Conference scaled the request back to $54million, a $2.6 million increase over 2002. Theincrease will be used to fund a mandatory 4.6% pay increase, to fund several information technology projects toincrease public access to information, to improveelectronic transaction capability, and to develop more accurate trade information for affected constituents. U.S. Commission on International Religious Freedom. The Commission, established in P.L. 105-292 , is anindependent agency charged with the annual and ongoing review and reporting of the facts and circumstances ofviolations of religious freedom. No additionalfunds were appropriated for FY2000 or FY2001. Congress passed the requested amount of $3 million for FY2002. No additional funds were appropriated forFY2000 or FY2001. Congress passed the requested amount of $3 million for FY2002. For FY2003, however,although the Administration requested, and theHouse and the Senate recommended, $3 million, the final enacted level was $2.9 million. Title V. Other Related Agencies (millions of dollars) a For FY2002, Congress enacted $245.1 million in overall funding resources, consisting of a direct appropriation of $26.3 million and $218.8 million in offsettingcollections. For FY2003, the President requested $268.3 million in overall funding resources, consisting of a directappropriation of $20.1 million and $248.2million in offsetting fee collections. The Senate omnibus bill set the overall funding level at $275.4 million andoffsetting fee collections at the same level, thusrequiring no direct appropriation. The House bill set overall funding at $256.4 million with offsetting fee collectionsat $248.2 million, requiring a directappropriation of $8.2 million. The enacted FY2003 omnibus funding bill provided $271 million in overall fundingresources, consisting of a direct appropriationof $2 million and $269 million in offsetting fee collections. b The FTC is fully funded by the collection of pre-merger filing fees. c The SEC is fully funded by transaction fees and securities registration fees. d Under the terms of its enabling legislation, the State Justice Institute is authorized to present its budget request directly to Congress. For FY2003, the Instituterequested $13.6 million -- as distinguished from the President, who has requested no funding for SJI. e Other includes agencies receiving appropriations of less than $2.0 million in FY2003. These agencies include Commission for the Preservation of AmericanHeritage Abroad; Commission on Security and Cooperation in Europe; Commission on Electronic Commerce; theMarine Mammal Commission, the Commissionon Ocean Policy, and the Congressional/Executive Commission on China, the National Veterans BusinessDevelopment Corp, the Pacific Charter Commission,and the U.S. Canada Alaska Rail Commission. H.R. 2048 (Coble) Requires the Attorney General to submit by October 2, 2002 to House and Senate Judiciary Committees a report regarding the effectiveness of the State JusticeInstitute. Introduced June 5, 2001; referred to the House Judiciary Committee. Reported by Judiciary Committee,August 2, 2001. Agreed to by voice vote ofHouse, under suspension of the rules, Sept. 5, 2001. Received in the Senate, Sept. 6, 2001; referred to the JudiciaryCommittee. Reported by the JudiciaryCommittee, without amendment, September 13, 2001. Passed Senate without amendment by unanimous consent,May 7, 2002. Presented to President, May 8,2002. P.L. 107-179 , May 20, 2002. H.R. 518 (Regula et al.) Amends the Trade Act of 1974 to revise the injury threshold the International Trade Commission must considerto determine the risk of increased imports to adomestic industry producing like or directly competitive articles in escape clause (Sec.201) actions. IntroducedFebruary 7, 2001; referred to House Ways andMeans Committee. H.R. 1988 (English et al.); S. 979 (Durbin et al.) Amends the Trade Act of 1974 to revise the injury threshold the International Trade Commission must considerto determine the risk of increased imports to adomestic industry producing like or directly competitive articles in escape clause (Sec.201) actions. Amends theTariff Act of 1930 to revise various factors thatthe Commission must consider in making material injury determinations in countervailing duty and antidumpingduty proceedings. H.R. 1988 introduced May 24, 2001; referred to House Ways and Means Committee. S. 979 introduced May 26, 2001;referred to Senate Finance Committee. S. 422 (Wellstone); H.R. 837 (Oberstar et al.) Directs the International Trade Commission to consider U.S. produced taconite pellets to be like or directlycompetitive with semifinished steel slab for purposesof: (1) Section 201 injury determinations, and (2) antidumping or countervailing duty determinations. S. 422 introduced March 1, 2001; referred toSenate Finance Committee. H.R. 837 introduced March 7, 2001; referred to House Ways and MeansCommittee. S. 187 (Snowe et al.); H.R. 1782 (Manzullo et al.) Small Business Export Enhancement Act of 2001 - Amends the Trade Act of 1974 to establish in the Office ofthe United States Trade Representative (USTR) theposition of Assistant USTR for Small Business to promote the trade interests of small businesses, remove foreigntrade barriers that impede small businessexporters, and enforce existing trade agreements beneficial to small businesses. S. 187 introduced January25, 2001; referred to the Senate Budgetand Senate Governmental Affairs Committee. H.R. 1782 introduced May 9, 2001; referred to HouseCommittee on Ways and Means. S. 714 (Snowe et al.) Expresses the sense of Congress that the U.S. Trade Representative should pursue the establishment of a smallbusiness advocate at the World Trade Organization(WTO) to safeguard the interests of small firms and represent those interests in trade negotiations involving theWTO. Introduced April 5, 2001; referred to theSenate Finance Committee. S. 19 (Daschle et al.) Protecting Civil Rights for All Americans Act. Would authorize $400 million for the Legal ServicesCorporation for FY2002. Introduced January 22, 2001;referred to S. Judiciary Committee. Title I. Department of Justice Title II. Department of Commerce and Related Agencies Title III. Judiciary Title IV. Department of State and International Broadcasting Title V. Other Related Agencies Title VI. General Provisions Title VII. Rescissions Title IX. Total Appropriation Funding, Titles I-IX, FY2001-FY2003 Request Source: U.S. House of Representatives. Committee on Appropriation. Note: Figures do not include the 0.65% across-the-board rescission included in the enacted FY2003 legislation. H.R. 247 was introduced only andreceived no other congressional action. Details may not add to totals due to rounding. Figures are for direct appropriations only; in some cases, agenciessupplement these amount with offsetting fee collections, including collections carried over from previous years. These agencies include: Immigration andNaturalization Service, Patent and Trademark Office, Small Business Administration, Federal CommunicationsCommission, Federal Trade Commission, and theSecurities and Exchange Commission. Information on such fees are contained in the background and issues sectionsof this report. Data for FY2002 includeEmergency Response Funds from the supplemental appropriation ( P.L. 107-117 ). a The Patent and Trademark Office (PTO) is fully funded by user fees. The fees collected, but not obligated during the current year, are available for obligation inthe following fiscal year. The prior-year carryover funds count against the FY2003 total appropriationfor the Dept. of Commerce. For example, in the enactedFY2002 amount, $282.3 million in prior-year carry over funds (plus $1.5 in emergency supplemental funds) countedtoward the Commerce Department total, butcurrent year fee funding does not. b As of October 1, 1999 both USIA and ACDA were consolidated into the Department of State. International Broadcasting remains an independent agency. c In addition to appropriations, State has authority to spend certain collected fees from machine readable visas, expedited export fees, etc. The amount for suchfees for FY2002 is $516.9 million; for FY2003 the estimate is $739.6 million. d For FY2001, Congress approved $229.5 million in overall funding resources for the FCC, consisting of a direct appropriation of $29.3 million and $200.1million in offsetting regulatory fee collections. For FY2002, Congress enacted $245.1 million in overall fundingresources, consisting of a direct appropriation of$26.3 million and $218.8 million in offsetting collections. For FY2003, the President requested $268.3 million inoverall funding resources, consisting of a directappropriation of $20.1 million and $248.2 million in offsetting fee collections. The Senate omnibus bill set theoverall funding level at $275.4 million andoffsetting fee collections at the same level, thus requiring no direct appropriation. The House bill set overall fundingat $256.4 million with offsetting feecollections at $248.2 million, requiring a direct appropriation of $8.2 million. The enacted FY2003 omnibusfunding bill provided $271 million in overall fundingresources, consisting of a direct appropriation of $2 million and $269 million in offsetting fee collections. e The FTC is fully funded by the collection of pre-merger filing fees. f The SEC is fully funded by transaction fees and securities registration fees. g Under the terms of its enabling legislation, the State Justice Institute is authorized to present its budget request directly to Congress. For FY2003, the Instituterequested $13.6 million -- as distinguished from the President, who has requested no funding for SJI. h Other includes agencies receiving appropriations of less than $2.0 million in FY2002. These agencies include Commission for the Preservation of AmericanHeritage Abroad; Commission on Security and Cooperation in Europe; Commission on Electronic Commerce; theMarine Mammal Commission, the Commissionon Ocean Policy, and the Congressional/Executive Commission on China, the National Veterans BusinessDevelopment Corp, the Pacific Charter Commission,and the U.S. Canada Alaska Rail Commission. i The grand total does not include an across-the-board cuts or rescissions that have yet to be determined. | The Commerce, Justice, and State, the Judiciary, and other related agencies (often referred to as CJS) appropriations for FY2003 were completed by Congress andsigned ( P.L. 108-7 ) by the President on February 20, 2003, five months into the budget year. The enacted CJSappropriation provides $44,773.7 million in newbudget authority (before applying an across-the-board rescission of 0.65%). President Bush sent the FY2003 budget request to Congress on February 4, 2002 seeking a total budget authority level for CJS appropriations of $44,019.0 million-- a mandatory level of $649.3 million and a discretionary level of $43,369.7 million. The major components ofthe Administration's FY2003 CJS requestincluded: Department of Justice -- $22,800.3 million; Department of Commerce -- $5,638.5 million; the Judiciary-- $5,241.6 million; and Department of State-- $8,139.2 million. The 107th Congress Senate Appropriations Committee reported out its CJSappropriations bill ( S. 2778 ; S.Rept. 107-218 ) July24, 2002. No House CJS bill was introduced by the 107th Congress. Congress passed a series ofcontinuing resolutions keeping the government running throughFebruary 20, 2003. In the 108th Congress, the Senate passed an omnibus budget bill ( H.J.Res. 2 ) on January 23, 2003. It set CJS totals at $44,939.6 million. Congressman Frank Wolf, Chairman of the House Appropriations Subcommittee on Commerce, Justice, State,introduced a CJS bill ( H.R. 247 ) onJanuary 8, 2003, to provide a House version of funding for the conference. No other action occurred on that bill. Its CJS totals were $44,352.9 million. Following are some key CJS issues for the FY2003 budget: Department of Justice. The FY2003 request was $22.8 billion, nearly $1 million below the FY2002 enacted level. The total enacted level, before anacross-the-board rescission, is $23,988.3 million. Department of Commerce. The FY2003 request was $5,638.5 million, almost 3% below the FY2002 funding level. The decline was largely due to reducedfunding for science and technology. The enacted level, before rescissions, is $5,774.8 million. The Judiciary . The FY2003 request emphasized court security, an increase in hourly pay to court-appointed attorneys representing indigent defendants in federalcriminal cases, and cost-of-living salary increases for judges and justices. Department of State and broadcasting . The FY2003 request was more than $8,139.2 million, similar to the FY2002 enacted level, including supplementals. TheDepartment stressed its three top priorities from the previous year: additional hiring; embassy security; andtechnology improvements worldwide. The enactedFY2003 level is $7,900.7 million, before applying the rescissions. |
"Pay-as-you-go" (PAYGO) procedures play an important role in enforcing budget policies with respect to the consideration of revenue and direct spending legislation. Generally, the purpose of PAYGO procedures is to discourage or prevent the enactment of legislation that would cause, or increase, a deficit or reduce a surplus. PAYGO procedures are not a comprehensive means of budget enforcement because they do not apply to discretionary spending, which is provided in annual appropriations acts; such spending is subject to other budget enforcement procedures. Further, PAYGO rules deal only with the budgetary impact of legislation considered by Congress; they do not address changes in direct spending and revenue levels under current law stemming from changes in the economy, demographic trends, and other factors. Over the years, several different PAYGO procedures have been used for budget enforcement purposes. The PAYGO procedures have been based in statute as well as congressional rules. Statutory and rules-based PAYGO procedures have been in effect simultaneously at times, while at other times only one form of PAYGO procedures was in effect. This report examines the statutory PAYGO process that was in effect from 1991 through 2002, beginning with a discussion of the complex and evolving budget enforcement framework of which it was an important part. The report continues with an explanation of the origin, extension, and termination of the PAYGO process, a review of its regular operation and statutory interventions in that operation involving directed scorekeeping, and an identification of major direct spending and revenue legislation subject to the PAYGO process. It concludes with a brief discussion of proposals to restore the PAYGO process. The modern congressional budget process commenced with the Congressional Budget and Impoundment Control Act of 1974. With respect to budget enforcement procedures, significant revisions and augmentations occurred under the Balanced Budget and Emergency Deficit Control Act of 1985, the Budget Enforcement Act of 1990, and other laws. In addition, the House and Senate established their own PAYGO rules. These laws and rules are summarized briefly below. The Congressional Budget and Impoundment Control of 1974 established the congressional budget process that is in use today. Under current practices, the process centers around the annual adoption of a multiyear budget plan in the form of a concurrent resolution. The budget resolution, as a concurrent resolution (rather than a bill or joint resolution), is not sent to the President for his approval or veto and serves as an internal "blueprint" for congressional action on budgetary legislation. The act established House and Senate Budget Committees, which exercise jurisdiction over budget resolutions, and an independent, nonpartisan agency, the Congressional Budget Office (CBO), which provides Congress with budgetary information and analysis. The policies of the budget resolution, which pertain to the aggregate levels of revenue, spending, the deficit or surplus, and the public debt, as well as functional allocations of spending, are enforced during the subsequent consideration of revenue, spending, and debt-limit legislation by various means, including points of order, the optional budget reconciliation process, scorekeeping procedures, and CBO (and Joint Tax Committee) estimates of the budgetary effects of individual measures. By 1985, the emergence of large deficits in the preceding few years, and the forecast of even larger deficits in the future, motivated Congress in part to augment the congressional budget process with strengthened budget enforcement procedures. The actual budget deficits for FY1983 and FY1984 were $208 billion and $185 billion, respectively, and President Ronald Reagan's budget for FY1986 estimated the current services deficit at $230 billion for FY1986 and at comparable levels through FY1990. There was widespread concern that procedures under the 1974 act were not sufficient to cope with persistent deficits of such size. The Balanced Budget and Emergency Deficit Control Act of 1985 provided strengthened procedures in the form of declining annual deficit targets, set in statute, that were expected to lead from a deficit of $171.9 billion for FY1986 to a balanced budget by FY1991. The deficit targets were enforced by a process known as sequestration, which involved largely across-the-board spending cuts in nonexempt programs that would be triggered automatically toward the beginning of the fiscal year if the Comptroller General determined that the applicable deficit target was not expected to be met. A sequester was viewed as such a draconian approach, and the consequences of it so unacceptable, that the threat of one would force Congress and the President to reach agreement on needed budgetary legislation under regular legislative procedures. The 1985 Balanced Budget Act was modified two years later by the Balanced Budget and Emergency Deficit Control Reaffirmation Act of 1987, signed into law by President Reagan on September 29, 1987. The two major modifications were: (1) in order to overcome constitutional objections, placing the authority to trigger a sequester in the hands of the director of the Office of Management and Budget (OMB); and (2) revising the deficit targets and extending the goal of a balanced budget by two years, to FY1993. Unlike the congressional budget process under the 1974 act, in which enforcement procedures were internal to Congress, the sequestration process relied on actions by the executive: the OMB director determined whether a sequester would occur and the amount of the required spending cuts; the President issued any required sequestration order; and executive agencies implemented the bulk of the spending cuts (sequestration also applied to legislative and judicial agencies, which constitute a relatively small portion of the federal budget). During the period that deficit targets were in effect, three deficit sequesters occurred, for FY1986, FY1988, and FY1990. Initial outlay savings associated with the three deficit target sequesters were substantial: $11.7 billion for FY1986; $20.0 billion for FY1988; and $16.1 billion for FY1990. The across-the-board cuts made in different categories of spending ranged in size from 4.3% to 10.5%. Except for FY1986, these savings subsequently were rescinded as part of a budget agreement (FY1988) or were reduced by a later law (to $4.55 billion for FY1990). Notwithstanding the implementation of a sequester for each of these three fiscal years, the deficit targets proved to be ineffective on the whole. The actual deficit for each of these years exceeded the applicable target by an average of about $60 billion. Continuing difficulties associated with the use of deficit targets prompted Congress and the President to enact the Budget Enforcement Act (BEA) of 1990, which fundamentally revised the procedures under the 1985 Balanced Budget Act. In mid-October of 1990, the OMB director estimated that the deficit for FY1991 would amount to $147.3 billion, representing an excess of $83.3 billion over the revised deficit target for that year of $64 billion. The required deficit target sequester for FY1991, had it been allowed to remain in effect, would have required across-the-board cuts of 34.5% for defense programs and 31.6% for nondefense programs. Although the BEA of 1990 extended the deficit targets through FY1995, it effectively replaced them with statutory limits on discretionary spending and the PAYGO process, covering FY1991-FY1995. As discussed in more detail in the next section, the main purpose of these enforcement procedures was to preserve deficit savings reached in a budget summit agreement between President George H.W. Bush and Congress and implemented in reconciliation and other budgetary legislation. Sequestration was retained as the means of enforcing the new procedures. The procedures were revised and extended by budget reconciliation legislation enacted in 1993 and 1997, and were modified by other laws. In 1993, the Senate established its own PAYGO rule as a means of buttressing the statutory PAYGO process. The rule has been revised significantly several times during its existence and currently is in effect through September 30, 2017. The House established its own PAYGO rule in 2007, long after the statutory process had been terminated, and revised it in 2009. The PAYGO rules of the two chambers operate in a roughly similar manner, but differ significantly from the way the statutory PAYGO process operated. The statutory PAYGO process originated in the Budget Enforcement Act of 1990, was extended by the Omnibus Budget Reconciliation Act of 1993 and the Budget Enforcement Act of 1997, and effectively was terminated by P.L. 107-312 . The first three of these acts were budget reconciliation measures, while the last act was a freestanding measure devoted solely to the purpose of terminating the PAYGO process before its scheduled expiration. Each of these measures is discussed in more detail below. The Omnibus Budget Reconciliation Act (OBRA) of 1990 was signed into law, as P.L. 101-508 , by President George H.W. Bush on November 5, 1990. The act largely represented the culmination of bipartisan budget summit negotiations between congressional and administration negotiators, occurring at Andrews Air Force Base, that began in early May of 1990 and concluded on September 30, 1990. According to CBO estimates, OBRA of 1990 reduced the deficit by $482 billion over five years (FY1991-FY1995), including $158 billion in revenue increases and $324 billion in spending cuts and debt service savings. Title XIII of the act (104 Stat. 1388, 1-630), referred to as the Budget Enforcement Act (BEA) of 1990, amended the 1985 Balanced Budget Act, the 1974 Congressional Budget Act, and other laws and rules. The BEA of 1990 established special deficit-reduction procedures for FY1991-FY1995 and made other permanent changes in the budget process. The budget process changes made by the BEA of 1990 fulfilled commitments that had been made during the lengthy negotiations to promote fiscal responsibility. On June 26, 1990, for example, the President issued a statement that he and congressional negotiators were in accord that any bipartisan budget agreement should include budget process reform "to assure that any Bipartisan agreement is enforceable and that the deficit problem is brought under responsible control." On September 11, 1990, in an address to a joint session of Congress, the President reiterated his position that any budget agreement "must reform the budget process." Initial House consideration of the reconciliation bill, H.R. 5835 , occurred under the terms of a special rule ( H.Res. 509 , 101 st Congress), reported by the House Rules Committee, that provided for the automatic adoption of a budget process title under a "self-executing" feature of the rule. The special rule was adopted by the House on October 16, 1990, and the bill, as amended, was approved later that day, by a vote of 227-203. During Senate consideration of a companion measure, S. 3209 , on October 18, Senate Majority Leader George Mitchell offered a leadership amendment (numbered 3046) to the bill adding a budget process title. A point of order was raised that the leadership amendment was nongermane; after a waiver motion was approved by a vote of 77-22, the amendment was agreed to by a voice vote. Following the adoption of further amendments, the Senate passed its version of the reconciliation legislation on October 18, by a vote of 54-46. House and Senate conferees filed a conference report on H.R. 5835 on October 26 (H.Rept. 101-964). Both chambers agreed to the conference report the next day; the House approved it by a vote of 228-200, and the Senate approved it by a vote of 54-45. The BEA of 1990 established a PAYGO process, covering FY1991-FY1995, to impose a deficit neutrality requirement on direct spending and revenue legislation. The process was set forth in Section 252 of an underlying law, the 1985 Balanced Budget Act. Under the process, legislation proposing new direct spending or decreasing revenues for a fiscal year could not result in a net cost for that year. The PAYGO process generally was intended to preserve the deficit reduction achieved in OBRA of 1990 by keeping an on-budget deficit from being increased or an on-budget surplus from being reduced. The statutory PAYGO process, as well as the discretionary spending limits, were extended later in the 1990s by provisions in budget reconciliation acts that resulted from budget agreements between the President and Congress. In 1993, the enforcement procedures were modified by the Omnibus Budget Reconciliation Act (OBRA) of 1993, signed into law by President Bill Clinton on August 10, 1993, as P.L. 103-66 . Title XIV (107 Stat. 683-685) of the act extended the procedures for three more fiscal years, through FY1998, and made some relatively minor adjustments in them. The extension of the procedures was intended to help preserve the $433 billion in deficit reduction over FY1994-FY1998 that CBO estimated would be achieved by OBRA of 1993 and other acts. (The title also included an adjustment to the PAYGO scorecard under a directed scorekeeping provision, as discussed in a later section.) In 1997, the enforcement procedures were modified by the Balanced Budget Act of 1997, signed into law by President Bill Clinton on August 5, 1997, as P.L. 105-33 . The act was one of two budget reconciliation measures considered that year, the other being the Taxpayer Relief Act of 1997 ( P.L. 105-34 ), which also was signed into law on August 5. Together, the two reconciliation acts implemented most of the deficit reduction, estimated by CBO to amount to $118 billion over FY1998-FY2002, and tax relief policies underlying the bipartisan budget agreement between President Clinton and congressional leaders reached on May 2, 1997. Title X (111 Stat. 677-712) of the Balanced Budget Act of 1997, referred to as the Budget Enforcement Act (BEA) of 1997, generally extended the enforcement procedures through the end of FY2002 and made various adjustments in them. In the case of the PAYGO process, the BEA of 1997 extended it to legislation enacted through the end of FY2002 (i.e., September 30, 2002), but it covered the effects of such legislation through FY2006. The PAYGO requirement effectively was terminated toward the end of 2002 by the enactment of P.L. 107-312 in December of that year. Shortly after the second session of the 107 th Congress began on January 23, 2002, OMB indicated that the balance on the PAYGO scorecard for FY2003 exceeded $110 billion and that the balances for the remaining years on the scorecard, FY2004-FY2006, were over $130 billion for each year. Although the House and Senate did not reach agreement in 2002 on a budget resolution for FY2003, it was clear that neither house intended to pursue policies that would eliminate the FY2003 balance on the PAYGO scorecard through revenue increases or direct spending reductions. Rather, it was expected that Congress and the President would agree to use procedural means for preventing a PAYGO sequester from occurring, as had been done in other years. As the session unfolded, Congress and the President enacted legislation that added several billion dollars more in net costs to the PAYGO scorecard. According to OMB estimates, only $31 billion could be cut under a PAYGO sequester because most direct spending was exempt from sequestration; consequently, a violation of more than $90 billion would have remained even if a full PAYGO sequester had occurred. In order to prevent a PAYGO sequester for FY2003 from occurring after the end of the session, the House and Senate passed H.R. 5708 , which President George W. Bush signed into law on December 2, 2002, as P.L. 107-312 (116 Stat. 2456). In addition to eliminating the imminent threat of a sequester by reducing the PAYGO balance for FY2003 (and FY2002) to zero, it also eliminated the sequester threat for FY2004-FY2006 by setting those balances at zero as well. This section identifies and describes the main elements of the statutory PAYGO process as it was intended to operate. Further, it analyzes the operation of the process by focusing on the final PAYGO determinations made each year by the OMB director and the use of emergency designations. Statutory interventions in the process involving directed scorekeeping, and the major direct spending and revenue legislation enacted under PAYGO procedures, are discussed in later sections. The PAYGO process unfolded during the course of a congressional session, with several actions scheduled to occur under a fixed timetable. The timetable was designed to give Congress and the President ample notice regarding the implications of its actions on budgetary legislation with respect to the possibility of a sequester occurring at the end of the session, after the beginning of the fiscal year to which it applied. As indicated earlier, the sequestration process was modified by several laws over the years and these modifications revised the timetable; the timetable in its most recent form is used in this report. Actions under the PAYGO process were synchronized with actions pertaining to the discretionary spending limits (and, for the remainder of their existence, the deficit targets). As a general rule, the enforcement procedures for the PAYGO process, on the one hand, and the discretionary spending limits, on the other, were separated by a "firewall." Violations of the PAYGO requirement were corrected by reductions solely in direct spending programs, while violations of the discretionary spending limits were remedied by reductions only in discretionary spending programs. Further, savings made on one side of the firewall could not be used to the advantage of programs on the other side. For example, the cost of tax-cut legislation could not be offset by reductions in discretionary spending in annual appropriations acts in order to avoid a PAYGO sequester. As mentioned previously, the PAYGO process was set forth in Section 252 of the 1985 Balanced Budget Act. Procedures dealing with the enforcement of the discretionary spending limits were set forth in Section 251 of the act, and procedures for the enforcement of the deficit targets were contained in Section 253. Aside from these core elements, the act also contained sections providing definitions (Section 250), dealing with the timetable for, and contents of, sequestration reports and orders (Section 254), exempt programs and activities (Section 255), general sequestration rules and special rules for selected programs (Section 256), construction of the budget baseline (Section 257), as well as other sections. With regard to direct spending, the PAYGO requirement applied to outlay levels rather than levels of budget authority. Outlays, rather than budget authority, are compared to revenue levels to determine the amount of the surplus or deficit. During the course of the session, OMB was required to provide Congress with a cost estimate for each budgetary measure within seven days of its enactment, so that compliance with the PAYGO requirement and discretionary spending limits could be monitored. The cost estimates had to be based on the economic and technical assumptions used in the President's most recent budget, and had to include similar cost estimates prepared by CBO together with an explanation of any differences between the two sets of estimates. The PAYGO balances for each fiscal year were recorded on a rolling PAYGO "scorecard," maintained by the OMB director, that accumulated the budgetary effects of laws enacted during the session and in prior years. The threshold test for a PAYGO sequester dealt with how legislation affected the net cost for a fiscal year on the PAYGO scorecard, not how it changed the surplus or deficit for that fiscal year in the federal budget. Under the timetable for the sequestration process, the OMB director issued a sequestration report at the time the President's budget was submitted to Congress (the preview report), midway through the congressional session (the update report), and within 15 days after the end of the session (the final report). In preparing its update and final sequestration reports, OMB had to use the economic and technical assumptions that were used in the earlier preview report. The CBO director issued sequestration reports in advance of the OMB reports, but they were advisory only. (CBO sequestration reports are not addressed in this report.) If the OMB director's final sequestration report indicated that enacted direct spending and revenue levels had incurred a net cost for the fiscal year on the PAYGO scorecard, then the President was required to immediately issue a sequestration order to remedy the violation through automatic, across-the-board spending reductions. If a sequester under this process was required, it had to occur within 15 calendar days after Congress adjourned at the end of a session and on the same day as any sequestration tied to enforcement of the discretionary spending limits. The sequester had to eliminate any net positive balance on the PAYGO scorecard, for that fiscal year and the prior fiscal year combined, caused by the enactment of legislation during the session and in prior years. (In order to close any enforcement loophole, the budgetary impact of direct spending and revenue legislation enacted during a session, but after the OMB director's final sequestration report had been issued, was recorded on the PAYGO scorecard in the following session. Hence, this balance was combined with the balance for the budget year to determine if a violation had occurred.) Any required reductions would have been made in non-exempt direct spending programs. Emergency direct spending and revenue legislation, so designated by the President and in statute, was not subject to the PAYGO sequestration process. Spending for the Social Security program, except for administrative expenses, was exempt from sequestration, as were many other direct spending programs. Any reductions in Medicare spending were limited to 4% and other special sequestration rules applied to selected programs. Section 258 of the 1985 Balanced Budget Act provided for the suspension of selected budget enforcement procedures because of low economic growth or war. With regard to low economic growth (i.e., at least two consecutive quarters of GDP growth below 1% or negative growth), the suspension procedure would have been triggered automatically by the issuance of a "low-growth report" by CBO. Under the suspension procedure, certain budget enforcement procedures would have been suspended if Congress and the President subsequently enacted a "suspension resolution." Action on a suspension resolution was required in the Senate but was optional in the House. During the years that these suspension provisions were available, the United States was in a period of sustained low economic growth only twice—in late 1990 through early 1991 and in late 2001 through early 2002. CBO issued low-growth reports three times in 1991, but in each instance a measure to suspend enforcement procedures was defeated in the Senate by a wide margin. More recently, CBO issued low-growth reports on October 31, 2001, and on January 30, 2002. In each instance, the Senate Budget Committee reported unfavorably a suspension resolution that subsequently was defeated on the floor. No suspension resolutions were enacted, although the Senate considered (and rejected) a total of five such measures in the 102 nd and 107 th Congresses. The House did not consider any suspension resolutions under this procedure. The suspension procedure expired on September 30, 2006. The suspension of enforcement procedures due to war was not triggered, despite the involvement of the United States in military operations in Iraq and Afghanistan, because a declaration of war was not enacted. In the late 1990s, as the budget moved from an overall deficit to an overall surplus, and as the prospect of an on-budget surplus emerged, there was some confusion regarding whether the PAYGO requirement would continue to apply. The concern arose from the fact that the stated purpose of the PAYGO requirement (in Section 252(a) of the 1985 Balanced Budget Act) referred only to legislation "that increases the deficit." In the report accompanying the FY2000 budget resolution, the House Budget Committee stated: The law is somewhat unclear whether PAYGO lapses when there is an on-budget surplus. OMB has hinted that PAYGO would indeed lapse if the budget was in balance without counting excess Social Security receipts. In response to this concern, OMB Director Jacob Lew issued a statement indicating that such a position was not correct, stating "we believe that PAYGO does apply when there is an on-budget surplus." The controlling factor, as stated previously, was how legislation changed the balance on the PAYGO scorecard. Under Section 252 of the 1985 Balanced Budget Act, as amended, the OMB director was required to issue a final sequestration report each year after the end of the congressional session indicating whether a PAYGO sequester was required. Although Section 252 required the issuance of such reports for each year over the 15-year period covering FY1992-FY2006, the OMB director only issued 12 reports. As mentioned previously, P.L. 107-312 effectively terminated the PAYGO requirement in late 2002; the final sequestration report for FY2003, issued by the OMB director on December 6, 2002, was the last report in the series. In order to determine whether a PAYGO sequester for a fiscal year was required, the OMB director had to combine the balance for that fiscal year (known as the "budget year") with the balance for the preceding fiscal year (known as the "current year"). The purpose behind adding in the balance for the current year was to fully capture the budgetary effects of any direct spending and revenue legislation enacted into law after the final sequestration report for a fiscal year had been issued but before the next congressional session got underway, thereby closing any enforcement loophole. Positive balances on the PAYGO scorecard were reflected to the extent that direct spending increases and revenue reductions in the net were greater than direct spending reductions and revenue increases in the net. A combined balance for the current year and the fiscal year that was zero or a negative amount indicated that no sequester was necessary. Table 1 shows the PAYGO determinations made by the OMB director in his final sequestration reports for FY1992-FY2003. As the table shows, the final combined balances on the PAYGO scorecard for all years either were negative amounts or zero. Accordingly, no PAYGO sequester was required for any fiscal year during this period. For the first nine fiscal years, FY1992-FY2000, the final combined balances were all negative amounts, ranging from -$0.011 billion (for FY1998) to -$7.532 billion (for FY1997). The average combined balance for these nine years was -$2.130 billion. In eight of the nine years, the balance for the budget year was a negative amount; for the other fiscal year (FY1996), a positive balance of $0.717 billion for the budget year was more than offset by a negative balance of -$1.822 for the current fiscal year. For the remaining six fiscal years, FY2001-FY2006, the final combined balances on the PAYGO scorecard all were zero. While the OMB director's final determinations indicated compliance with the PAYGO requirement in all years, in some cases the balances reflected adjustments due to emergency requirements or directed scorekeeping provisions in law that prevented a sequester from occurring, as discussed in subsequent sections of this report. Table 2 shows the 5-year total balances on the PAYGO scorecard (including the current year, the budget year, and the three succeeding outyears) as scored by the OMB director in each of his final sequestration reports. While the outyear balances were not used in a sequestration report to determine whether a PAYGO sequester was required for that year, they had to be taken into account in sequestration reports for succeeding years. In six of the first eight fiscal years (FY1992-FY1999), according to Table 2 , the 5-year total balances remained negative. They ranged in total from -$3.003 billion (for FY1995) to -$25.852 billion (for FY1997). In the other two years, the 5-year total balances changed to a modest positive amount, ranging in total from $0.004 billion (for FY1998) to $1.188 billion (for FY1996). In the next three fiscal years, FY2000-FY2002, the pattern changed significantly. A negative combined balance for FY2000 of -$3.014 billion changed to a positive 5-year total balance of $10.187 billion. The combined balances of zero for each of FY2001 and FY2002 changed to positive 5-year total balances of $53.854 billion and $371.122 billion, respectively. As indicated previously, the final PAYGO balances for FY2003-FY2006, as set forth in the OMB final sequestration report for FY2003, were reduced to zero in compliance with P.L. 107-312 . The multi-year balances on the PAYGO scorecard, as scored by the OMB director on a year-by-year basis in each of his final sequestration reports, are presented in Table 3 . In some years, as Table 3 shows, the OMB director provided balances for more than five fiscal years; in the sequestration report for FY1996, balances were provided only for four fiscal years (FY1995-FY1998). Section 252 of the 1985 Balanced Budget Act provided that any provision of direct spending or revenue legislation could be designated by the President and Congress as an "emergency requirement." While the President could make his designation in various ways, a designation by Congress had to be made in the statute. The budgetary impact of any provision so designated was not scored on the PAYGO scorecard. An emergency exemption also was authorized for discretionary spending provisions under the parallel enforcement mechanism, the discretionary spending limits. Although the emergency designation was used often for discretionary spending provisions in annual appropriations acts, it rarely was used for direct spending or revenue provisions. The most significant emergency designation under the PAYGO process applied to the Job Creation and Worker Assistance Act ( P.L. 107-147 ), which was signed into law on March 9, 2002. Section 502 (116 Stat. 58) of the act stated: Congress designates as emergency requirements pursuant to section 252(e) of the Balanced Budget and Emergency Deficit Control Act of 1985 the following amounts: (1) An amount equal to the amount by which revenues are reduced by this Act below the recommended levels of Federal revenues for fiscal year 2002, the total of fiscal years 2002 through 2006, and the total of fiscal years 2002 through 2011, provided in the conference report accompanying H. Con. Res. 83, the concurrent resolution on the budget for fiscal year 2002. (2) Amounts equal to the amounts of new budget authority and outlays provided in this Act in excess of the allocations under section 302(a) of the Congressional Budget Act of 1974 to the Committee on Finance of the Senate for fiscal year 2002, the total of fiscal years 2002 through 2006, and the total of fiscal years 2002 through 2011. According to the OMB director's final sequestration report for FY2003, the effect of the emergency designation for P.L. 107-147 was to remove net costs of $88.723 billion from the PAYGO scorecard over the period covering FY2002-FY2006, as follows: FY2002, costs of $46.538 billion; FY2003, costs of $36.878 billion; FY2004, costs of $29.022 billion; FY2005, savings of $3.001 billion; and FY2006, savings of $20.714 billion. Another significant emergency designation occurred with respect to the Air Transportation Safety and System Stabilization Act ( P.L. 107-42 ), which was signed into law on September 22, 2001. Section 101(b) (115 Stat. 230) of the act designated direct spending provisions in Title I as an emergency requirement. According to OMB, these provisions amounted to $8.000 billion over three years ($2.328 billion for FY2001, $4.172 billion for FY2002, and $1.500 billion for FY2003). The act also included direct spending and revenue provisions, not designated an emergency requirement, that were expected to yield costs of $6.130 billion over FY2001-FY2004 and no costs for FY2005-FY2006. According to CBO, provisions in two other measures, Section 6 (107 Stat. 34-35) of the Emergency Unemployment Compensation Amendments of 1993 ( P.L. 103-6 ) and Section 3309(c) (112 Stat. 745) of the Internal Revenue Service Restructuring and Reform Act of 1996 ( P.L. 105-206 ) contained costs designated as emergency requirements (for extended unemployment benefits and a waiver of interest penalties on underpayments of income taxes filed by taxpayers in a presidentially-declared disaster area). CBO estimated the impact on the 1993 and 1996 acts, respectively, at $5.7 billion for FY1993-FY1994 and $0.130 billion for FY1998-FY2003. No information on the budgetary impact of the emergency requirements was provided by the OMB director in his sequestration reports. In addition to availing itself of the authority under the 1985 Balanced Budget Act to designate direct spending and revenue changes in legislation as emergency requirements, Congress and the President also modified the operation of the PAYGO process through interventions using regular legislative procedures. In these instances, Congress and the President included "directed scorekeeping" provisions in legislation instructing the OMB director on how to treat the budgetary effects of legislation with regard to the PAYGO scorecard. Congress and the President enacted legislation intervening in the operation of the PAYGO process largely to deal with two different types of problems. First, in some years, the enactment of deficit-reduction measures would have resulted in large negative balances on the PAYGO scorecard that were not intended. The savings reflected in these balances could have been used to offset direct spending increases or revenue reductions that were not contemplated by the budget resolution. Second, in more recent years, the budget resolution recommended significant reductions in revenues, coupled with increases in direct spending, that would have incurred substantial positive balances (reflecting net costs) on the PAYGO scorecard. The barrier between the PAYGO process and procedures to enforce the discretionary spending limits did not permit savings from constraints on the growth of discretionary spending to offset or "pay for" revenue reductions. Consequently, the enactment of legislation imposing tax cuts and direct spending increases threatened to trigger a PAYGO sequester in some years. As a result of these two concerns, Congress and the President enacted provisions in at least seven different laws intervening significantly in the normal operation of the PAYGO requirement. The interventions involved scorekeeping directions to the OMB director that prohibited him from counting direct spending or revenue changes in certain legislation on the PAYGO scorecard, or that instructed him to reduce balances on the PAYGO scorecard or to set them to zero. Additionally, the OMB director sometimes was directed in statute to reclassify direct spending or revenue provisions in annual appropriations acts so that they would not be scored under the discretionary spending limits. In recent years, Congress and the President several times used omnibus appropriations measures to bring action on regular appropriations acts for a fiscal year to a close. Because the congressional leadership sometimes used such measures as a legislative vehicle for direct spending and revenue provisions, the directed scorekeeping provisions prevented the Appropriations Committees from being held responsible under budget enforcement procedures for budgetary provisions that were the responsibility of other House and Senate committees. Statutory interventions in the PAYGO process involving directed scorekeeping, and their implications for sequesters, are summarized in Table 4 . The text of the directed scorekeeping provisions is provided in Table 5 . Table 6 provides year-by-year detail on the budgetary effects of the directed scorekeeping provisions; the table divides them into two categories—those in which savings were removed from the PAYGO scorecard or not counted, and those in which costs were removed or not counted. As Table 4 and Table 6 show, in the first three instances of directed scorekeeping, the OMB director was instructed not to count savings from legislation on the scorecard, to remove savings balances from the scorecard, or to do both (so that the savings could not be used to offset legislation considered in subsequent sessions). The OMB director removed a total of $504.763 billion in savings stemming from the Omnibus Budget Reconciliation Act of 1993 from the FY1994-FY1998 balances on the scorecard; removed $6.301 billion in savings stemming from the Omnibus Consolidated Appropriations Act for FY1997 from the FY1997 balance on the scorecard; and removed $41.144 billion in prior savings from the FY1997-FY2002 balances on the scorecard and did not count $73.700 billion in savings for the same period stemming from the Balanced Budget Act of 1997 and the Taxpayer Relief Act of 1997. The fourth measure, the Consolidated Appropriations Act for FY2000, prohibited counting net costs of $15.193 billion for FY2000-FY2004 on the scorecard. (Even if the costs of $1.552 billion for FY2000 had been counted, a sequester for FY2000 would not have occurred because a combined savings balance of $1.462 billion would have remained). In addition, the act set balances for FY2000-FY2004 on the scorecard to zero (effective January 3, 2000). This action both removed savings from the scorecard ($3.072 billion for FY2000) and costs (total costs of $15.820 billion for FY1999 and FY2001-FY2004). In the remaining three cases, directed scorekeeping resulted in the removal from the PAYGO scorecard of costs that would have led to a $10.5 billion sequester for FY2001, a $130.279 billion sequester for FY2002, and sequesters in excess of $100 billion from FY2003 through FY2006. In the first two of these cases, the legislative vehicles were annual appropriations acts considered toward the very end of the session (the Consolidated Appropriations Act for FY2001 and the Defense Appropriations Act for FY2002); in the final instance, the legislative vehicle was a free-standing law devoted solely to this purpose. The seven measures containing directed scorekeeping provisions did not make adjustments in the FY1991-FY1993 balances on the PAYGO scorecard. For FY1994-FY2000, the net effect of the adjustments each year was to remove savings balances from the scorecard or to not count savings provisions in legislation. These net effects ranged from $13.991 billion (for FY1999) to $140.221 billion (for FY1998). The cumulative effect of all provisions to remove or not count savings through FY2006 was $628.980 billion. For FY2001-FY2006, the net effect of the adjustments each year was to remove cost balances from the scorecard or to not count cost provisions in legislation. These net effects ranged from $9.214 billion (for FY2002) to $150.790 billion (for FY2004). The cumulative effect of all provisions to remove or not count costs through FY2006 was $731.527 billion. In the net, the cumulative effect of all directed scorekeeping provisions through FY2006 was to remove or not count costs of $102.547 billion. Circumstances surrounding the cases in which costs were removed from the PAYGO scorecard are discussed by fiscal year in more detail below. On November 29, 1999, the Consolidated Appropriations Act for FY2000 was enacted into law as P.L. 106-113 . In addition to prohibiting the scoring of direct spending and revenue changes made in the act under the discretionary spending limits, Section 1001 (in Division B) of the act also prohibited the scoring of these changes on the PAYGO scorecard. This prevented costs of $1.552 billion for FY2000 (and costs of $15.193 billion for FY2000-FY2004) from being added to the PAYGO scorecard. However, even if the $1.552 billion for FY2000 had been added to the PAYGO scorecard, it would not have triggered a PAYGO sequester for that year because a savings balance of $1.462 billion would have remained. Section 1001 of the act also instructed the OMB director to change any balances on the scorecard to zero on January 3, 2000. This action removed from the scorecard the FY2000 savings of $3.072 billion and costs for FY1999 and FY2001-FY2004 of $15.820 billion (from the Consolidated Appropriations Act and other measures) that could have triggered PAYGO sequesters in those years if not offset or otherwise prevented. At the end of the 2000 session, Congress and the President wrapped up business by enacting the Consolidated Appropriations Act for FY2001. The measure, which became P.L. 106-554 on December 21, 2000, enacted regular appropriations as well as significant direct spending and revenue legislation by cross-reference. Section 2 of the act prohibited scoring the direct spending and revenue changes made in the act under the discretionary spending limits, but did require them to be scored on the PAYGO scorecard. This resulted in costs of $7.170 billion for FY2001 (and costs of $49.463 billion for FY2001-FY2005) being added to the PAYGO scorecard. Further, Section 2 of the act instructed the OMB director to change the balance on the scorecard for FY2001 to zero in the course of preparing the final sequestration report for that year. This action removed the net combined FY2000-FY2001 cost of $10.542 billion from the scorecard, thereby preventing a PAYGO sequester. Costs on the PAYGO scorecard for FY2002-FY2005 amounting to $74.527 billion, which would have triggered PAYGO sequesters for those years if not subsequently offset or otherwise prevented, were not affected. One of the last of the regular appropriations acts for FY2002 to be considered during the 2001 session, the Defense Appropriations Act, became the legislative vehicle for preventing a PAYGO sequester that year. The bill was signed into law on January 10, 2002, as P.L. 107-117 . Section 102 (in Division C) of the act prevented a PAYGO sequester for FY2002 by requiring the OMB director to set the balances on the PAYGO scorecard for FY2001 and FY2002 to zero. According to the OMB director's final sequestration report, the combined balance for FY2001-FY2002 on the scorecard before the required adjustment was $130.279 billion in costs. In its earlier sequestration update report, OMB had noted maximum savings achievable from a PAYGO sequester for FY2002 of $33.3 billion. Consequently, had a full PAYGO sequester (including a 4% cut in Medicare) been implemented, there still would have been a balance on the scorecard of nearly $100 billion. The remaining PAYGO balances for FY2003-FY2006, ranging from $110 billion to $135 billion a year, were not affected by the required adjustment. On January 23, 2002, shortly after the second session of the 107th Congress began, OMB indicated in the preview sequestration report for FY2003 that the balance for that fiscal year on the PAYGO scorecard was $110.694 billion. The balance for FY2002, which was to be combined with the FY2003 balance to determine whether a sequester for FY2003 would be required, previously had been reduced to zero. The balances for the remaining years on the scorecard, FY2004-FY2006, were $130 billion, $131 billion, and $135 billion, respectively. As discussed earlier, although the House and Senate did not reach agreement in 2002 on a budget resolution for FY2003, it was clear that neither house intended to pursue policies that would eliminate the FY2003 balance on the PAYGO scorecard through revenue increases and direct spending reductions. Rather, it was expected that Congress and the President would agree to use procedural means for preventing a PAYGO sequester from occurring, as had been done in recent years. During the session, Congress and the President enacted legislation that added net costs to the PAYGO scorecard for FY2002 and increased the existing net costs for FY2003. In the update sequestration report for FY2003, OMB indicated that the combined balance had increased to $125.6 billion ($2.2 billion for FY2002 and $123.4 billion for FY2003). According to OMB estimates, only $31.1 billion could be cut under a PAYGO sequester because most direct spending was exempt from sequestration; consequently, a violation of more than $90 billion would have remained even if a full PAYGO sequester had occurred. The PAYGO measure with the largest budgetary impact enacted during the 2002 session was an economic stimulus measure, the Job Creation and Worker Assistance Act ( P.L. 107-147 ), signed into law on March 9, 2002. OMB estimated the net cost of the act as $46.538 billion for FY2002, $36.878 billion for FY2003, and $88.723 billion over the five-year period covering FY2002-FY2006. (As indicated previously, Section 502 of the act designated these amounts as emergency requirements, thereby preventing them from being added to the scorecard.) The House and Senate, in order to prevent a PAYGO sequester for FY2003 from occurring after the end of the session, passed H.R. 5708 (entitled "To Reduce Preexisting PAYGO Balances, and Other Purposes"). In addition to eliminating the threat of a sequester for FY2003 by reducing the PAYGO balances for FY2002 and FY2003 to zero, it also eliminated the sequester threat for FY2004-FY2006 by setting those balances at zero as well. President George W. Bush signed the bill into law on December 2, 2002, as P.L. 107-312 . The House passed the bill on November 14 by a vote of 366-19. During House consideration of the bill, the PAYGO balance reductions for FY2004-2006 engendered some controversy. A motion to recommit with instructions that would have made reductions in the PAYGO balances for FY2004-FY2006 contingent upon the submission by the President of a balanced budget (on an on-budget basis), offered by Representative Dennis Moore, a Democratic member of the House Budget Committee, was rejected by a vote of 187-201. The Senate passed H.R. 5708 the next day without amendment by unanimous consent. In his final sequestration report for FY2003, issued on December 6, 2002, the OMB director indicated that the combined balance for legislation enacted through September 30, 2002, was $127.386 billion, reflecting a $2.320 billion balance for FY2002 and a $125.066 billion balance for FY2003. Balances over the full period, covering FY2002-FY2006, amounted to $559.693 billion. As required by P.L. 107-312 , the OMB director set the final balances for all fiscal years on the PAYGO scorecard to zero. In addition to the successful efforts to intervene in the PAYGO process discussed above, there were several unsuccessful ones involving instructions to the OMB director to reset PAYGO balances or not to score direct spending and revenue changes. The discussion below provides several examples. In the 105th Congress, the House considered the Taxpayer Relief Act of 1998 ( H.R. 4579 ), its principal vehicle for implementing large revenue reductions. As passed by the House on September 26, 1998, the measure instructed the OMB director "not to make any estimates of changes in receipts" on the PAYGO scorecard due to the enactment of the bill (see Section 607). Had the measure been enacted into law, the tax cuts would have taken effect without triggering a PAYGO sequester for FY1999. One obstacle to this approach is that any legislation directly or indirectly changing the budget process is prohibited by Section 306 of the 1974 Congressional Budget Act unless it was reported by the House or Senate Budget Committee, as appropriate (or unless the committee was discharged from further consideration). In the case of H.R. 4579 , therefore, the House needed to waive the prohibition so that it could consider the bill; the House did so by adopting a special rule, H.Res. 552 , that waived all points of order against its consideration. During the first session of the 106 th Congress, a similar directed scorekeeping provision was included by the House in Section 1801 of the Taxpayer Relief Act of 1999 ( H.R. 2488 ), but was dropped in the Senate due to difficulties in securing the 60 votes needed to obtain a waiver of Section 306. President Clinton vetoed the measure on September 23, 1999, in part because the absence of the directed scorekeeping provision would have led to a sequester. Toward the end of the 106 th Congress, the congressional leadership attempted to use a House-passed bill amending the Small Business Investment Act, H.R. 2614 , as a vehicle for wide-ranging issues, including significant revenue reductions. Under the conference agreement on H.R. 2614 , the bill would have enacted five other measures by cross-reference, including H.R. 5542 , the Taxpayer Relief Act of 2000 (as introduced on October 25, 2000). Section 731(a) of H.R. 5542 would have prevented a PAYGO sequester for FY2001 by instructing the OMB director to reset the PAYGO balance for that year to zero when preparing the final sequestration report. Final congressional action on the measure faltered at the end of October 2000. During the 12 calendar years that the PAYGO process operated, from 1991 through 2002, the OMB director issued separate cost estimates on nearly 600 direct spending and revenue measures. In addition, hundreds of other direct spending and revenue measures—each with an impact of less than $500 thousand—were identified by the OMB director, but separate cost estimates were not prepared for them. Of these hundreds of PAYGO measures, 65 may be considered to be "major" PAYGO legislation on the basis that the OMB director determined that they had an impact of $100 million or more in at least one of the first five fiscal years scored (including the current year, the budget year, and the first three outyears). Table 7 shows the net budgetary impact of the 65 major PAYGO measures on a calendar year basis for 1991-2002. For each calendar year, the balances reflect the 5-year impact of all PAYGO measures enacted during that year. These balances, unlike the final determinations presented in the preceding tables, do not reflect the impact of PAYGO legislation enacted in prior years or the removal of costs or savings from the scorecard due to directed scorekeeping provisions. Further, net costs of $96.723 billion over five years designated as emergency requirements (in the Job Creation and Worker Assistance Act and the Air Transportation Safety and System Stabilization Act) are counted in the table. Other PAYGO spending containing emergency requirements is not counted in the table because the necessary information was not provided in the OMB director's final sequestration reports. During the first eight calendar years, 1991-1998, the 5-year total balances either were negative amounts (in six instances) or positive amounts less than $5 billion (in two instances). The total balances ranged from a low of -$505.122 billion (for 1993) to a high of $4.037 billion (for 1995). In the remaining four calendar years, 1999-2002, the 5-year total balances all were positive amounts. They ranged from $29.066 billion (for 1999) to $434.720 billion (for 2001). Nearly three-quarters (48) of the 65 major PAYGO measures had a 5-year total balance of less than $5 billion, amounting to an average annual impact of less than $1 billion. The remaining 17 PAYGO measures, each with a 5-year total balance greater than $5 billion, are shown in Table 6 . (The OMB director scored two measures, the Balanced Budget Act of 1997 and the Taxpayer Relief Act of 1997, as a single entry.) As indicated in Table 8 , five measures had five-year total balances that were negative, ranging from -$5.254 billion for the Omnibus Consolidated and Emergency Supplemental Appropriations Act for FY1998 to -$504.763 billion for the Omnibus Budget Reconciliation Act of 1993. The other dozen measures all had positive 5-year total balances, ranging from $5.192 billion for the Agricultural Risk Protection Act of 2000 to $403.378 billion for the Economic Growth and Tax Relief Reconciliation Act of 2001. With regard to the 17 major PAYGO measures identified in Table 6 , the five acts with negative 5-year total balances were enacted before or during the 1998 session. On the other hand, the 12 acts with positive 5-year total balances were enacted during or after the 1999 session. Table 9 provides detailed information on the 65 major PAYGO measures. Proposals have been made from time to time to restore the statutory PAYGO requirement, but disagreements have centered principally on whether it should apply to both direct spending and revenue legislation (as originally framed) or only to direct spending legislation (as proposed mainly by some Republicans). In the 108 th Congress, President George W. Bush submitted draft legislation to Congress, the Spending Control Act of 2004, that would have restored the discretionary spending limits and the PAYGO process for direct spending legislation only. The House Budget Committee reported a bill, H.R. 3973 ( H.Rept. 108-442 ; March 19, 2004), reflecting the President's proposal; a comparable measure, H.R. 4663 , was considered in the House on June 25, 2004, but failed to pass by a vote of 146-268. In the 110 th Congress, interest was renewed in restoring a comprehensive PAYGO requirement. Section 508 (Sense of Congress Regarding Extension of the Statutory Pay-As-You-Go Rule) of the FY2008 budget resolution, S.Con.Res. 21 , stated: "It is the sense of Congress that in order to reduce the deficit Congress should extend PAYGO consistent with provisions of the Budget Enforcement Act of 1990." A similar provision was included, as Section 515, in the FY2009 budget resolution ( S.Con.Res. 70 ). On June 9, 2009, President Obama announced that he would submit a PAYGO proposal to Congress, the Statutory Pay-As-You-Go Act of 2009, that would restore a process applying to both direct spending and revenue legislation. House Majority Leader Steny Hoyer introduced the proposal on June 17 as H.R. 2920 ; the proposal did not include discretionary spending limits. On June 25, the House Budget Committee held a hearing on the proposal, receiving testimony from OMB Director Peter Orszag, among others. On July 22, 2009, the House considered and passed H.R. 2920 . Prior to action on the bill, the House considered and agreed to (by a vote of 243-182) a special rule, H.Res. 665 , providing for the bill's consideration. A modified substitute amendment was incorporated into the bill automatically under a "self-executing" provision in the rule, and a substitute amendment offered by Representative Paul Ryan, the ranking minority Member of the House Budget Committee, was defeated, by a vote of 196-234. Following the defeat, by a vote of 196-234, of a motion to recommit with instructions offered by Representative Ryan, the House passed the bill, by a vote of 265-166. Section 421 of the budget resolution for FY2010 ( S.Con.Res. 13 ) set forth a procedure, applicable only in the House, effectively exempting from the House PAYGO rule and other budget enforcement procedures the costs of legislation in four policy areas: (1) payments to physicians under Medicare ("Doc Fix"), (2) middle class tax reform, (3) reform of the alternative minimum tax (AMT), and (4) reform of the estate and gift tax. In each case, a limitation on the amount of costs subject to exemption was specified in Section 421. Pursuant to this procedure, the House considered H.R. 3961 (the Medicare Physician Payment Reform Act of 2009) on November 19, 2009, passing the bill by a vote of 243-183. Under the terms of the special rule governing consideration of the bill, H.Res. 903 , the text of the Statutory Pay-As-You-Go Act of 2009, as passed earlier by the House, was added to the engrossed version of H.R. 3961 , as Division B. Toward the end of the 2009 session, the House appended the text of H.R. 2920 to another measure under a similar procedure. Pursuant to Section 5 of a special rule, H.Res. 976 , providing for the consideration of H.R. 3326 , the Defense Appropriations Act for FY2010, and other measures, the text of the Statutory Pay-As-You-Go Act of 2009 was added to H.R. 2847 in an exchange of amendments with the Senate. The text of the "Jobs for Main Street Act, 2010" was incorporated into H.R. 2847 as a substitute, and the statutory PAYGO act was appended thereto. Prospects for consideration in the Senate of H.R. 2920 or another bill reinstating the statutory PAYGO process are uncertain at this time. On December 22, 2009, the Senate entered into a unanimous consent agreement providing for the consideration of H.J.Res. 45 , a long-term increase in the debt limit, on January 20, 2010. Several of the amendments made in order under the agreement pertain to budget enforcement issues, including an amendment to be offered by Senate Majority Leader Harry Reid on "pay go." All of the amendments are subject to a 60-vote threshold for passage. Appendix A. Section 252 of the 1985 Balanced Budget Act, As Amended (2 U.S.C. 902) SEC. 252 . ENFORCING PAY-AS-YOU-GO. (a) Purpose.—The purpose of this section is to assure that any legislation enacted before October 1, 2002, affecting direct spending or receipts that increases the deficit will trigger an offsetting sequestration. (b) Sequestration.— (1) Timing.—Not later than 15 calendar days after the date Congress adjourns to end a session and on the same day as a sequestration (if any) under section 251 or 253, there shall be a sequestration to offset the amount of any net deficit increase caused by all direct spending and receipts legislation enacted before October 1, 2002, as calculated under paragraph (2). (2) Calculation of Deficit Increase.—OMB shall calculate the amount of deficit increase or decrease by adding— (A) all OMB estimates for the budget year of direct spending and receipts legislation transmitted under subsection (d); (B) the estimated amount of savings in direct spending programs applicable to budget year 1 resulting from the prior year's sequestration under this section or section 253, if any, as published in OMB's final sequestration report for that prior year; and (C) any net deficit increase or decrease in the current year resulting from all OMB estimates for the current year of direct spending and receipts legislation transmitted under subsection (d) that were not reflected in the final OMB sequestration report for the current year. (c) Eliminating a Deficit Increase.—(1) The amount required to be sequestered in a fiscal year under subsection (b) shall be obtained from non-exempt direct spending accounts from actions taken in the following order: (A) First.—All reductions in automatic spending increases specified in section 256(a) shall be made. (B) Second.—If additional reductions in direct spending accounts are required to be made, the maximum reductions permissible under sections 256(b) (guaranteed and direct student loans) and 256(c) (foster care and adoption assistance) shall be made. (C) Third.—(i) If additional reductions in direct spending accounts are required to be made, each remaining non-exempt direct spending account shall be reduced by the uniform percentage necessary to make the reductions in direct spending required by paragraph (1) 2; except that the medicare programs specified in section 256(d) shall not be reduced by more than 4 percent and the uniform percentage applicable to all other direct spending programs under this paragraph shall be increased (if necessary) to a level sufficient to achieve the required reduction in direct spending. (ii) For purposes of determining reductions under clause (i), outlay reductions (as a result of sequestration of Commodity Credit Corporation commodity price support contracts in the fiscal year of a sequestration) that would occur in the following fiscal year shall be credited as outlay reductions in the fiscal year of the sequestration. (2) For purposes of this subsection, accounts shall be assumed to be at the level in the baseline. (d) Estimates.— (1) CBO Estimates.—As soon as practicable after Congress completes action on any direct spending or receipts legislation, CBO shall provide an estimate to OMB of that legislation. (2) OMB Estimates.—Not later than 7 calendar days (excluding Saturdays, Sundays, and legal holidays) after the date of enactment of any direct spending or receipts legislation, OMB shall transmit a report to the House of Representatives and to the Senate containing— (A) the CBO estimate of that legislation; (B) an OMB estimate of that legislation using current economic and technical assumptions; and (C) an explanation of any difference between the 2 estimates. (3) Significant Differences.—If during the preparation of the report under paragraph (2) OMB determines that there is a significant difference between the OMB and CBO estimates, OMB shall consult with the Committees on the Budget of the House of Representatives and the Senate regarding that difference and that consultation, to the extent practicable, shall include written communication to such committees that affords such committees the opportunity to comment before the issuance of that report. (4) Scope of Estimates.—The estimates under this section shall include the amount of change in outlays or receipts for the current year (if applicable), the budget year, and each outyear excluding any amounts resulting from— (A) full funding of, and continuation of, the deposit insurance guarantee commitment in effect under current estimates; and (B) emergency provisions as designated under subsection (e). (5) Scorekeeping Guidelines.—OMB and CBO, after consultation with each other and the Committees on the Budget of the House of Representatives and the Senate, shall— (A) determine common scorekeeping guidelines; and (B) in conformance with such guidelines, prepare estimates under this section. (e) Emergency Legislation.—If a provision of direct spending or receipts legislation is enacted that the President designates as an emergency requirement and that the Congress so designates in statute, the amounts of new budget authority, outlays, and receipts in all fiscal years resulting from that provision shall be designated as an emergency requirement in the reports required under subsection (d). This subsection shall not apply to direct spending provisions to cover agricultural crop disaster assistance. | "Pay-as-you-go" (PAYGO) procedures play an important role in enforcing budget policies with respect to the consideration of revenue and direct spending legislation. Generally, the purpose of PAYGO procedures is to discourage or prevent the enactment of legislation that would cause, or increase, a deficit or reduce a surplus in the federal budget. PAYGO procedures are not a comprehensive means of budget enforcement because they do not apply to discretionary spending, which is provided in annual appropriations acts; such spending is subject to other enforcement procedures. Further, PAYGO rules deal only with the budgetary impact of legislation considered by Congress; they do not address changes in direct spending and revenue levels under current law stemming from changes in the economy, demographic trends, and other factors. Over the years, several different PAYGO procedures have been used for budget enforcement purposes. The PAYGO procedures have been based in statute as well as congressional rules. Statutory and rules-based PAYGO procedures have been in effect simultaneously at times, while at other times only one form of PAYGO procedures was in effect. This report examines the statutory PAYGO process that was in effect from 1991 through 2002, beginning with a discussion of the complex and evolving budget enforcement framework of which it was an important part. The report continues with an explanation of the origin, extension, and termination of the PAYGO process; a review of its regular operation and statutory interventions in that operation involving directed scorekeeping; and an identification of major direct spending and revenue legislation subject to the PAYGO process. It concludes with a brief discussion of proposals to restore the PAYGO process. The statutory PAYGO process was established in 1990 as Section 252 of an underlying law, the 1985 Balanced Budget Act. As extended in 1993 and 1997, the PAYGO process applied to legislation enacted through the end of FY2002, but it covered the effects of such legislation through FY2006. The PAYGO process was effectively terminated in December 2002 by the enactment of P.L. 107-312, which set all remaining balances on the PAYGO scorecard to zero. Under the PAYGO process, if the OMB director determined that there was a positive balance for a fiscal year on the PAYGO scorecard, then the President was required to issue a sequestration order implementing across-the-board cuts in nonexempt direct spending to eliminate the balance. The OMB director issued 12 final sequestration reports under the PAYGO process, for FY1992-FY2003. The final balances on the PAYGO scorecard for all years were either negative amounts (reflecting net savings) or zero. Accordingly, no PAYGO sequester was required for any fiscal year during this period. While the OMB director's final determinations indicated compliance with the PAYGO requirement in all years, in some cases the balances reflected adjustments due to emergency requirements, provided for under the process, or directed scorekeeping provisions in law that intervened in the normal operation of the process in order to prevent a sequester. Emergency designations and directed scorekeeping provisions sometimes involved amounts ranging from tens of billions to more than one hundred billion dollars for a year. This report will be updated as developments warrant. |
Operation Enduring Freedom (OEF) began on October 7, 2001, and was primarily conducted in Afghanistan. On December 28, 2014, President Obama announced that OEF had ended. A "follow-on mission," Operation Freedom's Sentinel (OFS), was started on January 1, 2015, to "continue training, advising, and assisting Afghan security forces." Operation Iraqi Freedom (OIF) began on March 19, 2003, and was primarily conducted in Iraq. On August 31, 2010, President Obama announced that OIF had ended. A transitional force of U.S. troops remained in Iraq under Operation New Dawn (OND), which ended on December 15, 2011. Several thousand U.S. civilian personnel, contract personnel, and a limited number of U.S. military personnel remain in Iraq carrying out U.S. government business and cooperative programs under the auspices of agreements with the Iraqi government. On October 15, 2014, U.S. Central Command designated new military operations in Iraq and Syria against the Islamic State of Iraq and the Levant as Operation Inherent Resolve (OIR). (For more information on war and conflict dates, see CRS Report RS21405, U.S. Periods of War and Dates of Recent Conflicts , by [author name scrubbed].) Daily updates of total U.S. military and civilian casualties in OIF, OEF, OND, OIR, and OFS can be found at the Department of Defense's (DOD's) website, at http://www.defense.gov/news/casualty.pdf . Table 1 gives the overall casualties in OIF, OND, and OEF. The U.S. Army Office of the Surgeon General (OSG), using the Defense Medical Surveillance System (DMSS), provided data on the incidence of post-traumatic stress disorder (PTSD) cases. According to Dr. Michael Carino of the OSG, a case of PTSD is defined as an individual with two or more outpatient visits or one or more hospitalizations during which PTSD was diagnosed. The threshold of two or more outpatient visits is used in the DMSS to increase the likelihood that the individual has, or had, clinically diagnosable PTSD. A single visit on record commonly reflects a servicemember who was evaluated for possible PTSD, but did not actually meet the criteria for clinical diagnosis. In this data set, an incident of PTSD among deployed servicemembers is defined as occurring when a deployed servicemember was diagnosed with PTSD at least 30 days after being deployed. Many statistics on traumatic brain injury (TBI) are available to the public, at the Defense and Veterans Brain Injury Center, at http://dvbic.dcoe.mil/dod-worldwide-numbers-tbi . Unlike PTSD numbers, which are segmented by those deployed and those not previously deployed, TBI numbers represent medical diagnoses of TBI that occurred anywhere U.S. forces are located, including the continental United States. Table 4 shows the number of individuals with battle-injury major limb amputations for OEF, OFS, OIF, OND, and OIR. A major limb amputation includes the loss of one or more limbs, the loss of one or more partial limbs, or the loss of one or more full or partial hand or foot. The total number of individuals with major limb amputations as of June 1, 2015, is 1,645. Figure 3 charts the number of major limb amputations due to a battle injury in OIF, OND, OIR, OEF, and OFS from 2001 through June 1, 2015, for all services. DOD provides data on the demographics of servicemembers who have died or been wounded in action in OIF, OND, and OEF through the Defense Casualty Analysis System at https://www.dmdc.osd.mil/dcas/pages/casualties.xhtml . To find this information, select a conflict and select between "deaths" or "wounded in action," and then select from the demographic categories, including gender, age, race, and ethnicity. Similar data have not yet been publically released for OEF and OIR. | This report presents statistics regarding U.S. military and civilian casualties in the active missions Operation Freedom's Sentinel (OFS, Afghanistan) and Operation Inherent Resolve (OIR, Iraq and Syria) and, as well as operations that have ended, Operation New Dawn (OND, Iraq), Operation Iraqi Freedom (OIF, Iraq), and Operation Enduring Freedom (OEF, Afghanistan). It also includes statistics on post-traumatic stress disorder (PTSD), traumatic brain injury (TBI), and amputations. Some of these statistics are publicly available at the Department of Defense's (DOD's) website and others have been obtained through DOD experts. For more information on pre-2000 casualties, see CRS Report RL32492, American War and Military Operations Casualties: Lists and Statistics, by [author name scrubbed] and [author name scrubbed]. This report will be updated as needed. |
July 1, 2002, marked the birth of the International Criminal Court (ICC), meaning that crimes of the appropriate caliber committed after that date could fall under the jurisdiction of the ICC. The ICC is the first global permanent international court with jurisdiction to prosecute individuals for "the most serious crimes of concern to the international community." Since its creation, the ICC has received three referrals by States Parties, which involved allegations of war crimes in the Republic of Uganda, the Democratic Republic of Congo, and the Central African Republic. The United Nations Security Council has also referred a situation to the Prosecutor—allegations of atrocities occurring in Darfur, Sudan. The Chief Prosecutor subsequently decided to open investigations into three of the referred cases: Democratic Republic of the Congo, Republic of Uganda, and Darfur, Sudan. Currently, five arrest warrants have been issued by the Court, all in connection to the situation in Northern Uganda. The United Nations, many human rights organizations, and most democratic nations have expressed support for the ICC. The Bush Administration, however, opposes it and in May, 2002, formally renounced any U.S. obligations under the treaty, to the dismay of the European Union. On August 2, 2002, President Bush signed into law the American Servicemembers' Protection Act (ASPA) to restrict government cooperation with the ICC. The Administration had earlier stressed that the United States shares the goal of the ICC's supporters—promotion of the rule of law—and does not intend to take any action to undermine the ICC. While the United States initially supported the idea of creating an international criminal court and was a major participant at the Rome Conference, in the end, the United States voted against the Statute. Nevertheless, President Clinton signed the treaty December 31, 2000, at the same time declaring that the treaty contained "significant flaws" and that he would not submit it to the Senate for its advice and consent "until our fundamental concerns are satisfied." The Bush Administration has likewise declined to submit the Rome Statute to the Senate for ratification, and has notified the U.N. Secretary General, as depositary, of the U.S. intent not to ratify the treaty. The primary objection given by the United States in opposition to the treaty is the ICC's possible assertion of jurisdiction over U.S. soldiers charged with "war crimes" resulting from legitimate uses of force, and perhaps over civilian policymakers, even if the United States does not ratify the Rome Statute. The United States sought to exempt U.S. soldiers and employees from the jurisdiction of the ICC based on the unique position the United States occupies with regard to international peacekeeping. On June 30, 2002, the United States threatened to veto a draft U.N. resolution to extend the peacekeeping mission in Bosnia because the members of the Security Council refused to add a guarantee of full immunity for U.S. personnel from the jurisdiction of the ICC, a move that provoked strong opposition from ICC supporters concerned with the viability of that institution, and that also raised some concerns about the future of United Nations peacekeeping. Ultimately, however, the Security Council and the U.S. delegation were able to reach a compromise and adopted unanimously a resolution requesting the ICC defer, for an initial period of one year, any prosecution of persons participating in U.N. peacekeeping efforts who are nationals of states not parties to the ICC. The compromise reached by the Security Council did not provide permanent immunity for U.S. soldiers and officials from prosecution by the ICC; rather, it invoked article 16 of the Rome Statute to defer potential prosecutions for one year. Some States Parties to the Rome Statute and other supporters have argued that article 16 was meant only to apply to specific cases and was not intended to permit a blanket waiver for citizens of a specific country. The U.N. Security Council adopted another resolution extending the deferral to July 1, 2004. However, during the summer of 2004, opposition to extending the deferral through 2005 eventually led the Administration to drop its pursuit. The United States continues to pursue bilateral agreements to preclude extradition by other countries of U.S. citizens to the ICC. This report outlines the main objections the United States has raised with respect to the ICC and analyzes the American Servicemembers' Protection Act (ASPA) enacted to regulate U.S. cooperation with the ICC. The report discusses the implications for the United States, as a non-ratifying country, as the ICC begins to take shape, as well as the Administration's efforts to win immunity from ICC jurisdiction for Americans. A description of the ICC's background and a more detailed analysis of the ICC's organization, jurisdiction, and procedural rules may be found in CRS Report RL31437, International Criminal Court: Overview and Selected Legal Issues (pdf). The primary objection given by the United States in opposition to the treaty is the ICC's possible assertion of jurisdiction over U.S. soldiers charged with "war crimes" resulting from legitimate uses of force, or its assertion of jurisdiction over other American officials charged for conduct related to foreign policy initiatives. The threat of prosecution by the ICC, it is argued, could impede the United States in carrying out military operations and foreign policy programs, impinging on the sovereignty of the United States. Detractors of the U.S. position depict the objection as a reluctance on the part of the United States to be held accountable for gross human rights violations or to the standard established for the rest of the world. Below, in bold type, are summarized some of the main objections voiced by U.S. officials and other critics of the Rome Statute. Each objection is followed by the counterpositions likely to be voiced by representatives of U.S. foreign allies that support the ICC, as well as a very brief discussion of the issue. This section is intended to familiarize the reader with the basic issues that comprise the current debate, and not to provide an exhaustive analysis of the issues. None of the statements in the section below should be interpreted to represent the view of CRS, since CRS does not take positions on policy issues. Only nations that ratify treaties are bound to observe them. The ICC purports to subject to its jurisdiction citizens of non-party nations, thus binding non-party nations. ICC supporters may argue that the ICC has jurisdiction over persons, not nations. Non-party states are not obligated to do anything under the treaty. Therefore, the Rome Statute does not purport to bind non-parties, although non-party states may cooperate or defend their own interests that may be affected by a pending case. ICC opponents, however, may point out that if individuals are charged for conduct related to carrying out official policy, the difference between asserting jurisdiction over individuals and over the nation itself becomes less clear. After all, it is arguably the policy decision and not the individual conduct that is actually at issue. The threat of prosecution, however, could inhibit the conduct of U.S. officials in implementing U.S. foreign policy. In this way, it is argued, the ICC may be seen to infringe U.S. sovereignty. Some ICC supporters have asserted that the crimes covered by the Rome Statute are already prohibited under international law either by treaty or under the concept of "universal jurisdiction" or both; therefore, all nations may assert jurisdiction to try persons for these crimes. The ICC, they argue, would merely be exercising the collective jurisdiction of its members, any of which could independently assert jurisdiction over the accused persons under a theory of "universal jurisdiction"; the Nuremberg trials serve as an example of such collective jurisdiction. ICC opponents may note that the existence of "universal jurisdiction" has been disputed by some academics, who argue that actual state practice does not provide as much support for the concept as many ICC supporters may claim. However, ICC supporters note, the Rome Statute does not rely entirely on universal jurisdiction; certain pre-conditions to jurisdiction must be met, including the consent of either the State on whose territory the crime occurred or the State of nationality of the accused. The United States is already party to most of the treaties that form the basis for the definitions of crimes in the Rome Statute, meaning U.S. citizens are already subject to the prohibitions for which the ICC will have jurisdiction. ICC supporters may further argue that if the ICC could not assert jurisdiction over non-party States, so-called "rogue regimes" could insulate themselves from the reach of the ICC simply by not ratifying the Rome Statute. The purpose for creating the ICC would be subverted. The United States had proposed to resolve this problem by creating a mandatory role for the U.N. Security Council in deciding when the ICC should assert jurisdiction, but the majority of other countries refused to adopt such a rule on the stated grounds that it would mirror the uneven prosecution of war crimes and crimes against humanity under the present system of ad hoc tribunals. The ICC ' s flaws may allow it to be used by some countries to bring trumped-up charges against American citizens, who, due to the prominent role played by the United States in world affairs, may have greater exposure to such charges than citizens of other nations. ICC supporters argue that the principle of "complementarity" will ensure that the ICC does not take jurisdiction over a case involving an American citizen, unless the United States is unwilling or unable genuinely to investigate the allegations itself, a scenario some argue is virtually unthinkable. Some also take exception to the notion that Americans are more likely to be targeted for prosecution although many other countries that participate in peacekeeping operations, for example, are willing to subject their soldiers and officials to the jurisdiction of the ICC. Many U.S. opponents of the ICC express concern that the ICC will be able to second-guess a valid determination by U.S. prosecutors to terminate an investigation or decline to prosecute a person. It is not uncommon for unfriendly countries to characterize U.S. foreign policy decisions as "criminal." The ICC could provide a forum for such charges. Some ICC supporters dispute the likelihood of such an occurrence, and express confidence that unfounded charges would be dismissed. A recent determination by the ICC's Chief Prosecutor seems to demonstrate a reluctance to launch an investigation against the United States based on allegations regarding its conduct in Iraq. On February 9, 2006, the Chief Prosecutor issued a letter explaining his reasons for declining to launch an investigation despite multiple submissions by private groups urging action against the United States. In addition to acknowledging the limits of the Court's jurisdiction, which he noted precluded pursuing charges based on the legality of the decision to invade, the Prosecutor noted that the allegations about U.S. nationals' behavior during the Iraq occupation were "of a different order than the number of victims found in other situations under investigation," and concluded that the allegations were of insufficient gravity to warrant an investigation. The Office of the Prosecutor, an organ of the ICC that is not controlled by any separate political authority, has unchecked discretion to initiate cases, which could lead to " politicized prosecutions. " ICC supporters may counter that the ICC statute does contain some restraints on the Prosecutor, including a provision that the Prosecutor must seek permission from a pre-trial chamber to carry out a self-initiated prosecution, and a provision for removal of the Prosecutor by vote of the Assembly of States Parties. The independence of the prosecutor, it is argued, is vital in order to ensure just results, free from political control. U.S. negotiators at the Rome Conference had pressed for a role for the U.N. Security Council to check possible "overzealous" prosecutors and prevent politicized prosecutions. The majority of nations represented at the Rome Conference took the view that the U.N. Security Council, with its structure and permanent members, would pose an even greater danger of "politicizing" ICC prosecutions, thereby guaranteeing impunity for some crimes while prosecuting others based on the national interests of powerful nations. The ICC Statute gives the ICC the authority to define and punish the crime of " aggression, " which is solely the prerogative of the Security Council of the United Nations under the U.N. Charter. ICC supporters may argue that all States Parties will have the opportunity to vote on a definition of aggression after the treaty has been in effect for seven years, which definition must comport with the U.N. Charter, thereby preserving the role of the U.N. Security Council. The ICC, under this view, is merely providing a forum for trying persons accused of committing "aggression" under international law. Opponents of the ICC, however, may argue that the lack of agreement among nations as to the definition of aggression suggests that any definition adopted only by a majority of member states of the ICC may not be sufficiently grounded in international law to be binding as jus cogens . The U.N. General Assembly adopted a resolution in 1974 addressing the definition of aggression, but it has only been invoked once by the Security Council. The definition contains an enumeration of offenses included as possible aggression, but leaves the determination to the Security Council. The ICC will not offer accused Americans the due process rights guaranteed them under the U.S. Constitution, such as the right to a jury trial. Supporters of the Rome Statute contend it contains a comprehensive set of procedural safeguards that offers substantially similar protections to the U.S. constitution. Some also note that the U.S. Constitution does not always afford American citizens the same procedural rights. For example, Americans may be tried overseas, where foreign governments are not bound to observe the Constitution. Moreover, cases arising in the armed services are tried by court-martial, which is exempt from the requirement for a jury trial. The current U.S. policy about the use of military tribunals in the war against terrorism could lead to suggestions of a double standard on the part of the United States with respect to procedural safeguards in war crimes trials. Congress has passed several riders effectively precluding the use of funds to support the ICC. The 107 th Congress passed the American Servicemembers' Protection Act of 2002 (ASPA) as title II of the supplemental appropriations bill for 2002, which was signed by the President on August 2, 2002. The 108 th Congress included a provision in the Consolidated Appropriations Act, P.L. 108-447 , to prohibit the use of funds made available under the Economic Support Fund heading to provide assistance to countries who are members of the ICC and who have not entered into a so-called "Article 98" agreement with the United States. This provision, known as the Nethercutt Amendment, was reauthorized by the 109 th Congress as part of the FY2006 Consolidated Appropriations Act ( H.R. 3057 / P.L. 109-102 ). A substantially identical provision is included in H.R. 5522 , The Foreign Operations, Export Financing, and Related Programs Appropriations Act, 2007, as passed by the House of Representatives (§ 572). Both the House of Representatives and the Senate added the American Servicemembers' Protection Act (ASPA) to the supplemental appropriations bill for the fiscal year ending September 30, 2002, H.R. 4775 , 107 th Congress. The conferees adopted the Senate version of the bill, which included a new provision that the ASPA will not prevent the United States from cooperating with the ICC if it prosecutes persons such as Saddam Hussein or Osama bin Laden. Originally introduced in the 106 th Congress as S. 2726 , the ASPA is intended to shield members of the United States Armed Forces and other covered persons from the jurisdiction of the ICC. The Senate Committee on Foreign Relations held hearings the same day the bill was introduced but did not report it. The ASPA prohibits cooperation with the ICC by any agency or entity of the federal government, or any state or local government. (Section 2004) Covered entities are prohibited from responding to a request for cooperation by the ICC or providing specific assistance, including arrest, extradition, seizure of property, asset forfeiture, service of warrants, searches, taking of evidence, and similar matters. It prohibits agents of the ICC from conducting any investigative activity on U.S. soil related to matters of the ICC. Section 2004(d) states that the United States "shall exercise its rights to limit the use of assistance provided under all treaties and executive agreements for mutual legal assistance in criminal matters ... to prevent ... use by the [ICC of such assistance]." It does not ban the communication to the ICC of U.S. policy, or U.S. government assistance to defendants. It does not prevent private citizens from providing testimony or evidence to the ICC. Section 2006 requires the President to put "appropriate procedures" in place to prevent the direct or indirect transfer of certain classified national security information to the ICC. Unless subject to a blanket waiver under section 2003, section 2005 of the ASPA restricts U.S. participation in U.N. peacekeeping operations to missions where the President certifies U.S. troops may participate without risk of prosecution by the ICC because the Security Council has permanently exempted U.S. personnel from prosecution for activity conducted as participants, or because each other country in which U.S. personnel will participate in the mission is either not a party to the ICC and does not consent to its jurisdiction, or has entered into an agreement "in accordance with Article 98" of the Rome Statute. The latter option may not provide as much assurance as the first; an Article 98 agreement would prevent the surrender of certain persons to the ICC by parties to the Article 98 agreement, but would not bind the ICC if it were to obtain custody of the accused through other means. If the alleged crime is committed on the territory of a state party to the Rome Statute, the consent requirement for the jurisdiction of the ICC would be met, despite the existence of the Article 98 agreement. That country could, however, carry out its own investigation and invoke complementarity to preclude the ICC's jurisdiction. Additionally, the country that is the object of the peacekeeping mission may consent to the ICC's jurisdiction over U.S. participants for alleged crimes committed on its territory, whether or not it is a member of the ICC. The restriction may also be waived for peacekeeping missions where the President certifies that U.S. participation is in the national interest of the United States. The national interest qualification would appear to be the most easily met of the three waiver options; whenever the United States uses its vote in the Security Council to approve a peacekeeping operation, the mission presumably is deemed to serve the national interest. This section could conceivably be interpreted to suggest the President has the authority to commit U.S. troops to participate in U.N. peacekeeping missions without the prior approval of Congress. The restriction does not apply to peacekeeping missions established prior to July 1, 2003. Effective 1 July 2003, the ASPA also prohibits military assistance to any country that is a member of the ICC, except for NATO countries and major non-NATO allies, unless the President waives the restriction (section 2007) or a blanket waiver is in effect under section 2003. Military assistance, as defined in the ASPA, includes foreign assistance under chapters 2 and 5 of Part II of the Foreign Assistance Act of 1961, as amended, and defense articles and services financed by the government, including loans and guarantees, under section 23 of the Arms Export Control Act. The President may waive the prohibition without prior notice to Congress if he determines and reports to the appropriate committees that such assistance is important to the national interest or the recipient country has entered into a formal Article 98 agreement to prevent the ICC's proceeding against U.S. personnel present in such country. The restriction does not appear to apply to any regional organizations that may receive military assistance. The restrictions on military assistance will no longer apply to these countries if they agree to sign Article 98 agreements with the United States, or if the President waives the restrictions as he deems justified with respect to a particular country in accordance with national interests. One hundred countries are reported to have signed Article 98 agreements with the United States as of May 3, 2005. It is not clear whether all of the agreements have been ratified by their respective governments so as to be effective at present. Section 2008 authorizes the President to use "all means necessary and appropriate" to bring about the release of covered United States and allied persons, upon the request of the detainee's government, who are being detained or imprisoned by or on behalf of the ICC. The Act does not provide a definition of "necessary and appropriate means" to bring about the release of covered persons, other than to exclude bribes and the provision of other such incentives. Section 2008 also authorizes the President to direct any federal agency to provide legal representation and other legal assistance, as well as any exculpatory evidence on behalf of covered U.S. or allied persons who are arrested, detained, investigated, prosecuted or imprisoned by, or on the behalf of the ICC. Section 2008 further permits the government to appear before the ICC in defense of the interests of the United States. The ASPA contains multiple waiver provisions and exceptions. Section 2003(a)-(b) provides for presidential waivers of sections 2005 and 2007 (restriction on U.S. participation in U.N. peacekeeping missions and prohibition on military assistance) if the President certifies to Congress that the ICC has agreed not to seek to assert jurisdiction over any covered U.S. or allied person with respect to actions undertaken by such person in an official capacity. This blanket waiver may be extended for successive periods of one year if the ICC abides by the agreement. As described above, section 2005 may be waived under its own terms with respect to specific peacekeeping missions if satisfactory protection can be achieved through U.N. Security Council measures or by agreement with other participants, or if the national interests of the United States justify participation in the mission. Section 2007 also contains its own waiver provision, allowing the President to provide military assistance to a particular country if he determines and reports to Congress that it is in the national interest or that the country in question has entered into an agreement with the United States "pursuant to Article 98 of the Rome Statute preventing the International Criminal Court from proceeding against United States personnel present in such country." NATO and major non-NATO allies are excepted from the prohibition in section 2007. If the ICC enters into and abides by an agreement under sections 2003(a) or (b), section 2003(c) permits the President to waive sections 2004 and 2006 (prohibiting cooperation with the ICC and directing the President to implement measures to prohibit the transfer of classified information) with respect to specific cases before the ICC. To waive the prohibitions and allow cooperation with the ICC, the President must first certify to Congress that there is reason to believe the accused is guilty as charged, it is in the national interest to waive the prohibitions, and that the investigation and prosecution by the ICC will not result in the investigation or arrest of any covered U.S. or allied persons with respect to any actions undertaken by them in an official capacity. It is somewhat unclear what a waiver of section 2006 would entail, in that the section does not directly prohibit any action. Instead, it directs the President to implement rules to prevent transfer of classified national security information and law enforcement information to the ICC, and to prevent indirect transfer of material related to matters under investigation or prosecution by the ICC to the United Nations and ICC member countries unless assurances are received from the recipient that such information will not be made available to the ICC. A waiver of section 2006 could be interpreted to mean that the President's requirement to implement the rules is waived, or that the requirement to obtain assurances from recipients other than the ICC is waived, or that the rules themselves may be waived with respect to a particular case. Section 2011 provides an exception for certain presidential authorities, stating that the restrictions on cooperation with the ICC (section 2004) and the requirement for procedures to protect certain sensitive information (section 2006) do not apply to "any action or actions with respect to a specific matter taken or directed by the President on a case-by-case basis in the exercise of the President's authority as Commander in Chief of the Armed Forces of the United States under article II, section 2 of the United States Constitution or in the exercise of the executive power under article II, section 1 of the United States Constitution." The section would require the President to notify Congress within 15 days of the action, unless such notification would jeopardize national security. It further clarifies that "nothing in [the] section shall be construed as a grant of statutory authority to the President to take any action." Section 2012 prohibits delegation of the authorities vested in the President by sections 2003 (waiver provision) and 2011(a) (constitutional exception). Inasmuch as sections 2004 and 2006 are already subject to presidential waiver under section 2003(c) in the case of the investigation or prosecution of a "named individual," it appears that this section is drafted to avoid possible conflicts of the separation of powers between the President and Congress. In the event that the President takes the position that the prohibitions of sections 2004 and 2006 infringe upon his constitutional authority in certain cases, he might assert that Congress has no power even to require a waiver under section 2003. Section 2011 appears to ensure notification of Congress, at least at some point after the action has been taken, regardless of whether the President believes that sections 2004 and 2006 impinge his constitutional authority. The effect of section 2011 is not entirely clear, depending as it does on the interpretation of the President's executive powers under article II, section 1 of the Constitution and his authority as Commander in Chief of the Armed Forces. Interpreted broadly, the constitutional executive power includes the power to execute the law, meaning the execution of any law, whether statutory or constitutional, or even international law. Such an interpretation would seem to render sections 2004 and 2006, as well as the waiver provision of section 2003(c), largely superfluous. Interpreted narrowly, the executive authorities cited above could refer to those powers which the President does not share with Congress. Under a narrow interpretation, Congress would be deemed to be without authority to regulate such actions in any event, in which case it would appear to make little sense to restrict its application to sections 2004 and 2006. The language could be construed by a court to imply a waiver authority apart from the restrictions outlined in section 2003. Section 2015 provides clarification with respect to assistance to international efforts. It states: Nothing in this title shall prohibit the United States from rendering assistance to international efforts to bring to justice Saddam Hussein, Slobodan Milosovic, Osama bin Laden, other members of Al Qaeda, leaders of Islamic Jihad, and other foreign nationals accused of genocide, war crimes or crimes against humanity. This language would appear to have the effect of limiting the prohibitions in section 2004 to cases in which the ICC prosecutes non-U.S. citizens for the crimes currently under the jurisdiction of the ICC, although the United States may be obligated to deny such assistance in the case of an accused foreign national who is a national of a country with which the United States has entered into a reciprocal Article 98 agreement. The provision could also eliminate the restrictions on participation in peacekeeping missions or provision of military assistance where such participation or aid could be interpreted to further an international effort to prosecute the named crimes. There is no definition of "foreign national" in the ASPA; its use in section 2015 could lead to a conflict with sub-sections (d) and (f) of section 2004 (22 U.S.C. § 7423) as they apply to permanent resident aliens. In addition to the congressional notifications required by some of the waiver authorities described above, the ASPA encourages the President to submit, by February 2, 2003, a report for each military alliance to which the United States is a party assessing the command arrangements they entail and the degree to which such arrangements may place U.S. servicemembers under the command or control of foreign officers subject to the jurisdiction of the ICC. No later than August 2, 2003, the President was encouraged to submit a report describing possible modifications to such alliance command arrangements that would reduce the risks to U.S. servicemembers identified in the first report. Section 574 of the FY2005 Consolidated Appropriations Act ( H.R. 4818 / P.L. 108-447 ) prohibited Economic Support Funds (ESF) assistance to the government of any country that is a party to the ICC that has not entered into an Article 98 agreement with the United States, except for countries eligible for assistance under the Millennium Challenge Act of 2003. It authorized the President to waive the prohibition with respect to NATO members and major non-NATO allies without prior notice to Congress, if he determined and reported to the appropriate committees that a waiver was in the U.S. national security interest. The President could also waive the prohibition on economic assistance for countries that entered into Article 98 agreements with the United States. (Presumably, this provision would have applied to countries that later agreed to enter into such an Article 98 agreement, to ensure congressional notification). The Nethercutt Amendment was re-enacted by the 109 th Congress as part of the FY2006 Consolidated Appropriations Act ( H.R. 3057 / P.L. 109-102 ). The FY2006 measure, however, requires that the President give Congress notice before he invokes a waiver, but he may grant a waiver not only with respect to any NATO or major non-NATO ally, but also to "such other country as he may determine if he determines and reports to the appropriate congressional committees that it is important to the national interests of the United States to waive such prohibition." The Foreign Operations Appropriations bill for FY2007 ( H.R. 5522 ), recently passed by the House of Representatives, would continue these prohibitions (§ 572). As with prior years' legislation, the bill would not affect the funding for the Millennium Challenge Corporation. The Senate Appropriations Committee reported its version of the bill without any similar prohibition. The Senate passed a measure as part of the 2007 National Defense Authorization Act, S. 2766 , that would modify ASPA to end the ban on International Military Education and Training (IMET) assistance to countries that are members of the ICC and that have not implemented Article 98 agreements (§ 1210). The House version of the FY2007 Defense Authorization bill, H.R. 5122 , does not contain such a provision; however, after hearing testimony from several combatant commands regarding the perceived negative consequences flowing from the cut-off of IMET assistance to affected allies, the House Armed Services Committee reported its view that the President's authority to waive ASPA funding restrictions can and should be invoked where necessary to "impede undue influence on U.S. partner nations" by third-party governments that might occur in the absence of U.S. engagement efforts made possible through IMET. Some observers have suggested that Congress should pass legislation to close jurisdictional gaps in U.S. criminal law in order to ensure U.S. territory does not become a safe haven for those accused of genocide, war crimes, and crimes against humanity. The War Crimes Act of 1996, for example, establishes U.S. federal jurisdiction to punish war crimes, as defined in international treaties to which the United States is a party, but only when perpetrated by or against U.S. nationals. Likewise, the Genocide Convention Implementation Act of 1987 prohibits acts that would constitute genocide under the Rome Statute, except that the U.S. Code covers only conduct committed by a U.S. national or conduct committed within the United States. Some observers have expressed concern that war criminals or perpetrators of genocide from other countries could seek refuge in the United States from extradition to and prosecution by the ICC. However, the exception in section 2013 of the ASPA, which allows U.S. entities to cooperate with the ICC in the case of foreign nationals accused of war crimes, may obviate the need for such legislation. Some have suggested that changes in U.S. statutes to broaden the jurisdiction of federal courts to cover all crimes over which the ICC might assert jurisdiction could enhance the implementation of complementarity by precluding a finding by the ICC that the United States is "unable" to prosecute one of its citizens. For the most part, war crimes committed by U.S. persons are covered by the War Crimes Act, although there may be some acts covered by the Rome Treaty that are not explicitly prohibited by U.S. law. Also, there is no U.S. statute codifying crimes against humanity as such. U.S. criminal law prohibits most of the crimes enumerated under the Rome Statute as possible crimes against humanity, as long as they are committed within the United States or by military personnel. Under current law, acts that could constitute crimes against humanity committed by U.S. civilians overseas generally are not triable in U.S. civil or military courts unless they involve torture or certain acts of international terrorism. In the event a U.S. citizen is alleged to have committed such an act, the United States may not be deemed able to investigate and prosecute the alleged crime, a prerequisite for asserting complementarity. As a member of the Preparatory Commission established by the Rome Statute, the United States played a significant role during the drafting of rules of procedure, elements of crimes, and other documents detailing how the ICC will operate. Now that the Rome Statute has entered into force, the Preparatory Commission has been replaced by the Assembly of States Parties ("Assembly") as the governing body to oversee the implementation of the Rome Statute. The Assembly held its first conference September 3–10, 2002, during which it adopted rules of evidence and procedure and a host of other regulations, including the methods for nominating and electing its officials. During its subsequent session in February, the Assembly elected 18 judges, who later elected Canadian jurist Philippe Kirsch to be their president. In April of 2003, the Assembly elected Argentinian lawyer Luis Moreno Ocampo to be the ICC's first prosecutor. The first Review Conference, an alternative forum for considering amendments to the Statute, is to be convened in July of 2009, seven years after the Statute has entered into effect. Thereafter, Review Conferences may be convened from time to time by the U.N. Secretary-General upon request by a majority of the States Parties. As a non-party, the United States has no vote in either body. However, it will remain eligible to participate in both the Assembly and in Review Conferences as an observer. The Assembly of States Parties adopted procedural rules for its activities at its first conference, including rules setting forth the role of observers and other participants. Observers are entitled to participate in the deliberations of the Assembly and any subsidiary bodies that might be established. Observer States will receive notifications of all meetings and records of Assembly proceedings on the same basis as States Parties. They will not, however, be permitted to suggest items for the agenda or to make motions during debate, such as points of order or motions for adjournment. Thus, the United States may be able to participate substantially in Assembly debates as well as proffer and respond to proposals, even if it never becomes a party to the Statute. The United States may also use its position at the United Nations to communicate to the Assembly of States Parties. As noted, the United States is not able to vote in these bodies so long as it does not ratify the Rome Statute. It may not nominate U.S. nationals to serve as judges or cast a vote in elections for judges or the Prosecutor (or for their removal), or vote on the ICC's budget. It will not be able to vote on the definition of the crime of aggression or its inclusion within the jurisdiction of the ICC, when the matter is considered at first Review Conference, or on any other amendment to the Rome Statute, unless it ratifies the Rome Statute. The United States, as a non-party, will have no right itself to refer situations to the Prosecutor for investigation; as a Permanent Member of the Security Council, however, it could seek to influence referrals by the Security Council. Similarly, it may participate in Security Council requests to the Prosecutor to defer an investigation or prosecution and to the Pre-Trial Chamber to review a decision of the Prosecutor not to investigate or prosecute. As a non-party to the treaty, the United States is eligible, but not obligated, to cooperate with any ICC investigation and prosecution; and under the Statute, the United States could, but would not be obligated to, arrest a person named in a request for provisional arrest or for arrest and surrender from the ICC. The United States also retains the right not to provide information or documents the disclosure of which would prejudice its national security interests and to refuse to consent to the disclosure by a state party of information or documents provided to that state in confidence. Finally, as a non-party, the United States is not under any obligation to contribute to the budget for the ICC, except, perhaps indirectly, to the extent that the U.N. General Assembly regular budget might include ICC support. Perspectives differ on the impact of the ICC on U.S. interests, as it begins to operate. Some see the ICC as a fundamental threat to the U.S. armed forces, civilian policy makers, and U.S. defense and foreign policy. Others see it as a valuable foreign policy tool for defining and deterring crimes against humanity, a step forward in the decades-long U.S. effort to end impunity for egregious mass crimes. Debate over the ICC has created a tension between enhancing the international legal justice system and encroaching on what some countries perceive as their legitimate use of force. The review by the International Criminal Tribunal for the Former Yugoslavia (ICTY) of allegations that NATO bombing in Kosovo might be deemed a war crime is illustrative of this tension. Many opponents of the ICC were outraged that the issue was even considered. They questioned the legitimacy of the tribunal's actions, and their anger was not assuaged by the Tribunal's ultimate decision that there was "no basis for opening an investigation into any of those allegations or into other incidents relating to NATO bombing." While opponents of the ICC interpret this event as an indication that the ICC is likely to pursue spurious and politically motivated cases against U.S. citizens, proponents of the ICC see it as illustrating that similar allegations would be dismissed by the ICC Prosecutor. Another consideration is the practical effect that the U.S. position will have on the ICC itself. Because the ICC relies largely on States Parties to provide mechanisms and manpower for arresting suspects and enforcing verdicts of the ICC, it has been argued that the lack of U.S. participation in the ICC may seriously impair the ICC's ability to function. Those who believe the ICC is a fundamental threat to U.S. foreign and defense policy may welcome this outcome; while ICC supporters may argue that an ineffective court could serve the interests of human rights abusers, ensuring impunity and decreasing the likelihood of future ad hoc tribunals. The United States has enjoyed a long reputation for leadership in the struggle against impunity and the quest for universal human rights and the rule of law. Human rights organizations have expressed concern that U.S. refusal to ratify the Rome Statute, coupled with any actions that might undermine the ICC, could cause the United States to lose the moral high ground and damage its influence world-wide, including its ability to influence the development of the law of war. The perceived U.S. willingness to hold U.N. peacekeeping missions hostage to U.S. demands for immunity from the ICC may deepen the rift between the United States and allies that support the ICC. The withholding of military assistance and other economic aid to members of the ICC may also be seen as an effort to coerce countries to refuse to ratify the Rome Statute or to sign an Article 98 agreement, which could appear to some as undermining the ICC and negating the Administration's stated intent to respect the decisions of other countries to join the ICC. By seemingly demanding special treatment in the form of immunity from the ICC, the United States may bolster the perception of its unilateral approach to world affairs and its unwillingness to abide by the same laws that apply to other nations. This perception could undermine U.S. efforts at coalition-building to gain international support for the present war against terrorism and operations in Iraq, as well as future international endeavors. Others argue that the perception of U.S. commitment to the rule of law has little effect on countries where human rights abuses are most rampant. Despots like Cambodia's Pol Pot or Iraq's Saddam Hussein have not weighed possible future legal ramifications before committing massive crimes. Under this view, the establishment of the ICC might have the unintended effect of hardening the resolve of ruthless tyrants who may feel they have nothing to gain by giving up their power to more democratic regimes if they fear prosecution for the crimes they committed while in power. From this perspective, in terms of curbing human rights abuses, it does not matter whether the U.S. ratifies the Rome Statute, other than perhaps to provide support to an accused dictator's argument challenging the legitimacy of the ICC. According to this viewpoint, the costs to the United States appear to outweigh the benefits. ASPA § 2005 prohibits U.S. participation in peacekeeping and peace-enforcing missions established by the Security Council unless the President certifies and reports to the appropriate committees of Congress that U.S. personnel are not placed at risk of prosecution by the ICC because they are guaranteed immunity by the U.N. Resolution or because of arrangements with the host government. The Bush Administration has pursued efforts in the U.N. Security Council and with individual States to prevent the possibility that American citizens could be prosecuted before the ICC. This effort has met with some success but also some resistance. On July 12, 2002, in response to the U.S. veto of the extension of peacekeeping operations in Bosnia, the U.N. Security Council adopted a resolution requesting a blanket deferral of prosecutions by the ICC of peacekeepers from states not parties to the Rome Statute for a period of one year. Resolution 1422 provides, in pertinent part: Acting under Chapter VII of the Charter of the United Nations, 1. Requests , consistent with the provisions of Article 16 of the Rome Statute, that the ICC, if a case arises involving current or former officials or personnel from a contributing State not a Party to the Rome Statute over acts or omissions relating to a United Nations established or authorized operation, shall for a twelve-month period starting 1 July 2002 not commence or proceed with investigation or prosecution of any such case, unless the Security Council decides otherwise; 2. Expresses the intention to renew the request in paragraph 1 under the same conditions each 1 July for further 12-month periods for as long as may be necessary; 3. Decides that Member States shall take no action inconsistent with paragraph 1 and with their international obligations; 4. Decides to remain seized of the matter. The resolution, which was renewed for another year under Security Council Resolution 1487, appeared to fall short of the President's original proposal, which would have provided permanent immunity for U.S. troops and officials from the jurisdiction of the ICC. Opponents of the original proposal objected that the U.N. Security Council does not have the authority to "rewrite" international treaties. The compromise invoked article 16 of the Rome Statute, which provides: No investigation or prosecution may be commenced or proceeded with under this Statute for a period of 12 months after the Security Council, in a resolution adopted under Chapter VII of the Charter of the United Nations, has requested the Court to that effect; that request may be renewed by the Council under the same conditions. Although some opponents of the U.S. position had argued that article 16 was intended to be invoked only on a case-by-case basis, the language of the article does not expressly state such a requirement. Therefore, Resolutions 1422 and 1487 appear to be consistent with the Rome Statute. The language deferred ICC action for one year; it does not provide absolute immunity for actions occurring during the deferral period. Because the Security Council did not extend the deferral past July 2004, it appears that the ICC may investigate and prosecute any purported crimes under its subject matter jurisdiction that occurred at any time after the Rome Statute's entry into force, subject to other provisions of the Rome Statute. U.S. military personnel were able to participate in the United Nations Mission in Liberia (UNMIL) because, in authorizing the multinational force to enforce the cease-fire, the Security Council decided that current or former officials or personnel from a contributing State, which is not a party to the Rome Statute of the International Criminal Court, shall be subject to the exclusive jurisdiction of that contributing State for all alleged acts or omissions arising out of or related to the Multinational Force or United Nations stabilization force in Liberia, unless such exclusive jurisdiction has been expressly waived by that contributing State. Unlike the previous arrangement with respect to the U.N. mission in Bosnia, the authorization for operations in Liberia appears to provide permanent immunity to U.S. participants from the jurisdiction of the ICC with respect to conduct linked to the U.N. mission. Accordingly, President Bush made the appropriate certification to Congress under ASPA § 2005 (22 U.S.C. § 7424). Liberia had signed the Rome Statute in 1998 but did not ratify it until September of 2004. The United States also sent troops to participate in the U.N. mission to establish peace in Haiti in 2004. In April of 2004, the U.N. Security Council established the United Nations Stabilization Mission in Haiti (MINUSTAH). In June of that year, President Bush certified that U.S. servicemembers could safely participate because Haiti had signed an Article 98 agreement. On March 31, 2005, the U.N. Security Council, acting under Chapter VII of the U.N. Charter, adopted Resolution 1593 (2005) which refers reports about the situation in Darfur, Sudan (dating back to July 1, 2002), to the ICC Prosecutor, Luis Moreno-Ocampo. This is the first time such a referral from the U.N. Security Council has been made. As Sudan is not a party to the ICC, and has not consented to its jurisdiction, the ICC jurisdiction over the case could only be established by means of a U.N.S.C. referral. Under the ICC Statute, the ICC is authorized, but not required, to take such a case. The Resolution, which is binding on all U.N. member states, was adopted by a vote of 11 in favor, none against and with 4 abstentions—the United States, China, Algeria, and Brazil. U.S. foreign policy respecting action to address the situation in Darfur was complicated by its position regarding the ICC and its jurisdiction over non-member states. In September 2004, the United States concluded that genocide had taken place in Darfur. According to the State Department, it supported the formation of the International Commission of Inquiry but preferred a tribunal in Africa to be the mechanism of accountability for those who committed crimes in Darfur. After these proposals failed to garner sufficient support, the United States agreed to abstain from voting on the Resolution (which is not equivalent to a veto in the U.N. Security Council) once language was introduced into the Resolution that dealt with the sovereignty questions of concern and essentially protected U.S. nationals and other persons of non-party States outside Sudan from prosecution. The abstention did not change the fundamental objections of the United States to the ICC. Although some view the decision as a sign that the Administration is softening its stance with respect to the ICC, it may also be seen as consistent with the U.S. support of a version of the Rome Statute that would have allowed the U.N. Security Council to refer cases involving non-States Parties to the ICC, but would not have allowed other states to refer cases. At the same time, the compromise allowed the United States to show support for the need for the international community to come together and take action on the atrocities occurring in Darfur. The United States is also pursuing bilateral options for achieving protection for U.S. troops, within or outside U.N. peacekeeping arrangements, by concluding agreements similar to the status-of-forces agreements (SOFA) routinely negotiated where U.S. troops are stationed abroad. The United States has so far concluded 100 bilateral agreements whereby each signatory promises that it will not surrender citizens of the other signatory to the ICC, unless both parties consent in advance to the surrender. The Department of State is seeking to conclude these agreements with as many states as possible, even those who are not parties to the ICC and others who would not be subject to the sanctions under ASPA. The agreements are intended to make use of Article 98 of the Rome Statute, which states: Cooperation with respect to waiver of immunity and consent to surrender 1. The Court may not proceed with a request for surrender or assistance which would require the requested State to act inconsistently with its obligations under international law with respect to the State or diplomatic immunity of a person or property of a third State, unless the Court can first obtain the cooperation of that third State for the waiver of the immunity. 2. The Court may not proceed with a request for surrender which would require the requested State to act inconsistently with its obligations under international agreements pursuant to which the consent of a sending State is required to surrender a person of that State to the Court, unless the Court can first obtain the cooperation of the sending State for the giving of consent for the surrender. Paragraph 1 of Article 98 appears intended to retain diplomatic immunity and immunity for heads of state, while paragraph 2 seems to contemplate typical SOFA arrangements, in which countries hosting members or units of the armed forces of allies agree to forego certain types of jurisdiction over the soldiers and other government officers stationed there. The use of the term "sending state" in the second paragraph appears to indicate that it is meant to cover only persons who are sent to accomplish government business, and not citizens present in the country for personal or business reasons. The State Department reportedly sought broader application for the bilateral agreements. In 2002, the European Council argued that parties to the ICC who signed such agreements with the United States would be acting inconsistently with their obligations under the Rome Statute. The European Union (EU), all of whose members are parties to the Rome Statute, initially opposed the agreements altogether, but its members reached a compromise to allow member countries to sign. The EU issued guidelines for member countries for the acceptable terms of Article 98 agreements, specifying that coverage would be limited to government representatives on official business, the United States would expressly pledge to prosecute any war crimes committed by Americans, and the agreements would not contain a reciprocal promise to prevent the surrender of European citizens to the ICC. In response to the Nethercutt Amendment, the European Council released a statement calling on President Bush to make "full use of his waiver authority" and reiterated the EU stand with respect to Article 98 agreements, referring to the 2002 guidelines. Despite the EU compromise, the U.S. pursuit of "immunity" has been criticized by some as unnecessary or as an outright effort to undermine the ICC. Supporters of the policy note that agreements, such as SOFAs, that provide immunity for soldiers from prosecution in foreign courts are not unusual. For example, the 19-member International Security Assistance Force (ISAF), a joint force authorized by the U.N. Security Council to provide assistance to the interim government in Afghanistan, included a clause providing immunity for participants in its Military Technical Agreement with the interim government. Furthermore, supporters point out, the agreements are based on and consistent with Article 98 of the Rome Statute, and therefore cannot be said to undermine the ICC. The practical effect of the Article 98 agreements is as of yet uncertain. The use of such agreements with host countries does not provide absolute immunity from the ICC. They would bind only countries that choose to sign, and would have the effect only of preventing the host nation from surrendering an accused to the ICC for prosecution. While the Rome Statute gives some discretion to States Parties to honor their international obligations applicable to extradition of persons who are identified in an ICC request for surrender, there does not appear to be a provision for accused persons or their states of nationality to challenge the jurisdiction of the ICC based on the violation of a bilateral agreement. Therefore, States Parties to the Rome Statute are not precluded from entering into Article 98 agreements that provide for immunity of foreign troops from surrender, but if the ICC were nevertheless to gain custody over the accused through other means, its jurisdiction may not be affected by the agreement. Though the Administration continues to seek to conclude Article 98 agreements with relevant countries, it is not clear how many more such agreements are likely to be forthcoming. To strengthen the Administration's pursuit of these agreements, Congress could make more forms of aid contingent on the recipient country's agreement to protect U.S. troops from surrender to the ICC, or it could enact legislation to restrict the President's discretion to grant waivers. If further negotiations fail to garner necessary support, or in case the agreements should turn out to less effective than desired or counterproductive for other reasons, policymakers may seek alternative avenues. One option might be to implement a policy of investigating, and if warranted, prosecuting, all crimes under the ICC jurisdiction alleged to be committed by a U.S. person, thus preempting the ICC through application of the complementarity principle. Such a policy, coupled with changes in U.S. statutes to broaden the jurisdiction of federal courts to cover all relevant crimes, could further insulate U.S. citizens from the reach of the ICC. The United States could seek to further enhance its reputation for conducting fair and credible investigations and trials of suspected war criminals, as well as perpetrators of crimes against humanity or genocide, through the use of consistent procedures that are as open as security considerations permit. Such a practice may help to overcome any charges that a U.S. investigation or prosecution of an accused is not "genuine" for the purposes of complementarity. Finally, some have argued that a policy of cooperation with the ICC in the prosecution of persons accused of crimes that the United States agrees amount to "the most serious crimes of concern to the international community" would enhance the reputation of the United States as a promoter of human rights and the rule of law. Such a policy could take the form of passive non-interference with the ICC to active assistance, including working from within the U.N. Security Council to refer cases to the ICC. By actively keeping the Security Council involved in the referral of cases, some of the predicted problems with referrals by States Parties or by the prosecutor could be minimized. On the other hand, some argue a cooperative posture with respect to the ICC in the case of foreigners while pursuing immunity for U.S. citizens would be perceived as a double standard. | One month after the International Criminal Court (ICC) officially came into existence on July 1, 2002, the President signed the American Servicemembers' Protection Act (ASPA), which limits U.S. government support and assistance to the ICC; curtails certain military assistance to many countries that have ratified the Rome Statute establishing the ICC; regulates U.S. participation in United Nations (U.N.) peacekeeping missions commenced after July 1, 2003; and, most controversially among European allies, authorizes the President to use "all means necessary and appropriate to bring about the release" of certain U.S. and allied persons who may be detained or tried by the ICC. The provision withholding military assistance under the programs for Foreign Military Financing (FMF) and International Military Education and Training (IMET) from certain States Parties to the Rome Statute came into effect on July 1, 2003. The 109th Congress reauthorized the Nethercutt Amendment as part of the FY2006 Consolidated Appropriations Act (H.R. 3057/P.L. 109-102). Unless waived by the President, it bars Economic Support Funds (ESF) assistance to countries that have not agreed to protect U.S. citizens from being turned over to the ICC for prosecution. H.R. 5522, as passed by the House of Representatives, would continue the ESF restriction for FY2007. The Senate passed a measure as part of the 2007 National Defense Authorization Act (H.R. 5122, S. 2766) that would modify ASPA to end the ban on IMET assistance. The ICC is the first permanent world court with nearly universal jurisdiction to try individuals accused of war crimes, crimes against humanity, genocide, and possibly aggression. While most U.S. allies support the ICC, the Bush Administration firmly opposes it and has renounced any U.S. obligations under the treaty. After the Bush Administration threatened to veto a United Nations Security Council resolution to extend the peacekeeping mission in Bosnia on the ground that it did not contain sufficient guarantees that U.S. participants would be immune to prosecution by the ICC, the Security Council adopted a resolution that would defer for one year any prosecution of participants in missions established or authorized by the U.N. whose home countries have not ratified the Rome Statute. That resolution was renewed through July 1, 2004, but was not subsequently renewed. In addition, the United States is pursuing bilateral "Article 98"agreements to preclude extradition by other countries of U.S. citizens to the ICC. However, in what some view as a sign that the Administration is softening its stance with respect to the ICC, the United States did not exercise its veto power at the Security Council to prevent the referral of a case against Sudan's leaders for the alleged genocide in Darfur. This report outlines the main objections the United States has raised with respect to the ICC and analyzes ASPA and other relevant legislation enacted or proposed to regulate U.S. cooperation with the ICC. The report concludes with a discussion of the implications for the United States, as a non-ratifying country, as the ICC begins to take shape, as well as the Administration's efforts to win immunity from the ICC's jurisdiction for Americans. A description of the ICC's background and a more detailed analysis of the ICC organization, jurisdiction, and procedural rules may be found in CRS Report RL31437, International Criminal Court: Overview and Selected Legal Issues, by [author name scrubbed] (pdf). |
Assessing the achievement of students in elementary and secondary schools and the nation's educational progress is fundamental to informing education policy approaches. Congressional interest in this area includes and extends beyond the annual assessments administered by states to comply with the educational accountability requirements of Title I-A of the Elementary and Secondary Education Act (ESEA). Congressional interest in testing also encompasses a national assessment program, authorized by the National Assessment of Educational Progress Assessment Act (NAEPAA; Title III, Section 303 of P.L. 107-279 ), and participation in international assessment programs, authorized by the Education Sciences Reform Act (ESRA; P.L. 107-279 , Section 153(a)(6)). At the national level, students participate in the National Assessment of Educational Progress (NAEP). At the international level, U.S. students participate in the Trends in International Mathematics and Science Study (TIMSS), Progress in International Reading Literacy Study (PIRLS), and Program for International Student Assessment (PISA). When national and international assessment results are released, there is a tendency to take the results of one assessment and present them as a snapshot of U.S. student achievement. The focus on one set of assessment outcomes may result in a narrow and possibly misleading view of overall student achievement. The primary purpose of this report is to provide background and context for the interpretation of national and international assessment scores so that results can be interpreted appropriately over time and across multiple assessments. Other purposes of this report are to describe specific national and international assessments, describe the recent results of these assessments, and clarify specific issues regarding the interpretation of assessment scores that explain the achievement of U.S. students. National and international assessments are large-scale assessments of educational progress. While some may also consider statewide assessments "large-scale," for the purposes of this report "large-scale assessments" refers only to national and international assessments. These assessments differ from statewide and other assessments in several important ways. First, large-scale assessments have different purposes than smaller-scale assessments. Second, there are different participation requirements and sampling procedures. And, third, there are differences in the ways scores are typically reported for large-scale assessments versus smaller-scale assessments. This section of the report discusses some of the major differences between large-scale and other, smaller-scale assessments, such as state and local assessments. The primary purposes of large-scale assessments are to highlight achievement gaps, track national progress over time, compare student achievement within the United States, and compare U.S. academic performance to the performance of other countries. Unlike statewide assessments that evaluate schools and districts, large-scale assessment results generally cannot be connected to individual students, schools, or districts. Results are typically reported at the national or state levels. Results from large-scale assessment that are reported at the national or state levels are well suited for broad-based analyses of achievement gaps in the United States. The "achievement gap" refers to differences in educational performance across subgroups of U.S. students. The most commonly reported achievement gaps are those that highlight differences by race, ethnicity, socioeconomic status, disability status, and gender. Results reported at the national and state level are also well suited to track U.S. progress over time. Statewide assessments tend to change periodically depending on several factors, including changes in state and federal legislative requirements, in the assessments administered, and in the vendors that assist states with assessment development. By contrast, national and international assessments have remained relatively stable over time. Due to this stability, the results are easier to interpret from year to year because they are more of a direct comparison. Some national assessment programs date back to the 1960s and allow for a broader view of educational progress than statewide assessments. Results reported at the national level on international assessments are uniquely suited to compare U.S. academic performance to the performance of other countries. Statewide assessments and national assessments cannot be used for this purpose. The United States has participated in international assessments since the 1960s. Depending on the type of international assessment and year of administration, U.S. student performance has been compared to student performance in approximately 30 to 70 countries. Furthermore, some international assessments have been benchmarked against U.S. student performance in certain states. Participation requirements for statewide, national, and international assessments differ. States are required by the ESEA to assess all students in statewide assessment programs, including students with disabilities and English Learners (ELs). In assessment terminology, states are required to assess the "universe" of students (i.e., all students) in statewide assessments. States that receive Title I-A ESEA funding (currently, all states) are also required to participate in biennial NAEP assessments of reading and mathematics for the 4 th and 8 th grades. In contrast to statewide assessments, however, states are required to administer national assessments to a subset of students. In assessment terminology, states assess a "representative sample" of students. Additionally, states may not be required to administer the assessments to certain students with disabilities and ELs if these students require an accommodation that is not permitted on the national assessments. Although states are required to participate in these assessments, individual participation of students remains voluntary. Unlike statewide assessments and the NAEP assessment, states are not required to participate in many national assessments and or any international assessments. Participation is voluntary at both the state and student levels. If a state agrees to participate, each international assessment has a different method for selecting students. Like national assessments, international assessments test a "representative sample" of students. Score reporting for large-scale and smaller-scale assessments has some noteworthy similarities and differences. Statewide, national, and international assessments can all report student achievement as scaled scores. A scaled score is a standardized score that exists among a common scale that can be used to make comparisons across students, across subgroups of students, and over time on a given assessment. Educational assessment often reports scaled scores instead of raw scores or percent correct. There are several reasons that scaled scores are preferable. Large-scale assessment programs usually have multiple forms of the same test to control for student exposure to assessment items. As such, students take multiple forms of the same test. Although the multiple forms of the same assessment are similar, there are inevitably differences in difficulty of certain items across forms. By creating a scaled score, the scores of students or groups of students can be directly compared, even when different forms of varying difficulty were administered. Although all these assessments use scaled scores, they all have a different scale. For example, some scales from national assessments are from 0-300 while scales from international assessments are typically 0-1000. Therefore, scaled scores are not directly comparable. When a scaled score is reported in isolation, it may be difficult to determine how well a student or group of students performed. To provide a context for grade-level or age-level expectations, large-scale assessments (and some smaller-scale assessments, such as the statewide assessments required by Title I-A of the ESEA) use performance standards. A performance standard is an agreed upon definition of a certain level of performance in a content area that is expressed in terms of a cut score (i.e., basic, proficient, advanced) for a specific assessment. Although statewide, national, and international assessments use performance standards and may even use the same terminology (e.g., basic, proficient, advanced) to describe one or more of their performance standards, they do not use the same performance standards. For each assessment, there may be different cut scores and different definitions of each performance level. A student who is "proficient" on a statewide assessment may not be "proficient" on a national assessment and vice versa. In addition, within an individual assessment, the range of actual student performance within the "proficient" performance standard, for example, will include students whose assessment results are just high enough to be considered proficient as well as students whose assessment results almost put them into the next highest performance standard level (e.g., advanced). In this example, the "proficient" performance standard does not distinguish between a student who is just barely proficient and one who is nearly advanced. Both students would be considered to be proficient. International assessments usually report scores differently than statewide and national assessments. Although international assessments do report a scaled score and sometimes a performance standard, they have additional ways of reporting achievement. Performance on international assessments is also reported as a rank or as a score relative to an "international average" score. Rank and international average scores tend to change from one assessment administration to the next, depending on the countries that participate in the assessment. Perhaps the most important distinction between statewide and large-scale assessments is the level of reporting. Statewide assessments are administered so that scores can be reported for individual students. Because statewide assessment programs test the universe of students and each student takes all the assessment items, each student has his or her own scaled score and performance standard level (e.g., basic, proficient, advanced). In large-scale assessments, a representative sample of students is tested, and each student may only take a portion of the assessment items. This type of sampling procedure allows scores to be reported for groups of students but not individual students. Large-scale assessments, therefore, report scores for groups of students with similar demographic characteristics, groups within a large district or state, or groups within a country. Large-scale assessments are standardized assessments that are administered nationwide or worldwide. U.S. students currently participate in two types of large-scale assessments: national assessments and international assessments. The United States administers a series of national assessments called the National Assessment of Educational Progress. Although NAEP is described as a single assessment, it is actually a series of two assessment programs: the main NAEP and the long-term trends (LTT) NAEP. The main NAEP program consists of three subprograms: national NAEP, state NAEP, and the Trial Urban District Assessment (TUDA). The United States also participates in three major international assessments: the Trends in International Mathematics and Science Study (TIMSS), the Progress in International Reading Literacy Study (PIRLS), and the Program for International Student Assessment (PISA). Table 1 provides a quick reference guide to the characteristics of the large-scale assessments discussed in this report. Appendix A provides additional information on large-scale assessments, such as authorization and oversight provisions. The NAEP is referred to as the "Nation's Report Card" because it is the only nationally representative assessment of what America's students know and can do in various content areas. The original NAEP program began in 1969 and the first assessment was administered in 1971. The National Assessment of Educational Progress Authorization Act authorizes the NAEP. The Commissioner for the National Center for Education Statistics (NCES) in the U.S. Department of Education (ED) is responsible for the administration of the NAEP. The Secretary of Education appoints members to the National Assessment Governing Board (NAGB) to set the policy for NAEP administration. The Commissioner of NCES and NAGB meet regularly to coordinate activities. In the first two decades of NAEP administration, there was no "main NAEP" program or "LTT NAEP" program. Beginning in 1990, however, the NAEP program evolved into two separate assessment programs. The main NAEP program was first administered in 1990. In 1996, NAGB issued a policy statement to redesign the NAEP. The most noteworthy change was splitting the NAEP into two "unconnected" assessment programs. NAGB proposed a "main NAEP" program that would become the primary way to measure reading, mathematics, science and writing. NAGB recognized, however, that the nation's curricula would continue to change over time and there would still be value in tracking long-term trends with a stable assessment. NAGB, therefore, proposed the LTT NAEP assessment would be continued, though less frequently, to track trends over time. The main NAEP assessment framework was expected to change about every decade to account for changes in the nation's curricula while the LTT NAEP assessment framework was set to be stable over time. Another noteworthy change of the 1996 policy statement was the development of performance standards for the main NAEP. Although the original NAEP had numeric performance levels (i.e., 150, 200, 250, 300, 350), there were no descriptive performance standards associated with these levels (i.e., basic, proficient, and advanced). Performance standards were introduced with the administration of the main NAEP in 1990. The standards were subsequently amended several times over the next five years. In 1996, NAGB committed to improving the performance standards and recommended the continued use of performance standards. Because of this policy shift, the main NAEP and its subprograms continue to use basic, proficient, and advanced as their performance levels. The main NAEP has evolved over time and split into several subprograms: national, state, and TUDA. The national NAEP assesses the widest range of subject areas. For the national NAEP, a sample is selected from public and private schools and students, creating a representative sample across the nation. The state NAEP program began as a trial assessment program in 1990 and currently assesses four subject areas: reading, mathematics, writing, and science. In 1996, the state NAEP program was no longer considered a trial and it included 43 states and jurisdictions. In 2001, there was a significant change to the state NAEP program due to the reauthorization of the ESEA by the No Child Left Behind Act (NCLB; P.L. 107-110 ). The NCLB required states that receive Title I-A funding to participate in biennial NAEP assessments of reading and mathematics in 4 th and 8 th grades, provided that the Secretary of Education pays for the testing. Although states receiving funding are required to participate, only a sample of schools, and a sample of students within those schools, are selected from each state to participate, creating a representative sample of students within each participating state. Participation is voluntary at the individual level. The assessments administered in the state NAEP program are exactly the same as the national NAEP assessments. The latest reauthorization of the ESEA retained the requirement that states receiving Title I-A funding to participate in these assessments. In 2017, the most recent administration of the main NAEP, 585,000 4 th and 8 th grade students participated. The TUDA program assesses four subject areas: reading, mathematics, writing, and science. The TUDA began in 2002 with six participating districts. Participation has grown with each administration, and in 2017, 27 districts voluntarily participated. A total of 66,500 students participated in the 2017 mathematics assessment and 65,300 students participated in the 2017 reading assessment. The assessments administered in the districts are exactly the same as the national and state NAEP assessments. Although it was not called the LTT NAEP program at the time, the LTT NAEP program is typically considered to date back the origin of NAEP in 1969. Since it was initially the only NAEP assessment, the LTT NAEP assessment items changed over time throughout the 1970s and 1980s to reflect changes in the nation's curricula. Since 1990, however, the LTT NAEP program has remained unchanged. This continuity of assessment items over time is what allows the LTT to accurately track long-term trends. In early administrations of the LTT NAEP program, a wide range of content areas was assessed, including reading, mathematics, science, writing, citizenship, literature, social studies, music, art, and several areas of basic skills. In 1999, due to the development and administration of the main NAEP program, the LTT began to assess only reading and mathematics. The LTT NAEP program currently assesses 9-, 13-, and 17-year old students in reading and mathematics. The LTT NAEP was most recently administered in 2012 to approximately 53,000 students. While previously administered about every four years, the next LTT NAEP administration is scheduled for 2024. ED provides reports and data tools to explore the results of the NAEP. For example, ED releases publications and multimedia materials for educators, researchers, news organizations, and the public. ED also provides access to the NAEP Data Explorer, which allows the public to create customizable tables and graphics by state, district, content area, etc. The NAEP Data Explorer can also be used to conduct basic research analyses of NAEP data, such as significance testing, gap analysis, and regression analysis. Due to the amount of information provided by NAEP publications and the NAEP Data Explorer, it is not feasible to cover all NAEP results in this report. This discussion of NAEP results presented here focuses on major trends in performance over time as well as some recent trends. These trends are examined in terms of average scores across groups and average scores across groups of different achievement levels (i.e., 10 th , 25 th , 50 th , 75 th , and 90 th percentiles of achievement). Average trends across different achievement levels are often examined to determine whether the improvement (or lack thereof) can be attributed to higher-achieving students, lower-achieving students, or all students. Additionally, achievement gaps over time that are reported in NAEP publications are also presented. Results discussed herein are used in subsequent sections of this report to highlight some of the issues of interpretation in large-scale assessments. For links to more comprehensive results for NAEP, see Appendix B . The most recent administration of the main NAEP was 2017. Figure 1 shows the mathematics and reading results for 4 th and 8 th graders. Average scores have increased significantly in mathematics and reading performance for 4 th and 8 th grade on the main NAEP (since 1990 and 1992, respectively). Compared to the 2015 administration of the NAEP, average mathematics scores did not change significantly for 4 th or 8 th grade. Average reading scores did not change significantly for 4 th grade students, but there was a small, statistically significant improvement for 8 th grade students. NAEP uses three performance standard levels to describe achievement: basic, proficient, and advanced. For all grades and subject areas, U.S. students' average performance in 2017 falls between the basic and proficient levels. For the NAEP assessment, the proficient level of achievement is not considered "grade-level work." The proficient level is considered mastery of challenging subject matter, including the application of knowledge and demonstration of analytical skills. For 4 th grade mathematics , 40% of students scored at or above the proficient level which is not significantly different than the previous administration in 2015 (40%) but significantly higher than the initial administration in 1990 (13%). For 8 th grade mathematics, 34% of students scored at or above the proficient level which is not significantly different than the previous administration in 2015 (33%) but significantly higher than the initial administration in 1990 (15%). For 4 th grade reading , 37% of students scored at or above the proficient level which is not significantly different than the previous administration in 2015 (36%) but significantly higher than the initial administration in 1992 (29%). For 8 th grade reading , 36% of students scored at or above the proficient level, which is significantly higher than the previous administration in 2015 (34%) and the initial administration in 1992 (29%). Main NAEP scores are also reported at five different percentiles to track the performance of lower-achieving students, average-achieving students, and higher-achieving students over time (i.e., 10 th , 25 th , 50 th , 75 th , and 90 th percentiles). Figure 2 shows the progress over time for students achieving at various percentiles. Significant gains on the main NAEP assessment in the last several years are driven by students who are in higher-achieving percentile groups. 8 th grade students in the 75 th and 90 th percentile groups made significant gains in mathematics and reading since 2015. 8 th grade students in the 25 th percentile group scored significantly lower in mathematics since 2015. 4 th grade students in the 25 th and 10 th percentile groups scored significantly lower in mathematics and reading since 2015. Figure 3 shows the trend in average NAEP mathematics and reading performance on the LTT from the early 1970s until the most recent assessment in 2012. The LTT NAEP assessment corroborates the gains observed on the main NAEP for 9- and 13-year old students. In both mathematics and reading, 9- and 13-year old students have shown significant gains over time. Achievement gaps occur when one subgroup of students significantly outperforms another subgroup of students on an assessment of academic achievement. In the United States, there have historically been observed achievement gaps by gender, race, ethnicity, socioeconomic status, and disability status. NAEP results have highlighted various achievement gaps and tracked them over time. The following section reports selected achievement gaps that are often highlighted in publications presented by ED. This section does not, however, examine all possible achievement gaps. The 2017 NAEP results reveal that significant achievement gaps exist by gender, race, ethnicity, socioeconomic status, and school factors. Table 2 shows the size of the most recent gaps. The largest achievement gaps are typically by race, ethnicity and socioeconomic status. For the 2017 NAEP results, the largest significant gap reported is that between white students and black students in 8 th grade mathematics (32 points), the second largest significant gap reported is that between students not eligible for the National Student Lunch Program (NSLP) and students who are eligible for the program in 8 th grade mathematics, and the smallest significant achievement gaps reported are between male students and female students in mathematics. Some achievement gaps have changed since the early 1990s. As reported by ED, some have increased significantly over time. The largest increase in the achievement gap over time is the difference between white students and Asian/Pacific Islander students in 4 th grade reading (15 points) and 8 th grade mathematics (12 points). In 4 th grade reading, white students outperformed Asian/Pacific Islander students in 1992 but are now significantly outperformed by them. In 8 th grade mathematics, Asian/Pacific Islander students outperformed white students in 1990 and the gap has become significantly larger over time. Other achievement gaps have decreased significantly over time. The gap between white students and black students has decreased in both 4 th grade mathematics (7 points) and 4 th grade reading (6 points). The gap between white students and Hispanic students has decreased in 8 th grade reading (7 points). The LTT NAEP also tracks achievement gaps over time. In general achievement gaps have significantly narrowed or remained unchanged. For example, the gap between white students and black students in reading at age 9 has narrowed since 1971. While the average score for white students increased 15 points, the average score for black students increased 36 points, leading to the narrowing of the achievement gap. None of the measured achievement gaps in the LTT NAEP have increased significantly over time. The United States regularly participates in three international assessments: TIMSS, PIRLS, and PISA. While U.S. students have participated in international assessments since the 1960s, the modern era of international assessments began in the mid-1990s. This report focuses on international assessment results that highlight U.S. student performance over time and in relation to other countries. Results discussed herein are used in subsequent sections of this report to highlight some of the issues of interpretation in large-scale assessments. For links to more comprehensive results for the international assessments, see Appendix B . The TIMSS is an international comparative study that is designed to measure mathematics and science achievement in 4 th and 8 th grades. The TIMSS is designed to measure "school-based learning," and is designed to be broadly aligned with mathematics and science curricula in participating education systems (i.e., countries and some sub-national jurisdictions). The United States has participated in the TIMSS every four years since 1995. Less often, 12 th grade students participate in the TIMSS Advanced program, which measures advanced mathematics and physics. In 2015, approximately 20,250 U.S. students participated in TIMSS and about 5,900 U.S. students participated in TIMSS Advanced. The United States was one of over 60 education systems to participate in TIMSS and one of 9 to participate in the TIMSS Advanced program. All participation in TIMSS is voluntary. The next TIMSS administration is scheduled for 2019. No date has been announced for the next TIMSS Advanced administration. The TIMSS is conducted in the United States under the authority of international assessment activities. TIMSS assessments in the United States are administered by the Commissioner of NCES within the International Activities Program. The International Association for the Evaluation of Educational Achievement (IEA) coordinates TIMSS and TIMSS Advanced internationally. TIMSS reports results separately for mathematics and science. U.S. results for TIMSS mathematics are as follows: In 2015, 4 th grade, the United States scored significantly lower than 10 education systems, significantly higher than 34 education systems, and not significantly different than 9 education systems. In 8 th grade, the United States scored significantly lower than 8 education systems, significantly higher than 24 education systems, and not significantly different than 10 education systems. U.S. results for TIMSS science are as follows: In 2015, 4 th grade, the United States scored significantly lower than 7 education systems, significantly higher than 38 education systems, and not significantly different than seven education systems. In 8 th grade, the United States scored significantly lower than 7 education systems, significantly higher than 26 education systems, and not significantly different than nine education systems. TIMSS reports results over time by achievement level for U.S. students (i.e., 10 th percentile, 25 th percentile, 50 th percentile, 75 th percentile, and 90 th percentile). Figure 4 shows the results for 4 th and 8 th grade mathematics for U.S. students. Increases in achievement for 4 th grade mathematics may be driven by the performance of average or above average groups, however, the increases are not statistically significant. Performance on TIMSS increased for all achievement levels on 8 th grade mathematics, however, the increases were significant for average and above average groups while increases were not significant for below average groups. Science results for U.S. students are also reported over time and by achievement level. Figure 5 shows results for science performance for students in 4 th and 8 th grade over time and by achievement level. Science achievement in 4 th and 8 th grades has been generally flat since the 2011 administration of TIMSS. There have been some significant increases in 4 th and 8 th grade science achievement since the 2007 administration of TIMSS for students whose achievement falls between the 25 th and 75 th percentiles. Source: U.S. Department of Education, National Center for Education Statistics, Highlights From TIMSS and TIMSS Advanced 2015 , NCES 2017-002, November 2016, https://nces.ed.gov/ pubs2017/ 2017002.pdf . PIRLS is an international comparative study of 4 th grade students in reading literacy. PIRLS assesses reading literacy at 4 th grade because this is typically considered a developmental stage of learning where students shift from learning to read to reading to learn. PIRLS is not an assessment of word reading ability but rather an assessment of the purposes for reading, processes of comprehension, and reading behavior and attitudes. For young students, reading generally has two purposes both in and out of school: (1) reading for literacy experience, and (2) reading to acquire and use information. The United States has participated in PIRLS every five years since 2001. The next assessment of PIRLS will be administered in 2021. In 2016, the United States also participated in the first administration of ePIRLS, a computer-based assessment of online reading. ePIRLS is designed to measure informational reading comprehension skills in an online environment. In 2016, approximately 4,500 U.S. students participated in PIRLS and an additional 4,000 students participated in ePIRLS. The United States was one of 61 education systems to participate in PIRLS and one of 14 to participate in ePIRLS. All participation in PIRLS and ePIRLS is voluntary. PIRLS is conducted in the United States under the authority of international assessment activities. The PIRLS and ePIRLS assessments in the United States are administered by the Commissioner of NCES within the International Activities Program. Like TIMSS, the IEA coordinates PIRLS internationally. Results for PIRLS and ePIRLS are reported separately. For PIRLS, the United States scored significantly lower than 12 education systems, significantly higher than 30 education systems, and not significantly different than 15 education systems. For ePIRLS, the United States scored significantly lower than 3 education systems, significantly higher than 10 education systems, and not significantly different than 2 education systems. PIRLS reports results for U.S. students over time by achievement level (i.e., 10 th percentile, 25 th percentile, 50 th percentile, 75 th percentile, and 90 th percentile). Figure 6 shows the results for 4 th grade reading achievement by achievement level across time. In general, U.S. student performance from 2001 to 2016 was relatively flat. PISA is an international comparative study of 15-year-old students in the content areas of science, reading, and mathematics "literacy." It aims to measure the achievement of students at the end of their compulsory education. The PISA is not designed to measure "school-based learning" and is not designed to be aligned with academic content standards. Instead, PISA intends to measure students' preparation for life and focuses on science, reading, and mathematics problems within a real-life context. The United States has participated in PISA every three years since 2000. In 2015, approximately 6,000 U.S. students participated in PISA. The United States was one of 72 countries and economies to participate. All participation is voluntary. PISA 2018 was administered in the fall of 2018, and results are tentatively scheduled to be released in December 2019. PISA is conducted under the authority of international assessment activities. The PISA assessment in the United States is administered by the Commissioner of NCES within the International Activities Program. Unlike TIMSS and PIRLS, the international coordination of the PISA is conducted by the Organisation for Economic Cooperation and Development (OECD), an intergovernmental organization of industrialized countries. PISA reports results separately for reading literacy, mathematics literacy, and science literacy. For reading literacy, in 2015, the United States scored significantly lower than 14 education systems, significantly higher than 42 education systems, and not significantly different than 13 education systems. For mathematics literacy, in 2015, the United States scored significantly lower than 36 education systems, significantly higher than 28 education systems, and not significantly different than 5 education systems. For science literacy, in 2015, the United States scored significantly lower than 18 education systems, significantly higher than 39 education systems, and not significantly different than 12 education systems. Unlike the NAEP and other international assessments, PISA does not track progress over time in the same way for different levels of achievement (e.g., 10 th , 25 th , 50 th , 75 th , and 90 th percentiles). PISA does, however, track average performance over time. Table 3 shows average score changes for U.S. students in mathematics, reading, and science literacy: For mathematics literacy, the average score in 2015 was 11 points lower than the average score in 2012 and 17 points lower than the average score in 2009; however, the average score in 2015 was not measurably different than the average scores in 2003 and 2006. For reading literacy, the average score in 2015 was not measurably different than in previous years. For science literacy, the average score in 2015 were not measurably different than in previous years. Results of national and international assessments are difficult to interpret for a number of reasons. Perhaps the most difficult issue in the interpretation of large-scale assessments is processing the large volume of data presented in reports. The results provided in the previous section are a small fraction of what is available. These specific results were reported to provide a broad overview of the achievement of U.S. students across a wide range of assessments over time. When large numbers of results are reported in national and international assessments, it can be challenging to compile assessment results across assessments to determine how well U.S. students are achieving over time and relative to other countries. The purpose of this section of the report is to present a few issues to consider when interpreting national and international assessments. This discussion is not intended to provide a comprehensive list of possible considerations; however, the key issues presented below are pervasive across large-scale assessments. The concept of statistical significance is central to reporting assessment results. When states or countries are presented in a rank order, it is important to note whether differences in rank are statistically significant. For example, as reported in the TIMSS results above, in 4 th grade mathematics, the United States scored lower than 10 education systems, higher than 34 education systems, and not measurably different than 9 education systems. When average scores are presented in a rank order, however, the United States is ranked number 15. Four education systems above the United States and five education systems below the United States had average scores that were not statistically significantly different from the United States. Strictly ranking average scores does not account for statistically insignificant differences between average scores. Statistical significance is an important measure of whether a change is likely to be due to chance. Statistical significance, however, may not be the most important indicator of meaningful change. A statistically significant change in assessment score is a change that is unlikely to be due to chance. Statistical significance, however, is influenced by many factors. For the purposes of this discussion, the most relevant factor that influences statistical significance is sample size. The larger the sample size, the more likely a small change in assessment score will be statistically significant. Recall that national and international assessments sample tens of thousands or hundreds of thousands of U.S. students. Due to large samples, small increases or decreases in academic achievement may be statistically significant. For example, in the most recent NAEP administration, a two-point increase in 8 th grade reading performance was statistically significant. Statistical significance is not the same as educational significance. Educational significance is subjective and dependent on the educational context of the results. Statistical significance cannot determine the magnitude of the difference and whether or not it is of educational significance. For example, as reported above in the NAEP results, there is a statistically significant gap of one point between male and female students in 8 th grade mathematics. There is also a statistically significant gap of 32 points between white and black students in 8 th grade mathematics. While both gaps are statistically significant, the gap between white and black students may have more educational significance. Some researchers argue that statistical significance can be misleading for policy purposes because a statistically significant result may be too small to warrant a change in practices or policies. Educational significance is more subjective and difficult to define when considering assessment results. One way educational researchers have tried to define educational significance or practical significance is by using an effect size. An effect size can better determine the magnitude of an effect, however, there is still no consensus on the magnitude of an effect size that is meaningful in all contexts. When new national and international assessment results are released, there is a tendency to focus on a single assessment or a single result. A narrow focus on one assessment at one point in time, however, may not provide appropriate context for interpreting the results. Examining differences in results across assessments and trends over time can provide a more meaningful context for interpretation. For example, PISA results show a statistically significant decrease in mathematics literacy scores from 2012 to 2015. When considered in isolation, this result may indicate that the mathematics achievement of 15-year-old U.S. students is declining. Consider, however, that 8 th grade U.S. students made statistically significant gains in mathematics on TIMSS from 2011 to 2015 and showed no change in mathematics on the NAEP from 2015 to 2017. While conflicting results like these can be frustrating, it is important to consider them together as a body of evidence instead of isolated data points. There may be valid reasons that U.S. students' performance decreased on PISA and increased on TIMSS. For example, as discussed above, TIMSS measures more "school-based learning," and U.S. students have historically scored relatively higher on this assessment. Perhaps the content standards and curriculum in place in the United States are more aligned with content assessed by the TIMSS and less aligned with the content assessed by the PISA. Another issue to consider is the trend over time. For example, although U.S. students' performance on PISA significantly decreased from 2009 to 2015, the 2015 score is not measurably different than the average scores in 2003 or 2006. While any significant decrease may be cause for concern, it is important to recognize that scores have not decreased significantly since the initial administration of the PISA. While a statistically insignificant change in achievement across 10 to 15 years may not be considered a positive result, the long-term trend presents a different picture of achievement than the short-term trend. Examining trends allow researchers and policymakers to identify policies and practices that were implemented at a certain time that may have contributed to an observed trend. In general, reports from a single assessment that claim U.S. student achievement has stagnated, increased, or decreased must be interpreted with caution. When one result is reported in isolation, it is easy to make oversimplified conclusions that do not necessarily generalize across assessments and over time. International assessments results are based on a representative sample of students. There are considerable differences in the characteristics of students within certain countries, however, and an accurate representative sample would also reflect these differences. Some of the differences in populations across countries may have considerable implications in the interpretation of assessment results. For example, one difference that has been found to have implications for the interpretation of assessment results is the range of socioeconomic inequality. The United States has a broader income distribution than many of the countries that participate in international assessments. The sample from the United States, therefore, likely has a larger number of students from lower-income families than samples from countries with more concentrated income distributions. Some researchers argue that "social class inequality," which is largely determined by income, is a major factor in the interpretation of international assessment results. These researchers found that students from lower-income families perform worse than students from higher-income families in every country in their analysis. Since there are more lower-income families in the United States than in the some of the countries it is routinely compared to, researchers argue that the relative performance of U.S. students is actually better than it appears when simply comparing countries' national averages. In an analysis of 2009 PISA results, researchers found that if U.S. students had an income distribution similar to that of other countries in the analysis, the average reading scores would be higher than those of the other countries and the average math scores would be about the same. Furthermore, these researchers suggest that examining trends for students at varying income distributions over time would be more useful than examining average scores over time. Since U.S. students participate in national assessments and several international assessments, there is a natural inclination to want to compare results from one assessment to another, especially when results are released within a short timeframe. The most frequently administered assessments for U.S. students are annual statewide assessments and biennial NAEP assessments. It often appears as if there is overlap in the content, timing, and grade-levels assessed, so it begs the question: can NAEP be compared to the results of statewide assessment systems required by the ESEA? Although U.S. students participate in international assessments less frequently, there is also apparent overlap in the content, timing, and grade-levels assessed. This leads to questions such as, can NAEP be compared to international assessments? If NAEP and TIMSS both measure 8 th grade mathematics, are those results comparable? If NAEP and PIRLS both measure 4 th grade reading, are those results comparable? The answers to these questions largely depend on the alignment between assessments and the purpose of the comparison. The following section of the report discusses some of the alignment studies that have been conducted and the usefulness of making comparisons across large-scale assessments. Both NAEP and statewide assessments measure 4 th and 8 th grade achievement in reading and mathematics. They both report scaled scores and performance levels of students in these content areas. These similarities may lead some to question whether these assessments are comparable or even redundant. While national and state assessments may appear to have significant similarities, each was designed for a different purpose and by different stakeholders. There are three main issues to contemplate when considering making a comparison: the alignment of content standards, the scale, and the definition of performance standards. NAEP and statewide assessments overlap in the sense that both assessment programs measure mathematics and reading achievement. The assessment programs, however, use different frameworks to decide what mathematics and reading content will be measured. For NAEP, the NAGB determines what students know and should be able to do in various content areas based on the knowledge and experience of various stakeholders, such as content area experts, school administrators, policymakers, teachers, and parents. The content assessed by NAEP is not aligned to any particular content standards. The specific content measured by statewide assessments, however, is aligned with the state's content standards. Each state has a different process for determining its content standards for mathematics and reading, but, like NAEP, it also includes input from multiple stakeholders. While it may not be feasible to study the content alignment between NAEP and all states' content standards, there was a recent alignment studies between NAEP and the common core state standards (CCSS). The study used an expert panel to study the alignment of NAEP and CCSS in 4 th and 8 th grade mathematics. The study found 79% alignment for 4 th grade students and 87% alignment for 8 th grade students, concluding that alignment between NAEP and CCSS was "strong." Other investigations have examined the alignment of NAEP reading and writing frameworks and the CCSS English language arts standards, however, these examinations did not determine a degree of alignment. It is important to note that many states are not currently using the CCSS or are using a modified version of the CCSS. From the data presented here, it is not possible to determine how well the NAEP framework aligns with specific state content standards in mathematics and reading. Even if a "strong" alignment between NAEP frameworks and state content standards is assumed, there are other difficult issues to consider when making comparisons between the assessment results. For example, NAEP and statewide assessments use different scales. NAEP scaled scores for reading and mathematics are reported on a scale from 0-500. Statewide assessments use a scale that is specific to the assessment used in each state. For the purpose of illustration, consider three common assessments that are in place across some states: the ACT Aspire, the Partnership for Assessment of Readiness for College and Careers (PARCC), and the Smarter Balanced Assessment Consortium (SBAC). The ACT Aspire uses a scale that typically reports achievement in the 400-500 range (grades 3-10). The PARCC scale scores range from 650 to 850 (grades 3-11). The SBAC scale scores range from 2114-2795 (grades 3-8, and 11 th grade). Clearly, given these different scales, a scaled score cannot be compared across NAEP and a statewide assessment. Furthermore, improvement in scaled scores cannot be directly compared. If a group of students improves 20 points on the 4 th grade NAEP reading assessment, it is not equivalent to a 20-point improvement on a statewide assessment, such as the PARCC or SBAC. If scaled scores cannot be compared, what about performance standards? A performance standard is a generally agreed upon definition of a certain level of performance in a content area that is expressed in terms of a cut score (e.g., basic, proficient, advanced) for a given assessment. There are no generally agreed upon performance standards that apply to both NAEP and state assessments, so performance standards cannot be compared across assessments. For example, as discussed earlier, NAEP defines performance standards as basic, proficient, and advanced . By contrast, PARCC and SBAC use levels as performance standards. For example, "Level 4" (out of 5) on the PARCC corresponds to "met expectations." Although it seems similar, it is unlikely that "met expectations" on the PARCC represents the same level of achievement as "proficient" on the NAEP. Setting cut points for these levels requires a specific standard-setting process that is assessment-specific, so it is unlikely that meeting expectations on one assessment corresponds to the same level of performance as being proficient on another. Perhaps even more difficult to reconcile may be when states and NAEP use the same performance standards terminology. For example, the state of Alaska uses four performance standards: Far Below Proficient, Below Proficient, Proficient, and Advanced. "Proficient" is defined as "meets the standards at a proficient level, demonstrating knowledge and skills of current grade-level content." Unlike NAEP, the "proficient" definition does not necessarily include application of skills to real-world situations or analytical skills. Neither definition of "proficient" is correct or incorrect, but these definitions demonstrate the difficulty in comparing "proficient" performance standards of NAEP to those of state assessments. In an effort to examine how closely the performance standards of NAEP reflect those used in the states, NCES released an alignment study to map state performance standards onto the NAEP scale. This mapping study is not an evaluation of the quality of state performance standards or NAEP performance standards but rather is intended to give context to the discussion of comparing performance standards. The study found that most "proficient" state standards in 4 th and 8 th grade reading and mathematics mapped at the NAEP "basic" level. This finding reinforces the difficulty in comparing NAEP to statewide assessments. Since the "proficient" performance standard on many statewide assessments may be more comparable to the "basic" performance standard on NAEP, it may not be possible to make meaningful comparisons between state assessments and NAEP using performance standards. Given the difference in the meaning of "proficient" across assessments, the number of students "proficient" on NAEP will likely be lower than the number of students "proficient" on most state assessments. If fewer students score at the "proficient" performance standard on NAEP, it does not mean that either the NAEP or statewide assessment measured achievement correctly or incorrectly. Rather, the assessments used a different assessment framework and cut score to define the performance standard of "proficient." Both NAEP and international assessments measure reading and mathematics performance of students around 4 th and 8 th grade. For instance, NAEP, TIMSS, and PISA all measure mathematics performance for students around 8 th grade. NAEP and PIRLS both measure 4 th grade reading performance. NAEP and PISA both measure reading performance around 8 th grade. Comparing NAEP to international assessments requires considering some of the same issues as comparing NAEP to statewide assessments systems: the scale, the definition of performance standards, and the alignment between the assessments. There are also some additional considerations, including the different target populations, participating education systems, differences in voluntary student participation, and the precision of measurement. As previously discussed, NAEP and the international assessments use different scales and different performance standards to describe achievement. These types of results cannot be directly compared. Perhaps an even larger difference between NAEP and international assessments is their assessment framework. That is, the specific knowledge and skills being measured within a content area. If assessment frameworks are significantly different, the assessments are not closely aligned. While national and international assessments may appear to have significant similarities, each was designed for a different purpose and uses a unique framework to measure achievement. Differences in results across the assessments do not necessarily imply a problem with measuring achievement but rather may represent different types of achievement. NCES has studied certain issues of alignment between NAEP, PISA, PIRLS, and TIMSS. In general, NAEP was developed with national interests in mind while the international assessments were developed in a collaborative process with other countries, reflecting a consensus view of content. In terms of alignment, the NAEP and TIMSS tend to focus on "school-based learning." NAEP and TIMSS are organized similarly and measure skills such as "knowing, applying, and reasoning." In mathematics, these two assessments are relatively well-aligned, but they are less well-aligned in science. PISA differs from NAEP and TIMSS in that it measures real-world learning, so it draws not only from school curricula but also learning that occurs outside of school. PISA measures mathematics skills that focus on "reproduction, connections, and reflection." In terms of reading alignment, the NAEP focuses more on school-based learning while PIRLS and PISA focus more on the context of reading and purposes for reading. There is potential overlap and potential differences in terms of the skills and abilities being assessed. In terms of target population, the NAEP, TIMSS, and PIRLS sample by grade. NAEP and TIMSS both sample students in 4 th and 8 th grade, which means the ages sampled are comparable. Likewise, PIRLS samples the equivalent 4 th grade students, which is comparable to NAEP 4 th grade students. PISA, however, samples by age. In the United States, most 15-year-old students selected for PISA are in 10 th or 11 th grades. Comparisons to younger 8 th grade students on NAEP may be less appropriate. Different assessments have different participating education systems. An education system is typically a country but can also include a sub-national jurisdiction, such as a province, state, or large city. For example, the United States participates in PISA, and Massachusetts, North Carolina, and Puerto Rico also participate as separate jurisdictions. Similarly, the United States participates in PIRLS, and Florida also participates as a separate jurisdiction. Across education systems (i.e., countries and sub-national jurisdictions), there are different types of governance. Many countries have a more centralized education administration than the United States. The implications for results may differ depending on the governance of the education system. For example, while some countries can use the results of international assessments to change policies across the board, less centralized education systems may be unable to implement unilateral, system-wide changes. International assessments also differ in how they treat the scores of sub-national jurisdictions. The international average score for PISA is based only on OECD countries' scores while the international average in PIRLS is based on all participating countries and jurisdictions. Thus, across assessments and administrations, international averages are based on different sets of countries, making comparisons across time more difficult. Further complicating this issue is the fact that in each administration of an international assessment, participating countries and sub-national jurisdictions can change. The average from year to year depends on which education systems participate in a particular administration. National and international assessments remain voluntary at the individual student level. If the group of students that choose not to participate are different than students who choose to participate, it can lead to a non-representative sample of participating students. If a non-representative sample is assessed, it can lead to selection bias in the results. On the NAEP, students with disabilities and English learners can be excluded if students require an accommodation that is not permitted by the NAEP. It is possible that if many students with disabilities or ELs are excluded, the sample would not include enough of these students to be representative of the population. Typically, large-scale assessments analyze the sample for selection bias. ED provides exclusion data for students with disabilities and ELs by state for the NAEP. Exclusion rates by state vary. For example, in 2011 for 8 th grade mathematics, state exclusion rates for students with disabilities and ELs ranged from 4% to 56%. ED also provides exclusion rates for education systems participating in the TIMSS. For example, in 2011, education system exclusion rates ranged from 0% to 23%. High exclusion rates may lead to selection bias and unreliable results that do not represent the achievement of the state or education system. Comparisons between states or education systems with high exclusion rates may be inaccurate because they may compare the achievement of a representative sample to the achievement of an unrepresentative sample. National and international assessments differ in how precisely they can measure student achievement. The precision of measurement depends largely on the sample size. The more students that participate in an assessment, the more likely it will be to detect significant small changes in performance or performance over time. International assessments tend to sample anywhere from approximately 5,000 to 25,000 U.S. students per administration. NAEP, on the other hand, samples hundreds of thousands of students. NAEP, therefore, can measure student performance with more precision. Furthermore, NAEP is better suited than international assessments to measure subgroups of students due to the sampling design and overall size of the sample. Because of the differences in the precision of measurement, students may make progress on a NAEP assessment but not on an international assessment. In this case, it is possible that the international assessment did not sample enough students to detect a statistically significant increase in student performance. Similarly, NAEP results may show that an achievement gap is getting bigger or smaller, but this result may not be duplicated by international assessments. International assessments may not have a large enough sample from minority groups to detect the same size of change in achievement gap as the NAEP. Given the difficulty of making comparisons, it is not surprising that there may be differences in results for a given year or over time among the assessments. Each assessment was developed for its own purpose and is administered in its own way, and each may present a different side of U.S. students' achievement. For example, TIMSS results may highlight how U.S. students perform on measures of school-based learning and PISA results may highlight how U.S. students perform on measures of real-world applications of learning. The fact that U.S. students perform relatively better on TIMSS than on PISA does not mean that either result is wrong but that they are measuring different skills. As previously discussed, students already participate in myriad assessments at the state and local levels, including state assessments in reading, mathematics, and science required under ESEA Title I-A. These state assessments must be aligned with state standards in the relevant subject areas. From a policy perspective, this raises obvious questions about why the United States participates in NAEP and international large-scale assessments when data on student performance are available from a multitude of other assessments. While every state administers state assessments aligned with state standards in reading, mathematics, and science, each state is able to select its own assessment and its own standards. Thus, it is possible that every state could use a different set of assessments aligned with different content and performance standards, making it difficult to compare student achievement across states based on these data. NAEP is a nationally administered assessment in reading and mathematics, and periodically in other subjects, which produces nationally representative data for each state and for large urban districts. It provides a comparison of student achievement across the United States in the subjects tested. It also provides both a snapshot in time of student achievement and trends in this achievement over time for the nation overall, states, and large urban districts, and allows comparisons of student subgroup performance at each of these levels. NAEP enables states to benchmark state performance against other states and the nation. According to NAEP, the data are also used to "inform educational policy and practice by reporting the achievement of various student groups, analyzing NAEP results in the context of educational experiences, and providing tools and resources for data analysis." NAEP provides data on national, state, and large urban district performance. By itself, however, it does not provide any data on the how students in the United States compare to those in other countries. Participation in international large-scale assessments provides insights into how the United States performs relative to other countries based on external standards that are measured the same way for each country participating in a given assessment. These assessments can provide another piece of information that broadly addresses student achievement and academic trends in the United States, potentially confirming or contradicting evidence from other assessments. Other reasons cited in research for participating in international large-scale assessments include being able to benchmark state standards to those of other countries; examine educational progress over time among countries (as opposed to only states in the United States); learn more about what is educationally possible to establish performance expectations; collect information about school environments, instruction, and resources; and compare the performance of groups of students (e.g., by race/ethnicity) with comparable groups of students from other countries to examine achievement gaps and other issues. Some researchers have also argued that the data from other countries can provide a "unique basis for generating hypotheses about American secondary schooling," even when the education systems of other countries are considerably different. If a country scores well on an international assessment, researchers may be able to isolate policies and practices that may have contributed to the country scoring well. Researchers can select these policies and practices and develop hypotheses about how they may affect the achievement of students in the United States. These policies and practices, however, are not de facto effective practices that can be immediately implemented in the United States, but rather, require further study within the context of the U.S. education system. While there are several reasons that the United States chooses to administer NAEP and to participate in international large-scale assessments, there are several factors that limit the use of national and international assessment results in shaping education policy. In addition, it is unclear whether student achievement on international assessments may be related to economic prosperity and whether increasing student achievement on these assessments may be linked to improvements in a country's economic health. When national and international assessment results are released, they provide a snapshot of the general condition of education. Tracking results over time can indicate whether students are making educational progress in certain content areas at certain grades. If U.S. students are ranked significantly lower than many other countries and not making clear progress over time, it may signal a problem in elementary and secondary education policies and practices. The results, however, may not be particularly helpful in identifying policies that may increase student achievement or aid the United States in meeting other educational goals, such as increasing high school graduation rates. For example, U.S. students' achievement has significantly decreased over the last two administrations of PISA. A decrease in achievement could represent an actual decrease in student achievement. On the other hand, a decrease in achievement could be indicative of curricula that are misaligned with the test, teaching and learning practices in the U.S. that are different than what PISA requires, or even a lack of student engagement in the testing process. With the numerous possibilities to explain student achievement, it may be unclear how policymakers should begin to address a decrease in achievement. One way policymakers may consider addressing a decrease in achievement is to adopt policies and practices from countries that consistently score well on international assessments. This approach raises myriad questions. For example, is it in the best interest of the United States and its students to adopt the educational policies of countries that may be quite different than the United States? Other countries may differ from the United States in many ways, including with respect to their student populations, levels and distribution of education funding, policies regarding the tracking of students by academic ability, secondary school and university enrollment rates, and the quality of educator provided to subgroups of students (e.g., low-income students, English learners, students with disabilities, minority students). And if it is determined that adopting the policies of another country is the best course of action, the feasibility of adopting such policies must be addressed, including whether educational policies are generalizable across countries and whether the will and capacity to make needed changes exists. In addition, just as academic achievement in the United States has changed over time, the same is true for other countries. For example, earlier in the 21 st century, Finland was a top performer on PISA and viewed as a country having policies worthy of emulation. However, in both the 2012 and 2015 administrations of the PISA, Finland has seen its performance in science, math, and reading decline. This raises questions about what would have happened if the United States had focused on mirroring Finland's policies in the hopes of achieving Finland's top level of performance. The example of Finland above highlights an important characteristic of international assessments – these assessments provide a snapshot of achievement, but they do not evaluate policies and practices within or across countries. The PISA did not evaluate the effectiveness of any policies or practices in place in Finland. The decline in achievement seen in Finland in the 2012 and 2015 PISA assessments may have been due to a specific policy or practice or it may have been due to factors outside of education (e.g., economic health, political climate, changing demographics, etc.). In the 1990s and early 2000s, PISA was not able to provide information on why students in Finland were high achieving, and currently, PISA is not able to provide information on why the achievement of students in Finland has declined. None of the international assessments provides data on the factors that may explain student achievement. Even if it is possible to identify an education policy that would increase U.S. student achievement on national and international assessments, there may be barriers to implementing that policy. Compared to many other countries that participate in international assessments, the United States has a decentralized education system that primarily reserves the power to make education policy decisions for state and local authorities. State and local authorities already rely upon state and local assessments to evaluate students, schools, and districts. While the results of national and international assessments may, in some cases, highlight a problem, the assessment results may not offer a policy solution for states. By contrast, state and local assessments are aligned with state content and performance standards, which possibly make them better suited than national and international assessments to address any perceived problems in teaching and learning at the state level. For example, if student performance is trending downward in reading on a statewide assessment, state and local authorities may choose new curricula, allocate more teaching time to reading, or provide funding for reading specialists. If student performance is trending downward in reading on an international assessment, state and local authorities cannot determine whether the score is low because student achievement is actually declining or if the test is not aligned with their content standards, curricula, or teaching practices. There is considerable debate about the impact of student achievement on a country's economic prosperity. Several analyses have tried to link performance on international assessments to various indicators of national wealth and prosperity. One analysis of the relationship between international test scores and "national success" that garnered attention was presented in 2007 by Keith Baker, a former researcher at ED. Baker used scores from 11 countries that participated in the First International Mathematics Study (FIMS) in 1964 to predict seven indicators of national success 30 years later: wealth, rate of growth, productivity, quality of life, livability, democracy, and creativity. For almost all indicators, there was no relationship or a negative relationship between scores on FIMS and national success. That is, as scores on international assessments increased, the wealth, rate of growth, etc. of a nation decreased or remained the same. Increases in achievement, therefore, were associated with decreases in indicators of national success. The one exception was the indicator of creativity (as measured by the number of patents issued). As international test scores increased, the creativity indicator also increased. Baker also analyzed the relationship between PISA and national success indicators. Results showed that nations at the PISA average generally outperformed other nations scoring well above or well below average. Based on these findings, Baker concluded that there may be some baseline level of achievement that is important for national success; however, once that baseline has been reached, focusing on increasing test scores may divert time and resources away from other factors that may contribute to national success. Another analysis that garnered attention was conducted by Eric Hanushek and Ludgar Woessmann and published by the OECD. Their analysis used economic modeling to predict the impact of achievement on international assessments on economic growth. The model used growth in PISA scores over time to project growth in gross domestic product (GDP) in selected countries. The results indicate that if all OECD countries increased their average PISA scores by 25 points over the next 20 years, the aggregate gain of OECD GDP over 80 years would be approximately $115 trillion. Furthermore, if all countries performed at a level of minimal proficiency for the OECD, the aggregate GDP would increase $200 trillion. Without a clearer picture of how performance on international assessments contributes to a country's economic prosperity, it may be difficult to decide whether attempting to increase international test scores for this purpose would be a worthwhile education policy goal. Given limited time and resources, policymakers may choose to focus efforts on other factors that contribute to educational achievement and economic prosperity. Given the overwhelming amount of data gathered by national and international assessments, it is difficult to comb through all of the results and gain a clear picture of the achievement of U.S. students over time and relative to other countries. Perhaps even more difficult is understanding the policies and practices that drive performance on these assessments. For example, in the last decade, two Secretaries of Education have expressed concern over U.S. performance on the PISA and called for different reforms to address the problem. In 2010, Secretary Arne Duncan used U.S. performance on the PISA to argue for advancing the education policy goals of the Obama Administration, most notably changes to teacher recruitment, teacher evaluation, and the compensation of highly effective teachers. He argued that the OECD found that most high-achieving countries in PISA have policies that mirror the Obama Administration's focus on highly effective teachers. By contrast, Secretary Betsy DeVos used U.S. performance on PISA to argue for advancing the education policy goals of the Trump Administration, most notably school choice. She argued that countries that outperform the United States on PISA have more quickly adopted school choice policies. Clearly, education leaders have been concerned about the performance of U.S. students on international assessments; however, the data from the assessments do not point to either a conclusive policy problem or solution. Both NAEP and international large-scale assessments provide the United States with comparative data about student achievement that is not available through assessments administered only at the state and local level. Having these data to examine student performance at a given moment in time and over the long term can be used in many ways, including as a check to confirm or contradict what data from state and local assessments indicate about student performance. While NAEP is developed and implemented solely in the United States, the results of the assessments may have limited value in identifying particular policies or practices that are and are not working for U.S. students. Since NAEP is not aligned with any particular state's standards or curricula, it cannot provide direct feedback on how well students within a state are achieving the state's standards. Although, NAEP results do provide states with an opportunity to benchmark themselves against other states that operate in the same decentralized system of educational control. International large-scale assessments also offer benchmarking and like NAEP may be less useful with respect to determining which policies and practices are contributing to student success and whether those policies and practices could be successfully implemented in locales within the United States. Thus, while national and international assessments may provide valuable data, the data do not easily translate into effective education policies. The results, therefore, may be more useful in identifying areas in need of attention or resources and may have limited utility for shaping education policy approaches. Appendix A. National and International Educational Assessments: Authorization and Oversight Provisions Appendix B. Additional Resources on National and International Assessments For more information on NAEP: https://nces.ed.gov/nationsreportcard/ For more information on TIMSS: https://nces.ed.gov/timss/https://iea.nl/timss/ For more information on PIRLS: https://nces.ed.gov/surveys/pirls/https://iea.nl/pirls/ For more information on PISA: https://nces.ed.gov/surveys/pisa/http://www.oecd.org/pisa/ For more information on the coordination of NAEP and international assessments: https://nces.ed.gov/nationsreportcard/about/international.aspx Other CRS reports on assessment in elementary and secondary education: CRS In Focus IF11021, National and International Educational Assessments CRS Report R45048, Basic Concepts and Technical Considerations in Educational Assessment: A Primer CRS Report R45049, Educational Assessment and the Elementary and Secondary Education Act Appendix C. Glossary of Acronyms CCSS: Common Core State Standards ED: U.S. Department of Education EL: English learner ESEA: Elementary and Secondary Education Act ESRA: Education Sciences Reform Act ( P.L. 107-279 , Title I) ESSA: Every Student Succeeds Act ( P.L. 114-95 ) FIMS: First International Math Study GDP: Gross domestic product IEA: International Association for the Evaluation of Educational Achievement LTT NAEP: Long-term trends National Assessment of Educational Progress NAEP: National Assessment of Educational Progress NAEPAA: National Assessment of Educational Progress Assessment Act ( P.L. 107-279 , Title III) NAGB: National Assessment Governing Board NCES: National Center for Education Statistics NCLB: No Child Left Behind Act ( P.L. 107-110 ) NSLP: National School Lunch Program OECD: Organisation for Economic Cooperation and Development PARCC: Partnership for Assessment of Readiness for College and Careers PIRLS: Progress in International Reading Literacy Study PISA: Program for International Student Assessment SBAC: Smarter Balanced Assessment Consortium TUDA: Trial Urban District Assessment (part of NAEP) TIMSS: Trends in International Mathematics and Science Study | U.S. students participate in many assessments to track their educational achievement. Perhaps the most widely discussed of these are statewide assessments required by the Elementary and Secondary Education Act (ESEA), which was most recently comprehensively amended by the Every Student Succeeds Act (ESSA; P.L. 114-95). However, U.S. students also participate in large-scale national assessments, authorized by the National Assessment of Educational Progress Assessment Act (NAEPAA; Title III, Section 303 of P.L. 107-279), and international assessments, authorized by the Education Sciences Reform Act (ESRA; Title I, Section 153(a)(6) of P.L. 107-279). At the national level, students participate in the National Assessment of Educational Progress (NAEP). At the international level, U.S. students participate in the Trends in International Mathematics and Science Study (TIMSS), Progress in International Reading Literacy Study (PIRLS), and Program for International Student Assessment (PISA). Although there are some similarities between statewide, national, and international assessments, they differ in purpose and level of reporting. For example, the purpose of statewide assessments is primarily to inform statewide accountability systems and provide information on individual achievement. By contrast, the purpose of large-scale assessments is to highlight achievement gaps, track national progress over time, compare achievement within the United States, and compare U.S. achievement to that of other countries. Results of these assessments are not reported for individuals. National Assessments: The NAEP is a series of assessments measuring achievement in various content areas. The long-term trends NAEP (LTT NAEP) has tracked achievement since the 1970s and has remained relatively unchanged. The main NAEP assessment has tracked achievement since the 1990s and changes periodically to reflect changes in school curricula. The main NAEP has three levels: national, state, and Trial Urban District Assessment (TUDA). States that receive Title I-A funding under the ESEA are required to participate in biennial state NAEP assessments in reading and mathematics for 4th and 8th grade. Results from the 2017 main NAEP show a small but significant increase in 8th grade reading since 2015. There were no significant changes in 4th grade reading, 4th grade mathematics, or 8th grade mathematics since 2015. Longer term, however, average reading and mathematics scores have increased significantly since the initial administrations in the 1990s. International Assessments: The United States participates in three international assessments: TIMSS, PIRLS, and PISA. TIMSS is an assessment of mathematics and science for 8th grade students. PIRLS is an assessment of reading literacy for 4th grade students. PISA is an assessment of reading literacy, mathematics literacy, and science literacy for 15 year old students. In general, U.S. students have made statistically significant gains since the initial administrations of international assessments; however, achievement did not consistently increase in the most recent administrations of international assessments. Issues of Interpretation of National and International Assessments: Results of national and international assessments are difficult to interpret. One challenge is processing the large amount of data. Another is understanding the difference between statistical significance and educational significance. Reporting statistical significance is standard practice in research, but it does not convey the magnitude of a difference and its associated educational significance. Another issue is the tendency to focus narrowly on one assessment at one point in time. A narrow focus may not provide the appropriate context to interpret results accurately. International assessment results may also be affected by socioeconomic considerations within and across countries. Comparing Results Across Assessments: Comparing results across national and international assessments can be challenging. Each assessment was created for a unique purpose by different groups of stakeholders, which makes direct comparisons difficult. There are a number of issues to consider when evaluating U.S. students' performance across assessments. For example, consideration must be given to the differences in (1) the degree of alignment of content standards and assessments, (2) the target population being assessed, (3) the voluntary nature of student participation, (4) the participating education systems, (5) the scale of the assessment, and (6) the precision of measurement for each assessment. |
T he Endangered Species Act (ESA; P.L. 93-205 , 87 Stat. 884. 16 U.S.C. §§1531-1544) frequently receives significant congressional attention. It offers comprehensive protection for species identified as endangered or threatened with extinction. Over the years, the power of this protection has ignited calls for greater bounds on this power, as well as assertions of its lax implementation. The following discussion provides an overview and background on the various features of the ESA that contribute to its legal stature and yet spark an ongoing debate over its implementation. The ESA is a comprehensive attempt to provide legal protection to identified species and to consider habitat protection as an integral part of that effort. It is administered primarily by the Fish and Wildlife Service (FWS) for terrestrial and freshwater species, but also by the National Marine Fisheries Service (NMFS) for certain marine species. Under the ESA, individual species of plants and animals (both vertebrate and invertebrate) can be listed as either "endangered" or "threatened" according to assessments of the risk of their extinction. Once a species is listed, powerful legal tools are available to aid the recovery of the species and to protect its habitat. Among these legal tools are the ESA's prohibition of unpermitted "take" (e.g., killing, capturing, or harming) of endangered species and its requirement that agencies, in consultation with FWS or NMFS as applicable, ensure that their actions are not likely to jeopardize the continued existence of listed species or result in destruction or adverse modification of critical habitat. (See "Take" and " Critical Habitat ," below.) As of August 24, 2016, a total of 2,266 species of animals and plants had been listed as either endangered or threatened; 1,593 of these species occur in the United States and its territories, and the remainder occur only in other countries. Of the U.S. species, 1,156 are covered by recovery plans. The ESA was passed in 1973, but was preceded by simpler acts to conserve species in 1966 and 1969. It has been amended on numerous occasions since then: 1976, 1977, 1978, 1979, 1980, 1982, 1988, and 2003. The authorization for funding under the ESA expired on October 1, 1992, although Congress has appropriated funds in each succeeding fiscal year. ESA prohibitions and penalties remain in effect regardless of appropriations. A stated purpose of the ESA is to "provide a means whereby the ecosystems upon which endangered species and threatened species depend may be conserved." While the ESA plays an important role in protecting species, it also can become a surrogate battleground in debates whose primary focus is the allocation of scarce or diminishing lands, waters, or resources. The surrogate role is especially likely because other laws often lack the strict substantive provisions that Congress included in the ESA (see " Major Provisions " sections, below). There can be economic interests on multiple sides of some vanishing species issues. Like the miners' canaries signaling a scarce resource (safe air supply), declining species are often symptoms of resource scarcities and altered ecosystems. Examples of such resource controversies include the Tellico Dam (hydropower development and construction jobs versus farmland protection and tribal graves, as well as the endangered snail darter); and Northwest timber harvest (protection of logging jobs and communities versus commercial and sport fishing, recreation, and ecosystem protection, as well as salmon and spotted owls). The worldwide debate over global climate change (fossil fuels, carbon dioxide emission levels, shoreline erosion, melting glaciers, traditional jobs, etc.) has found an avatar in the polar bear. Tensions over the ESA have increased as species have been added to the protected list, and as the greater demands of a growing economy and human population have affected species' habitats. Both Congress and the executive branch have sought to lessen these tensions by, among other things, tailoring application of the ESA for particular circumstances. The ESA's critics contend that neither the ESA nor administrative efforts go far enough in accommodating needs other than species conservation, while the ESA's defenders counter that it only balances what they see as an inherent bias toward development in other governmental laws and policies. Debate on the ESA splits largely along demographic lines. While most demographic groups support species conservation to some degree, that support is stronger among urban and suburban populations and less so in rural areas, and is stronger among those along the coasts and less so in central and mountain states. Sport hunters and anglers seem divided on the issue. Native Americans, as a group often dependent on natural resources (e.g., fish), are frequently involved in ESA issues and often support the survival of listed species. Groups opposing strong protections for listed species usually assert that jobs will be lost if conservation measures are stringent, but those seeking strong protections often claim that jobs will be lost if they are not. It is also noteworthy that, while the debate often centers on jobs and biology, people on both sides claim ethical support for their positions, and many religious groups participate in the debate. In addition, some industries (e.g., logging and land development) generally see the ESA as a serious problem, while others (e.g., some commercial fishing and many recreation interests) see it as generally supporting their interests. There is a difference between the statutory authority to carry out an action and the authorization of appropriations within a statute. The ESA contains both statutory authority for certain activities and a provision authorizing approp riations. Section 15 (16 U.S.C. §1542) is the provision authorizing appropriations—through FY1992. Even though Congress has continued to appropriate funding for ESA, the following questions are sometimes raised: (1) are the act's various prohibitions and authorities still in effect; (2) what are the House and Senate rules concerning appropriating in the absence of a current authorization; and (3) what would be the effect of a failure to appropriate funds for the agencies (primarily for FWS and NMFS, but also Coast Guard, and Secretaries of Agriculture and Treasury) to carry out their responsibilities under the ESA? Because the authorization for appropriations expired in FY1992, it is sometimes said that the ESA is not authorized. However, that does not mean that the agencies lack authority to conduct actions (Sections 4, 6-8, 10, and 11; 16 U.S.C. §§1533, 1535-1537, 1539 and 1540), or that prohibitions within the act are no longer enforceable (Section 9; 16 U.S.C. §1538). Those statutory provisions continue to be law, even if no money were appropriated. The expiration of a provision authorizing appropriations does not end the statutory obligations created by that law. The U.S. Supreme Court has long held that "the mere failure of Congress to appropriate funds, without further words modifying or repealing, expressly or by clear implication, the substantive law, does not in and of itself defeat a Government obligation created by statute." Moreover, Section 11(g) (16 U.S.C. §1540(g)) "allows any citizen to commence a civil suit on his own behalf" on various broad, specified provisions of the act. This option would still be available, regardless of agency funding. Consequently, persons carrying out acts prohibited by ESA might still face citizen suits, even if FWS or NMFS were temporarily unable to carry out their enforcement responsibilities due to lack of funds. The possibility of citizen suits could have the potential to dissuade many parties from carrying out such prohibited acts. Both the House and Senate have long-standing internal rules that distinguish between authorizations and appropriations and provide for the separate consideration of legislation containing these types of provisions. This distinction, however, exists for the convenience of Congress and does not affect a measure's statutory force when enacted into law. Either chamber can choose to observe or waive its rules during the course of the legislative process. Clause 2 of House Rule XXI prohibits consideration of measures or amendments that contain unauthorized appropriations. Further, clause 5 of House Rule XXII prohibits consideration of conference reports containing unauthorized appropriations. House rules additionally prohibit appropriations in legislation not reported by the Committee on Appropriations (Rule XXI, clause 4), amendments thereto (Rule XXI, clause 4), or conference reports (Rule XXII, clause 5). These rules are enforced via points of order on the floor. The House Rules Committee, however, may report a special rule that sets procedural parameters for the consideration of an appropriations measure. This can include the waiver of rules prohibiting unauthorized appropriations for any specified floor amendments, as well as the measure itself. Special rules can also waive points of order against provisions in a conference report on an appropriations measure. In order for these waivers to occur, the House must adopt a special rule prior to consideration of the measure or conference report. Senate rules also distinguish between authorizations and appropriations and prohibit unauthorized appropriations in both committee and floor amendments, except in specified circumstances (Rule XVI, paragraphs 2 and 4). This prohibition does not apply to conference reports. This rule is enforced via points of order during consideration, but its application may be waived by unanimous consent. The practical effects of a lapse in funding would be mixed from the standpoint of supporters and critics of existing law. Some of the areas which might be affected during the period of the lapse are listed below. (These activities are described in the remainder of the report.) No interagency consultations to approve agency actions (e.g., on construction of highways or dams, siting of pipelines on federal lands, or offshore energy drilling; see " Consultation "), nor issuance of incidental take statements to shield agencies from citizen suits; No species listed or delisted, potentially increasing lawsuits when Services fail to meet the listing deadlines in Section 4 (see " Listings "); No critical habitat designated, revised, or removed from designation, potentially increasing lawsuits when Services fail to meet deadlines (see " Critical Habitat "); No issuance of incidental take permits for nonfederal actions (see " Permits for Nonfederal Actions "); No or reduced inspections of incoming cargo for violations of species listed under the Convention on International Trade in Endangered Species (CITES) (see " International Applications of the ESA "); No fulfillment of other obligations under CITES; No monitoring of candidate species (see " Candidate Species "); No federal enforcement of prohibitions on taking listed species or adverse modification of critical habitat (though citizen suits under the ESA still possible; see " Prohibitions, Penalties "); No acquisition of habitat for listed species (because money for administering purchases would not be available; see " Land Acquisition "); No state grants for conservation of listed or candidate species (see " Land Acquisition "); and No ability under Section 7 (e)-(p) to exempt agency actions from jeopardy opinions (see " Exemptions "). The last major effort to end all funding for the ESA occurred in the 104 th Congress. Interest at the time was centered on a desire to eliminate a major source of conflict in projects such as those cited above. However, because of the type of effects just listed, the effort was abandoned, although funding for the listing of new species was temporarily halted. The answer to this question depends very much on the choice of measurement. A major goal of the ESA is the recovery of species to the point at which the protection of the ESA is no longer necessary. If this is the standard, the ESA might be considered a failure, because only 34 species have been delisted due to recovery, as of July 25, 2016. Ten species have become extinct since their listing; 8 have been delisted due to scientific reclassification of the species; and 11 have been delisted due to improved data, changes in the law, or improved scientific understanding. In the case of the species now believed extinct, some were originally listed to protect any last remaining few that might have been alive at the time of listing. It can be quite difficult to prove whether extraordinarily rare species are simply that, or in fact are already extinct. For example, two bird species, the ivory-billed woodpecker and the Eskimo curlew, are both listed as endangered, though confirmed sightings are so rare or so far in the past that these birds may actually be extinct; proving a negative (i.e., that such species do not exist any longer) is quite difficult. Rare species are, by definition, hard to find. Even so, because some scientific studies have demonstrated that most species are listed only once they are very depleted (e.g., median population of about 400 animals for vertebrates listed as endangered according to one study), another measure of effectiveness might be the number of species that have stabilized or increased their populations, even if the species is not actually delisted. If this is the standard, the ESA could be considered a success, since a relatively large number (41% of listed species according to one study) have improved or stabilized their population levels. One could also ask what species might have become extinct if there were no ESA: some species (e.g., red wolves and California condors) might not exist at all without the ESA protection, and this too might be considered a measure of success, even though the species are still rare. The authors are unaware of comprehensive studies regarding the likely status of rare species were there no ESA, but some species (e.g., some salmon populations, Florida panthers, California condors, and plants of very narrow ranges) might have declined further, from exceptional rarity to extinction, if ESA did not exist. Scientific information and analysis are pillars of ESA actions and enforcement. Three issues form the scientific background of the ESA: What are the leading causes of extinction? Is extinction normal? How do current extinction rates compare to background levels of extinction? Until the mid-20 th century, the focus of the extinction debate was on losses due to over-exploitation, generally through hunting, trapping, or fishing. The poster species of the debate were passenger pigeons, tigers, wolves, and other well-known animals. But during the 20 th century, a shift occurred. The vast majority of species, including those for which actual removal from the wild was probably an early factor in their decline, now are generally also at risk due to habitat loss. Habitats that have been reduced to a small fraction of their former extent include tall-grass prairie, fresh and salt water wetlands, old growth forests of most types, free-flowing rivers, coral reefs, undisturbed sandy beaches, and others. Global climate change is another contributor to habitat loss, acting in concert with other factors influencing population levels. Another high-ranking factor in the demise of many species is the introduction of nonnative invasive species. Nonnative species can be disease vectors or parasites (e.g., avian malaria in Hawaii, chytrid fungus attacking amphibians in much of the world, or Asian long-horned beetles in North America), predators (e.g., brown tree snakes in Guam and Hawaii), or competitors (e.g., barred owls in the Pacific Northwest or snakeheads in the Potomac River). The gradual homogenization of the world's flora and fauna has led to a demise of many species. Finally, many species are threatened by multiple factors, and some species decline for no obvious reason. If extinction is normal, some argue that there is no need for the government to intervene to halt this natural process. But is it normal? Geological evidence shows that the vast majority of species that have ever lived on Earth are now extinct—an observation uncontested by paleontologists. However, many scientists are concerned that the current rate of extinction exceeds background extinction rates over time. But calculating current rates of extinction, much less making comparisons with the geologic past, is extremely difficult. Current estimates of total numbers of species range from 3.5 million to 100 million, with 10-30 million being commonly accepted numbers. If scientists are unsure of how many species exist, it is naturally difficult to estimate how fast they are going extinct, and whether current extinction rates exceed background extinction rates. Consequently, scientists use very conservative assumptions to make these estimates. The resulting extinction rates (17,000 species per year being a typical estimate) may still seem astonishingly large, in part because the public is generally unaware of the huge number of species in groups to which many people pay little or no attention (e.g., beetles, marine invertebrates, fish), and the large number of species estimated on Earth. Widely diverse methods of calculating extinction rates all suggest that current rates exceed background rates. Normal rates are thought to be from 1 to 10 species for every 10 million species per year. (That is, if there are 20 million species now, background levels would be about 2 to 20 species extinctions per year.) Common estimates of current extinction rates range from 100 to 10,000 times such background rates—roughly comparable to the five great episodes of extinction in the geologic past. Critics most frequently question these calculations by stressing uncertainties, rather than citing specific factual errors. This criticism is not surprising, since each step in these calculations contains uncertainties (e.g., estimating the number of existing species). Most biologists counter by noting that similar numbers are generated in studies of widely different groups by a variety of scientists using different methods; robust results (i.e., similar results from the testing of a hypothesis in a variety of ways) are usually considered scientifically sound. Once extinct, a species cannot be revived. But, faced with high rates of extinction, some might argue that a return to an equal number of species, even if those species are different, would constitute a recovery of sorts. Evolution continues, so new species may evolve that are better adapted to new conditions. How long would such a replacement/recovery take? Examining the geologic record after major extinction episodes, some scientists estimate that recovery to approximately equal numbers of (different) species took up to 25 million years for the most severe extinction events. Thus, if the current extinction rate and recovery rate are comparable to past rates, the return to species numbers of the pre-historic era would take at least several million years. The following are the major provisions of the ESA in the order they appear in the U.S. Code . An endangered species is defined as "any species which is in danger of extinction throughout all or a significant portion of its range." A threatened species is defined as "any species which is likely to become an endangered species within the foreseeable future throughout all or a significant portion of its range." The ESA does not rely on a numerical standard; such a standard would not reflect the wide variety of many species' biology. (For example, a population of 10,000 butterflies, all confined to one mountaintop, would be at greater risk than 10,000 butterflies scattered over dozens of mountaintops.) The protection of the ESA extends to all species and subspecies of animals (not just birds and mammals), although for vertebrates, further protection can be given for distinct population segments within a species, and not just the species as a whole. More limited protection is available for plant species under the ESA. There is no protection afforded under the ESA for organisms (e.g., Eubacteria, Archaea, viruses) considered neither animal nor plant. The term "take" under the ESA means "to harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect, or to attempt to engage in any such conduct." (Harassment and harm are further defined by regulation at 50 C.F.R. §17.3.) There has been controversy over the extent to which the prohibition on taking may include habitat modification. A 1995 Supreme Court decision held that the inclusion of significant habitat modification where it actually kills or injures wildlife was a reasonable interpretation of the term "harm" in the law. The Secretary of the Interior manages and administers most listed species through FWS. Marine species (including most marine mammals) and anadromous fish are the responsibility of the Secretary of Commerce, acting through NMFS. The law assigns the major role to the Secretary of the Interior (all references to "Secretary" below are to the Secretary of the Interior unless otherwise stated) and provides for the relationship of the two Secretaries and their respective powers. Species may be listed on the initiative of the appropriate Secretary or, more commonly, by petition from an individual, group, or state agency. The Secretary must decide whether to list the species based only on the best available scientific and commercial information, after an extensive series of procedural steps to ensure public participation and the collection of relevant information. At this point, the Secretary may not consider the economic effects that listing may have on the area where the species occurs, although economic considerations are part of the critical habitat determination. This section (§4(b)(1)(A)) is the only part of the ESA where economic considerations are expressly forbidden, because Congress directed that listing be fundamentally a scientific question: is the continued existence of the species threatened or endangered? A species may be designated as either endangered or threatened, depending on the severity of its decline and threats to its continued survival. Under Section 3 of the ESA, an endangered species is a species that is "in danger of extinction throughout all or a significant portion of its range." A threatened species is defined as a species "likely to become endangered within the foreseeable future throughout all or a significant portion of its range." Because the ESA defines species as a species, a subspecies, or—for vertebrates only—a "distinct population segment," there is some flexibility as to how to provide different levels of protection to less than a whole species. The phrase "all or a significant portion of its range" has had different interpretations. The Department of the Interior (DOI) at one time interpreted the phrase to find that only a species in danger of extinction throughout all of its range was truly endangered. Under this interpretation, a species at risk of extinction only in a significant portion of its range would not be considered endangered. With only two exceptions, every court that considered the issue found DOI's interpretation violated the ESA, including one federal court of appeals. In 2014, FWS and NMFS issued their joint interpretation of the phrase. Under their interpretation, a portion of a species' range is significant if the species is not currently endangered or threatened throughout its range, but the portion's contribution to the viability of the species is so important that, without the members in that portion, the species would be in danger of extinction, or likely to become so in the foreseeable future, throughout all of its range. The interpretation also states that the range of a species is the area in which a species currently exists, not the historical range where the species once existed. The determination of whether a species should be listed as endangered or threatened must be based on several scientific factors related to a species and threats to its continuance. The ESA expressly states that listing determinations are to be made "solely on the basis of the best scientific and commercial data available." The word "solely" was added in the 1982 amendments to the ESA to clarify that the determination of endangered or threatened status was intended to be made without reference to its potential economic impacts. Observers have compared the decision of whether to list a species to diagnosing whether a patient has a potentially fatal disease: the diagnosis should be a strictly scientific decision, but other factors can be considered later in deciding how to treat the disease. In discussing the addition of the word "solely," a committee report stated: The principal purpose of the amendments to Section 4 is to ensure that decisions pertaining to the listing and delisting of species are based solely upon biological criteria and to prevent non-biological considerations from affecting such decisions.... [T]he legislation requires that the Secretary base his determinations regarding the listing or delisting of species "solely" on the basis of the best scientific and commercial data available to him. The addition of the word "solely" is intended to remove from the process of the listing or delisting of species any factor not related to the biological status of the species. The Committee strongly believes that economic considerations have no relevance to determinations regarding the status of species.... The only alternatives involved in the listing of species are whether the species should be listed as endangered or threatened or not listed at all. Applying economic criteria to the analysis of these alternatives and to any phase of the species listing process is applying economics to the determinations made under Section 4 of the Act and is specifically rejected by the inclusion of the word "solely" in this legislation. In summary, the ESA makes clear that the question of whether a species is endangered or threatened is a scientific decision in which economic factors must not play a part. Even so, once this determination is made, nothing in the ESA prevents choosing conservation methods that will lower costs to society, industry, or landowners, as long as the chosen methods still achieve conservation goals. As noted above, species listings are often initiated by petition, although petitions to change the status of a species (uplist or downlist) or to delist a species may also be filed and are subject to the same standards and deadlines. The ESA requires that "to the maximum extent practicable," FWS and NMFS must make an initial determination within 90 days of receiving a petition from any interested person (often, in practice, an environmental advocacy group). The 90-day determination assesses whether the petition presents substantial scientific or commercial information indicating that the petitioned action may be warranted. If so, the agency has 12 months to conduct a status review of the candidate species and find that (1) the action is not warranted; (2) the action is warranted and a listing proposal will be promptly published; or (3) the action is warranted but precluded by higher priority species for listing. A "warranted but precluded" finding must be reevaluated annually. Lawsuits have been brought against the agencies for failure to meet these deadlines, particularly in the face of increasing numbers of petitions. Several of these lawsuits were settled in 2011, setting deadlines for listing determinations on hundreds of species. As of August 2016, FWS had received more than 160 ESA petitions, of which more than 100 were for listing; other petitions have requested changes to listing or other actions. The question may arise as to the responsibilities of the federal government toward a species that is proposed for listing but has not yet been listed. This question could be important because there may be a significant time between the proposal for listing and the actual listing, during which time federal agencies could be faced with decisions on management actions of various types. Under current law, an agency must "confer" with the appropriate Secretary on any agency action that is likely to jeopardize the continued existence of any species proposed to be listed or to destroy or adversely modify critical habitat proposed to be designated for such species. The implementing regulations state that the conference is designed to assist the federal agency and the applicant (if any) in identifying and resolving potential conflicts at an early stage in the planning process. The conference process that applies to species proposed for listing is distinct from the consultation process that applies to listed species. The conference is intended to be less formal and to permit FWS or NMFS to advise an agency on ways to minimize or avoid adverse effects. The agency may choose to follow the more complete and formal process even at the proposed listing stage to avoid duplication of effort later. The ESA states that the conference stage does not require a limitation on the irreversible or irretrievable commitment of resources by agency action that would foreclose reasonable and prudent alternative measures. Once a species is listed, an agency will have definite responsibilities and an agency might consider it prudent at the proposed listing stage both to avoid harm to a precarious species and to avoid possible liability for compensation arising from agency actions creating private rights that later cannot be exercised. For example, an agency might choose to avoid holding timber sales in an area containing a proposed species. The relevant Secretary must monitor candidate species and prevent a significant risk to the well-being of any such species. A candidate species is "any species being considered by the Secretary for listing as an endangered or threatened species, but not yet the subject of a proposed rule." As of August 24, 2016, there were 58 candidate species. While a species is a candidate for listing, federal agencies and other entities may pursue a strategy of working to improve the status of a species to avoid a listing proposal at some future date. Federal agencies may develop a candidate conservation agreement (CCA) with FWS or NMFS to take specified actions to conserve a species. Nonfederal landowners may pursue a candidate conservation agreement with assurances (CCAA). Under a CCAA, a landowner may agree to carry out certain actions that will improve conservation of the species, with the assurance that, as long as the agreed actions are carried out, there will be no required change if any candidate species covered under the conservation agreement is subsequently listed as threatened or endangered. If a species is proposed for listing under the ESA, the Secretary must publish the proposed regulation in the Federal Register ; give notice to state agencies and counties where the species is thought to occur; invite those governments to submit comments on the proposal; give notice, if practical, to foreign countries where the species occurs or whose citizens harvest the species on the high seas; notify relevant professional societies; publish a summary of the regulation locally; and hold a public hearing in the area where the species is found. As of August 24, 2016, 73 species were proposed for listing. Federal agencies must confer with the appropriate Secretary on actions likely to jeopardize the continued existence of candidate species, but agencies need not limit commitments of resources. In the interval between a proposal and a listing decision, the Secretary must monitor the status of a candidate species and, if any emergency poses a significant risk to the well-being of the species, promptly list it. Some steps in the normal listing process may be skipped for emergency listings. The Secretary may promulgate special regulations to address conserving those species listed as threatened. Protections and recovery measures for a particular threatened species can be carefully tailored to particular situations, as was done, for example, with respect to the threatened northern long-eared bat and the polar bear. A federal regulation also clarifies that a threatened species for which a special rule has not been promulgated enjoys the same protections as endangered species. A distinct population segment (DPS) under the ESA refers to a portion of a listed species, separated from the rest of the species by genetic distinction and range. By definition, only vertebrates may be designated as a DPS. A 1996 policy contains the criteria that must be met for designating a DPS: the population must be discrete and significant. Discreteness is based on separation from other groups of its kind. To be significant, the segment's demise must be an important loss of genetic diversity. Once the appropriate service finds that a DPS exists, the DPS's protection status is determined using the same criteria as for other listings. If the DPS is found to be threatened, special rules under Section 4(d) of the ESA may be written. One DPS designation that has prompted extensive litigation is that of the gray wolf, with each DPS established since 2003 vacated by courts. In one decision, a court said that FWS had not used the DPS process correctly when it created a DPS and removed all protection for that DPS at the same time. NMFS developed the concept of evolutionarily significant units (ESUs) as a way of interpreting the "distinct population segment" language in Section 3(16) of the ESA. ESUs generally include multiple (often as many as 20 to 30) populations or stocks and are intended to identify important groups of salmon populations. As of July 25, 2016, 28 ESUs of salmon and steelhead trout along the Pacific coast were listed as either endangered or threatened under the ESA. The ESU concept has been problematic to some because it is not specifically scientifically based—the term was not used or recognized before NMFS invented it. NMFS chose to use the ESU concept for both policy and scientific reasons: the stock level was not practical because there are thousands of distinct stocks, and the full species level would not distinguish among distinct population segments that have different situations. The question of whether hatchery fish may be assigned to an ESU, thereby augmenting an ESU's population count, has been particularly controversial. In 1982, Congress added the concept of experimental populations to the ESA as a way of reintroducing a species to its historic range without risking severe restrictions on the use of private and public land in the area. Two criteria must be met to qualify for reintroduction as an experimental population. First, the service must have authorized the release of the population. Second, the population must be wholly separate geographically from other animals of that species. Congress required the separation so that the introduced population could be clearly distinguished. An experimental population's protected status is determined differently from that of a DPS or other species. If the experimental population is in imminent danger of extinction, it is deemed essential. (Currently, no experimental populations are designated as essential.) Otherwise, the experimental population is treated as nonessential and is considered threatened. Special regulations under Section 4 of the ESA are made regarding these populations and can include rules for taking the species. Unless the experimental population is in a national wildlife refuge or a national park, no Section 7 consultation is required for an agency action that may take a member of the population. (See " Consultation ," below.) Critical habitat is not designated for nonessential experimental populations. The processes for delisting, uplisting, or downlisting a species from the Lists of Endangered and Threatened Wildlife and Plants are the same as the processes for listing. Delisting is removing a species from the lists. Downlisting is reclassifying a species from endangered to threatened, and uplisting is the reverse. The Secretary of the Interior may initiate a change in the status of listed species. Alternatively, after receiving a substantive petition for any change in listing status, the Secretary is to review the species' status. The determination to delist, uplist, or downlist a species must be made "solely on the basis of the best scientific and commercial data available" and "without reference to possible economic or other impacts." The statute and regulations also mandate that, at least once every five years, there be a review of each species already listed to determine whether it should be removed from the list, changed from endangered to threatened, or changed from threatened to endangered. Critical habitat, as defined, includes not only geographic areas occupied by the species at the time of listing, but also areas outside that geographic area, if the Secretary determines that such additional areas are essential for the conservation of the species. When a species is listed, the Secretary must also designate critical habitat. If the publication of this information is not "prudent" because it would harm the species (e.g., by encouraging vandals or collectors), the Secretary may choose not to designate critical habitat. The Secretary may also postpone designation for as long as one year if the information is not determinable. Eventually, with the exception of designations that would not be prudent, critical habitat is to be designated. As of July 25, 2016, critical habitat had been designated for 758 listed species, or 47.5% of the 1,596 listed domestic animal and plant species. Any area, whether or not federally owned, may be designated as critical habitat, but private land is affected by critical habitat designation only if some federal action (e.g., a license, loan, or permit) is also involved. Federal agencies must avoid "destruction or adverse modification" of critical habitat, either through their direct action or activities that they approve or fund. If the Secretary designates critical habitat, the Secretary must do so on the basis of the best scientific data available and after taking into consideration the economic impact, and any other relevant impact, of specifying any particular area as critical habitat. The Secretary may exclude any area from critical habitat if he determines that the benefits of such exclusion outweigh the benefits of specifying such area as part of the critical habitat, unless he determines, based on the best scientific and commercial data available, that the failure to designate such area as critical habitat will result in the extinction of the species concerned. Therefore, although economic factors are not to be considered in the listing of a species as endangered or threatened, economic factors must be considered in the designation of critical habitat. Some habitat areas may be excluded from designation based on such concerns, unless the failure to designate habitat would result in the extinction of the species. Although avoiding adverse modification of critical habitat is an express obligation only for federal agencies and actions, it is frequently misunderstood by the public as the major restriction on a private landowner's authority to manage land. However, restrictions on use of private land come primarily from the ESA's prohibition on taking (as defined) of listed species. Only occasionally—when some federal nexus is present—are these restrictions due to any additional strictures resulting from designated critical habitat. Moreover, the ESA provides significantly fewer restrictions on the nonfederal taking of listed plants than listed animals. P.L. 108-136 amended the ESA to add a provision specifying that the Secretary shall not designate critical habitat on lands controlled by the Defense Department, if those lands are subject to an Integrated Natural Resource Management Plan (INRMP) under the Sikes Act (16 U.S.C. §670a). The provision was subject to the Secretary's determination, in writing, that the INRMP provided "a benefit" to the lands which might otherwise have been designated as critical habitat. In addition, the Secretary was directed to take national security into consideration in designating critical habitat. These provisions were added in response to assertions that designated critical habitat on some military lands interfered with military training and readiness activities. For more than 20 years, Administrations have supported and Congress has approved restrictions on FWS's ability to designate critical habitat under the ESA through the appropriations process. According to FWS, critical habitat designation shows its greatest conservation benefit when it includes areas not currently occupied by the species; these areas may be important as connecting corridors between populations or as areas in which new populations may be reintroduced. In an announcement on October 22, 1999, FWS placed designation of critical habitat at the lowest priority in its listing budget and stated that the agency could not comply with all of the ESA's demands under its budget constraints. Conservation groups saw a contradiction between that claim and the agency's repeated decision not to request increased funds for listing, together with the agency's requests that Congress place a special cap on funding for designation of critical habitat. These funding restrictions on designation of critical habitat have remained in all subsequent appropriations bills. FWS has been sued frequently for its failure to designate critical habitat, and the agency consistently loses such suits. In the agency's view, critical habitat offers little protection for a species beyond that already available under the listing process and thus the expense of designation, combined with the perception of a small margin of additional conservation benefit, make critical habitat requirements a poor use of scarce budgetary resources, especially if the public views critical habitat as the major regulatory impact of the ESA rather than as a supplement to the ESA's prohibition on "taking" a listed species. The designation of critical habitat may provide additional protection for listed species in the context of federal actions. Federal agencies must consider whether their actions are likely to destroy or adversely modify critical habitat under the Section 7 consultation provisions, meaning this protection is not available for species without such designated habitat. The FWS previously disagreed that extra protection is provided in this way, saying that it would be rare that a habitat would be harmed in this way without the species also being put in jeopardy. Therefore, according to FWS, designated critical habitat does not provide additional protection from federal actions because the jeopardy consideration would provide the necessary protection. This conclusion was based in part on the FWS regulatory definition of "destroy or adversely modify," which required that the federal action must "appreciably diminish the value of critical habitat for both the survival and recovery of a listed species." However, it was argued that the definition improperly shifted the focus from recovery of the species to survival of the species. Several federal courts of appeal agreed, holding that the definition was contrary to the ESA because it ignored the recovery goal of the law. This was finally changed in February 2016. The Federal Register notice said: After the Ninth Circuit's decision, the Services each issued guidance to discontinue the use of the 1986 definition …. Specifically, in evaluating an action's effects on critical habitat as part of interagency consultation, the Services began directly applying the definition of "conservation" as set out in the Act. … The definition now in 50 C.F.R. 402.02 gives greater emphasis to the act's focus on recovery: Destruction or adverse modification means a direct or indirect alteration that appreciably diminishes the value of critical habitat for the conservation of a listed species. Such alterations may include, but are not limited to, those that alter the physical or biological features essential to the conservation of a species or that preclude or significantly delay development of such features. The appropriate Secretary must develop recovery plans for the conservation and survival of listed species. Recovery plans to date tend to cover birds and mammals, but a 1988 ESA amendment prohibits the Secretary from favoring particular taxonomic groups. The ESA and its regulations provide little detail on the requirements for recovery plans, nor are these plans binding on federal agencies or others. The resulting hortatory nature of these plans has been widely criticized. As of August 24, 2016, there were recovery plans for 1,156 U.S. species. Land may be acquired to conserve (recover) endangered and threatened species. Money from the Land and Water Conservation Fund (LWCF) may be appropriated for this acquisition. LWCF is a federal fund derived primarily from receipts from offshore oil and gas leases, and is used primarily for land acquisition for four agencies charged with managing most federal lands. Under the ESA, the appropriate Secretary must cooperate with the states in conserving protected species and must enter into cooperative agreements to assist states in their endangered species programs, if the programs meet certain specified standards. If there is a cooperative agreement, the states may receive federal funds to implement the program, but the states must normally provide a minimum 25% matching amount. The 1988 ESA amendments created a fund to provide for the state grants, including land acquisition and planning assistance. While the authorized size of the fund is determined according to a formula, money from the fund still requires annual appropriation. For FY2016, Congress appropriated $53.5 million for cooperative activities with states and territories. If federal actions or actions of nonfederal parties that require federal approvals, permits, or funding might adversely affect a listed species as determined by the Secretary, the federal action agencies must complete a biological assessment (BA). The assessment is used to determine whether formal consultation is necessary. This assessment also is to be based on "the best scientific and commercial data available." Through consultation with either FWS or NMFS, federal agencies must ensure that their actions are "not likely to jeopardize the continued existence" of any endangered or threatened species, nor to adversely modify critical habitat. This is referred to as a Section 7 consultation . "Action" includes any activity authorized, funded, or carried out by a federal agency, including permits and licenses. Consultation is usually begun at the request of the action agency but may be initiated at the request of an FWS Regional Director or NMFS's Assistant Administrator for Fisheries. Where a federal action is dictated by statute, a Section 7 consultation is not required. If the appropriate Secretary finds that an action would neither jeopardize a species nor adversely modify critical habitat, the Secretary issues a biological opinion (BiOp) to that effect, and the agency is provided with a written incidental take statement, specifying the terms and conditions under which the federal action may proceed in order to avoid jeopardy or adverse modification of critical habitat. Alternatively, if the proposed action is judged to jeopardize listed species or adversely modify critical habitat, the Secretary must suggest any reasonable and prudent alternatives that would avoid harm to the species. The ESA does not expressly state that the BiOp is to be based on the "best scientific and commercial data available," but this arguably is implied and is expressly required under the implementing regulations, which require that the consulting agency provide "the best scientific and commercial data available or which can be obtained during the consultation." Such information is to be the basis of the BiOp, and the BiOp is to include a summary of the information on which the opinion is based. The great majority of consultations result in "no jeopardy" opinions, and nearly all of the rest find that the project has reasonable and prudent alternatives, which will permit it to go forward. The relevant Secretary generally is to complete consultation within 90 days for a wholly federal action, unless the Secretary and the federal agency mutually agree to a longer period (up to 150 days) and reasons are given for the delay. A consultation involving a nonfederal party is to be completed within the time agreed to by the Secretary, the federal agency involved, and the applicant concerned. In practice, formal consultation may take a year or more. If no reasonable and prudent alternatives are feasible, then the agency proposing the action must (1) forego the action, (2) risk incurring penalties under the ESA, or (3) obtain a formal exemption from the penalties of the ESA as set out below. If the jeopardy that is expected to result from a proposed agency action cannot be avoided and the agency proposing the action nonetheless wants to go ahead with the action, the agency (or the affected governor(s) or license applicant(s)) may apply for an exemption to allow the action to go forward. Exemptions are available only for actions (e.g., water withdrawals), not for species (e.g., Delta smelt). A high-level Endangered Species Committee (ESC) of six specified federal officials and a representative of each affected state (often called the "God Squad") decides whether to allow the action to proceed despite future harm to a species; at least five votes are required to pass an exemption. The six federal officials are the Secretaries of the Interior (chair), Agriculture, and the Army; the Chair of the Council of Economic Advisors; and the Administrators of the National Oceanic and Atmospheric Administration and of the Environmental Protection Agency. The law includes extensive rules and deadlines to be followed in applying for such an exemption, a full administrative hearing, and some stringent rules for the ESC in deciding whether to grant an exemption. The ESC must grant an exemption if the Secretary of Defense determines that an exemption is necessary for national security. In addition, and under specified circumstances, the President may determine whether to exempt a project for the repair or replacement of facilities in presidentially declared disaster areas. (A separate discussion of the six times when the exemption process has been invoked is provided in the Appendix .) To be eligible for an exemption, the federal agency concerned (and any nonfederal exemption applicant) must have carried out the consultation processes required under Section 7 of the ESA in good faith. Under Section 7(g), the agency also must have made a reasonable and responsible effort to develop and fairly consider modifications or reasonable and prudent alternatives to the proposed action that would not jeopardize the continued existence of any endangered or threatened species or destroy or adversely modify critical habitat of a species. The agency must also have conducted required biological assessments. In addition, to the extent determinable within the time provided, the agency must have refrained from making any irreversible or irretrievable commitment of resources. (Such commitments are those that would foreclose the formulation or implementation of reasonable and prudent alternatives that would avoid jeopardizing the species and/or adversely modifying its habitat.) These qualifying requirements were put in place to ensure that the exemption process is meaningful and that consideration of the issues would not be preempted by actions already taken. Additional requirements for an application are contained in the relevant regulations. The ESC shall grant an exemption for the project or activity if, based on the evidence, the ESC determines that (i) there are no reasonable and prudent alternatives to the agency action; (ii) the benefits of such action clearly outweigh the benefits of alternative courses of action consistent with conserving the species or its critical habitat, and such action is in the public interest; (iii) the action is of regional or national significance; and (iv) neither the federal agency concerned nor the exemption applicant made any irreversible or irretrievable commitment of resources prohibited by subsection (d) of this section [commitments that jeopardize species or critical habitat]. In addition, the ESA specifies particular instances when special provisions will apply to the granting of an exemption. These provisions concern international treaty obligations, national security, and presidentially declared disasters. The ESA does not have a general provision that allows the granting of an exemption in other emergency conditions. As outlined above, the exemption process is a complex affair for the applicant, and even without extensions, could take 280 days. Since a decision to exempt an action would, by definition, jeopardize the continued existence of a species, some find a rigorous process to be appropriate. But even were the process simple, any potential exemption applicant would face these challenges: The applicant must fund any required mitigation measures; the funding obligation lasts for the life of the action—potentially forever depending on the nature of the action. Because the exemption applies to the action and not to the species, FWS or NMFS must continue to attempt to recover the species. Consequently, the burden of conservation and recovery may fall that much more heavily elsewhere. A governor, trying to balance the interests of an entire state, might find this a particularly difficult obstacle. If conservation of a listed species is only one of various statutory obligations under federal or state laws, then an exemption from the ESA for the action may not be sufficient to allow an action to go forward, since those other statutory obligations may still be required. Many parties to a dispute may be reluctant to appear to side publicly with the extinction of a species. Moreover, if the increased risk of extinction provides only modest advancement for the action, the rewards of a successful exemption application may not seem worth the effort. As a practical matter, the consultation process itself offers federal agencies many opportunities to modify their actions to avoid jeopardizing species or adversely modifying their designated critical habitats yet still proceed with their actions. The well-known implications of an ESA conflict prompt agencies to consider the ESA consequences at a very early stage in their actions and to avoid conflict, and specifically to avoid the need for an exemption. For actions by private parties that might take a listed species, but without any federal nexus such as a loan or permit, the Secretary may issue permits to allow "incidental take" of species for otherwise lawful actions. The applicant for an incidental take permit (ITP) must submit a habitat conservation plan (HCP) that shows the likely impact, the steps to minimize and mitigate the impact, the funding for the mitigation, the alternatives that were considered and rejected, and any other measures that the Secretary may require. In the 1990s, the use of this section was greatly expanded, and an agency handbook provides for streamlined procedures for activities with minimal impacts. Other provisions specify certain exemptions for raptors; regulate subsistence activities by Alaskan Natives; prohibit interstate transport and sale of listed species and parts (e.g., ivory); control trade in parts or products of an endangered species that were owned before the law went into effect; and specify rules for establishing experimental populations. (Provisions of the ESA referring to international activities are discussed below.) The ESA enumerates various prohibited acts, including taking endangered species; possessing, selling, or transporting any unlawfully taken endangered species; and violating any regulation promulgated by FWS or NMFS pertaining to any endangered or threatened species. As noted above, in the absence of a special rule for a species listed as threatened, agency rules provide that threatened species are subject to essentially the same protections and prohibitions as endangered species. Attempting to commit, soliciting another to commit, or causing to be committed any prohibited act is also a violation of the ESA. The ESA's prohibitions apply broadly to any person subject to the jurisdiction of the United States. Sections 9 and 10 of the ESA provide exceptions when the prohibitions will not apply, including incidental take permits, as discussed above. Section 11 of the ESA also provides that no civil penalties will be imposed on persons who can show that they committed an ESA violation based on a good-faith belief that they were protecting themselves or another person from bodily harm from any endangered or threatened species. Any person who violates any provision of the ESA or any regulation or permit issued pursuant to the ESA may be subject to civil penalties for each violation. Knowing violators and persons engaged in business as importers or exporters of fish, wildlife, or plants are subject to higher fines. Knowing violations of most of the ESA's statutory provisions may also be criminal violations. The ESA contains a number of provisions relating to enforcement. Any person may bring a lawsuit in federal district court to enjoin anyone, including governmental entities, who the person alleges to be in violation of any provision of the ESA or its regulations or to compel the Secretary to perform a nondiscretionary duty under the ESA's listing-related provisions in Section 4. The person generally must provide written notice of intent to sue at least 60 days prior to bringing the action. The ESA also expressly provides that the court may award litigation costs and attorneys' fees to any party whenever the court determines such an award to be appropriate. The citizen suit provisions of the ESA have been a driving force in the ESA's history and often have been used to force agencies to devote greater effort toward conserving the species in question. At least one study suggests that citizen groups drive listings of species that may be at greater risk than those proposed by FWS; the same article presented data to support the thesis that citizen proposals for listings are more likely to concern species in conflict with development. ESA citizen suits seeking to list species, or to challenge delays in listing decisions, amount to a significant number of lawsuits against FWS and NMFS. In addition to providing for listing and protecting species, the ESA is the implementing legislation for the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) and the Convention on Nature Protection and Wildlife Preservation in the Western Hemisphere (the Western Hemisphere Convention) for the United States. CITES parallels the structure of ESA by dividing its listed species into groups according to the estimated risk of extinction, but uses three major categories, rather than two. In contrast to the ESA, CITES focuses exclusively on trade, and does not consider or attempt to control habitat loss. The ESA makes violations of CITES violations of U.S. law if committed within the jurisdiction of the United States. Through the Western Hemisphere Convention, the United States committed to establishing various categories of nature reserves, controlling international wildlife trade with other signatories, and protecting wildlife more generally. To some extent, the convention's goals have been subsumed under those of the ESA and other international treaties, particularly with respect to wildlife conservation. The following are the major international provisions of the ESA. The ESA designates the Secretary of the Interior as the Endangered Species Scientific Authority (ESSA) specified under CITES. As the ESSA, the Secretary must determine that the United States' international trade of living or dead organisms, or their products, will not harm the species in question. The Secretary has authority to enforce these determinations; this authority is exercised through FWS. The Secretary is required to base export determinations upon "the best available biological information," although population estimates are not required. Certain other ESSA responsibilities are also spelled out in CITES. The Secretary of the Interior is also named as the Management Authority for the United States under CITES. The Management Authority must assure that specimens are exported legally; that imported specimens left the country of origin legally; and that live specimens are shipped under suitable conditions. Certain other Management Authority responsibilities are also spelled out in CITES. In general, the ESA prohibits any person subject to the jurisdiction of the United States from importing into, or exporting from, the United States any listed species. The ESA sets forth exceptions under which the Secretary may permit such import or export for scientific purposes or to enhance the propagation or survival of the affected species, and certain other exceptions. To enhance enforcement of the trade-related provisions of the ESA, the ESA requires importers and exporters of fish or wildlife (other than most shellfish and fishery products) to obtain permission from the Secretary to engage in such business; to keep records and allow inspections; and to use certain ports designated by the Secretary, unless the Secretary deems it appropriate and consistent with the ESA to permit importation or exportation elsewhere. In three instances, an Endangered Species Committee (ESC) reached a decision on an application for an exemption: Grayrocks Dam. The Platte River is a major stopover site on the migration path of whooping cranes, listed under the ESA as an endangered species. FWS determined that the construction of the Grayrocks Dam and Reservoir in Wyoming, along with existing projects in the Platte River Basin, would jeopardize the downstream habitat of whooping cranes. The ESC voted (7-0) to grant an exemption for Grayrocks Dam and Reservoir on January 23, 1979, conditioned on specified mitigation measures that included maintenance and enhancement of critical whooping crane habitat on the Platte River, as well as a permanent, irrevocable trust fund to pay for these activities. A previous enactment by Congress would have exempted the project, if the ESC had not reached a decision within a certain time. Tellico Dam. The Tellico Dam on the Little Tennessee River was to serve multiple purposes. It was vigorously opposed by several sectors, including local landowners and Indian tribes. After the snail darter (a fish) was listed as endangered, litigation was filed to stop the construction of the dam, resulting in the landmark Supreme Court case TVA v. Hill . The decision clarified the broad reach of the ESA, and its relationship to the question of ratification of public works projects through appropriations measures. The decision was quickly followed by congressional passage of P.L. 95-632 , which provided for an ESC process. The measure also gave an automatic exemption to the dam if the ESC did not reach a decision within a specified time. Directed to take economic implications into account, the ESC denied an exemption for Tellico (on a 7-0 vote), but in P.L. 96-69 , Congress directed that the dam be completed, notwithstanding any other provision of law. Subsequently, additional snail darters were found in a few other locations, and the snail darter was reclassified as threatened. Bureau of Land Management Timber Sales. The Bureau of Land Management, an agency in DOI, sought an exemption for 44 Oregon timber sales in the habitat of the threatened northern spotted owl. In 1992, the ESC voted (5-2) to grant an exemption for 13 of the sales. Controversy over the sales and the processes within the department continued, and the 13 timber sales were subsequently withdrawn in the Clinton Administration. In three other instances, there were applications for exemptions, but no ESC decisions: Pittston Company Refinery. The Pittston Company applied for an exemption to build a refinery in Eastport, ME. Following jeopardy opinions based on probable effects on threatened bald eagles and endangered right and humpback whales, the company applied for an exemption, but further action on this application appears to have been discontinued in 1982. Consolidated Grain and Barge Company Docking Area. This company sought to build a docking area for barges at Mound City, IL, on the Ohio River, an area that was habitat for an endangered mussel. Following a jeopardy opinion, and a denial of permits by the Army Corps of Engineers, the company applied for an exemption, but withdrew the application in 1986. Suwanee River Authority. The consulting engineer of the Suwanee River Authority applied for an exemption for a project to dredge Alligator Pass in Suwanee Sound, Florida, part of the habitat for the endangered manatee. The project had been denied a permit by the Army Corps of Engineers. The engineer apparently lacked the authority to apply on behalf of the Authority, which in 1986 refused to ratify his actions and withdrew the application. Although the engineer attempted to continue the application, the withdrawal was effective. | The Endangered Species Act (ESA; P.L. 93-205, 87 Stat. 884. 16 U.S.C. §§1531-1544) has a stated purpose of conserving species identified as endangered or threatened with extinction and conserving ecosystems on which these species depend. The ESA is perennially controversial because the protections provided can make it the visible policy focal point for underlying situations involving the allocation of scarce or diminishing lands or resources, especially in instances where societal values may be changing or traditional land use patterns are affected. As a result, the act often becomes controversial even where a particular species is not the focus of a controversy but a symptom of it. In response to past controversies, Congress has repeatedly considered minor amendments and major changes to the ESA. The major features of the ESA and related controversies are briefly summarized as follows: ESA retains its authorities even though its authorization for funding expired in 1992, and funds may be and have been appropriated in the absence of a current authorization. ESA prohibitions and penalties remain in effect regardless of appropriations. ESA's principal parts are the listing and protection of species, designation of critical habitat and avoidance of its destruction, and consultation by federal agencies regarding actions that may harm listed species. Dwindling species are listed as either endangered or threatened according to assessments of the risk of their extinction. Once a species is listed, legal tools are available to aid its recovery and to protect its habitat. ESA has broad provisions for citizen suits to enforce the act, and lawsuits have played a major role in enforcement and interpretation of many, or perhaps most, of the act's provisions. ESA provides for exemptions from the act for agency projects, but the provisions are little used for a variety of reasons. The act is administered primarily by the Fish and Wildlife Service for terrestrial and freshwater and by the National Marine Fisheries Service for most marine and anadromous species. ESA is the implementing legislation for U.S. participation in the Convention on International Trade in Endangered Species (CITES). |
On December 26, 2007, the President signed the Consolidated Appropriations Act, 2008 ( H.R. 2764 ) into law ( P.L. 110-161 ) as shown in Table 1 . This act includes the FY2008 Commerce, Justice, Science, and Related Agencies (CJS) appropriations bill, as well as 10 other appropriations bills, in addition to emergency military funding for Iraq and Afghanistan. Congressional leaders opted to use the Department of State, Foreign Operations, and Related Appropriations bill, 2008 ( H.R. 2764 ) as the legislative vehicle for the FY2008 omnibus spending measure. In an exchange of amendments between the Senate and House, Congress completed action on H.R. 2764 during December 17-19, 2007. In P.L. 110-161 , Congress has appropriated $54.637 billion for the federal departments, bureaus, agencies, administrations, offices and activities funded under the CJS appropriations bill. Congress had previously passed continuing resolutions to fund those departments and agencies in the absence of the regular FY2008 CJS appropriation. Regarding the Consolidated Appropriations Act, 2008, Representative David Obey, chair of the House Appropriations Committee, had an explanatory statement on the FY2008 omnibus spending measure inserted into the December 17 th Congressional Record that included detailed funding tables and additional information. In January 2008, the House Appropriations Committee issued a committee print on the Consolidated Appropriations Act, 2008, that includes legislative text and the explanatory statement (with some modifications) that was previously inserted into the Congressional Record . Table 2 shows funding levels for the departments and related agencies currently under the jurisdictions of the House and Senate CJS Appropriations Subcommittees for FY2007 enacted, FY2008 requested, FY2008 House-reported and -passed, FY2008 Senate-reported and -passed, and FY2008 enacted. Not shown in Table 2 are enacted and proposed rescissions of "unobligated balances" and "prior year appropriations." Those rescissions, however, are given below in summary Table 11 at report's end. In the Consolidated Appropriations Act, 2008 ( P.L. 110-161 ), Congress has provided $54.637 billion in CJS appropriations, a 3.4% increase over the FY2007 enacted level and a 2.2% increase over the Administration's request. For the Department of Commerce, the act includes $6.857 billion, or $231.8 million more than the FY2007 enacted level (an increase of 3.5%) and $260.7 million more than the President's FY2008 request (an increase of 4.0%). For the Department of Justice, the act includes $23.592 billion, or $381.5 million more than the enacted FY2007 level (an increase of 1.6%) and $1.244 billion more than the President's FY2008 request (an increase of 5.6%). For science agencies, the act includes $23.380 billion, or $1.173 billion more than the enacted FY2007 level (an increase of 5.3%) but $364.3 million less than the President's FY2008 request (a decrease of 1.5%). For related agencies, the act includes $808.8 million, or $8 million more than the FY2007 enacted level (an increase of 1.0%) and $46.2 million more than the President's FY2008 request (an increase of 6.1%). By comparison, Table 2 shows that the Administration's FY2008 request included $53.45 billion for the Departments of Commerce and Justice, certain science agencies, and related agencies, or about a 1.1% increase over amounts appropriated by Congress for FY2007. The requested appropriation included $6.596 billion for the Department of Commerce (a 0.4% decrease compared to the FY2007 enacted level), $22.348 billion for the Department of Justice (a 3.7% decrease), $23.744 billion for science agencies (a 6.9% increase), and $762.5 million for related agencies (a 4.8% decrease). In addition to these amounts, in February 2008, the Administration has requested another $146.7 million for Justice as part of the FY2008 Global War on Terror Supplemental. The House Appropriations Committee ordered reported an FY2008 CJS appropriations bill ( H.R. 3093 ) on July 12, 2007. The reported bill included $55.975 billion for FY2008, or $3.132 billion more than the FY2007 enacted level, and $2.621 billion more than the FY2007 request. The House passed H.R. 3093 (amended) on July 26, 2007. The House-passed bill included $10 million less than the reported bill, but it also included a provision that would have increased the amounts available for obligation under the Crime Victims Fund by a like amount. Table 2 shows that the House-passed bill would have provided $55.965 billion in FY2008 funding for the departments, bureaus, agencies, administrations, commissions, and offices under the CJS Appropriations Subcommittee's jurisdiction. By comparison, the House bill would have provided a 5.9% increase over the FY2007 enacted level, and a 4.7% increase over the Administration's FY2008 request, but $1.1% less than the Senate mark. For the Department of Commerce, the House-passed bill would have provided $7.018 billion, or $393.7 million more than the FY2007 enacted level (an increase of 5.9%) and $422.6 million more than the FY2008 request (an increase of 6.4%). For the Department of Justice, the House-passed bill would have provided $23.974 billion, or $763.8 million more than the FY2007 enacted level (an increase of 3.3%) and $1.626 billion more than the FY2008 request (an increase of 7.3%). For science agencies, the House-passed bill would have provided $24.127 billion, or $1.92 billion more than the FY2008 enacted level (an increase of 8.6%) and $383.1 million more than the FY2008 request (an increase of 1.6%). For related agencies, the House-passed bill would have provided $845.7 million, or $44.9 million more than the FY2007 enacted level (an increase of 5.6%) and $83.2 million more than the FY2008 request (an increase of 10.9%). The Senate Appropriations Committee reported an FY2008 CJS appropriations bill ( S. 1745 ; S.Rept. 110-124 ) on June 29, 2007. The Senate-reported bill included $56.58 billion for FY2008 for CJS departments and agencies, $3.738 billion more than the FY2007 enacted level of $52.843 billion and $3.226 billion more than the FY2008 request of $53.45 billion. The Senate amended the House-passed bill ( H.R. 3093 ) with the text of S. 1745 , amended that language during three days of consideration, and passed H.R. 3093 on October 16, 2007. The Senate-passed bill would have provided $57.7 billion for FY2008, or $4.858 billion more than the FY2007 enacted level and $4.346 billion more than the Administration's FY2008 request. The Senate-passed amount included $1 billion in emergency funding for National Aeronautics and Space Administration's (NASA's) return to flight initiative. In addition, the Senate-passed bill was amended to include a provision that would have exempted certain returning H-2B (foreign temporary nonagricultural) workers from the H-2B annual cap of 66,000 visas. The provision would have exempted from the FY2008 H-2B visa cap aliens who had been present in the United States as H-2B nonimmigrants in any one of the previous three fiscal years. The House-passed bill included no similar provision. Table 2 shows that the Senate-passed version of H.R. 3093 would have provided $56.7 billion in FY2008 CJS appropriations. This amount included $1 billion in emergency funding for NASA's return to flight initiative. The Senate bill would have provided a 7.3% increase over the FY2007 enacted level and a 6.1% increase over the Administration's request. For the Department of Commerce, the Senate-passed bill included $7.289 billion, or $664.5 million more than the FY2007 enacted level (an increase of 10.0%) and $693.4 million more than the President's FY2008 request (an increase of 10.5%) . For the Department of Justice, the Senate-passed bill included $24.493 billion, or $1.282 billion more than the enacted FY2007 level (an increase of 5.5%) and $2.145 billion more than the President's FY2008 request (an increase of 9.6%). For science agencies, the Senate-passed bill included $25.019 billion, or $2.812 billion more than the enacted FY2007 level (an increase of 12.7%) and $1.275 billion more than the President's FY2008 request (an increase of 5.4%). For related agencies, the Senate-passed bill included $899.7 million, or $99 million more than the FY2007 enacted level (an increase of 12.4%) and $137.2 million more than the President's FY2008 request (an increase of 18.0%). In late November 2007, a conference meeting on H.R. 3093 was cancelled over objections to language included in the Senate-passed bill that would have prohibited the Equal Employment Opportunity Commission from using funding appropriated under this bill to initiate or participate in a civil action against any employer who requires an employee to speak English while at work. Although the House passed a motion to instruct conferees to include this language in the conference agreement, some members of the Congressional Hispanic Conference reportedly opposed this restriction. It was also reported that the H-2B visa cap exemption would not be included in the conference version of H.R. 3093 . Because of these and possibly other objections, however, no further action was taken on this bill. As described above, congressional leaders opted to use H.R. 2764 as the legislative vehicle for the Consolidated Appropriations Act, 2008 ( P.L. 110-161 ). Appropriations bills reflect the jurisdiction of the subcommittees of the House and Senate Appropriations Committees in which they are considered. In the 110 th Congress, the House and Senate committees have created parallel jurisdictions for the Commerce, Justice, Science, and Related Agencies (CJS) Appropriations Subcommittees. This was not the case in the 109 th Congress, however. In that Congress, both the House and Senate Appropriations Committees transferred, from what had previously been the Commerce, Justice, State, the Judiciary, and Related Agencies (also abbreviated CJS) Appropriations Subcommittee, jurisdiction for the Judiciary to the Transportation and HUD Appropriations Subcommittees. In addition, certain "science" agency appropriations were transferred to the former CJS subcommittees. Those science agencies included the White House's Office of Science and Technology Policy (OSTP), the National Aeronautics and Space Administration (NASA), and National Science Foundation (NSF). In the Senate, moreover, jurisdiction for the Department of State was transferred to the Foreign Operations Appropriations Subcommittee. In the House, however, it remained under the jurisdiction of the former CJS subcommittee, renamed the Science, State, Justice, Commerce, and Related Agencies (SSJC) Appropriations Subcommittee. On February 15, 2007, Congress passed the Revised Continuing Appropriations Resolution, 2007 ( P.L. 110-5 ), in which FY2007 funding was provided for those agencies that had not yet received a permanent appropriation. While this law funded certain CJS departments, agencies, administrations, and offices with specific appropriations, most others were funded by extending their FY2006 budget through FY2007 (subject to rescissions in some cases). In addition, on May 24, 2007, Congress passed the U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007 ( P.L. 110-28 ), which included supplemental funding for some, but not all of the agencies for which the CJS Appropriations Subcommittees have jurisdiction. For FY2007, Table 2 shows that Congress has provided $52.843 billion in CJS appropriations. That amount is $2.402 billion more than the previous year ($50.441 billion), or an increase of 4.8%. Table 3 shows funding trends for the major agencies in CJS appropriations over the six-year period FY2002-FY2008, including supplemental appropriations. Funding for the Department of Commerce increased by 14.1% from FY2002 through FY2005. Due to rescissions, it decreased by 1.9% for FY2006, but increased by 3.1% for FY2007 and 3.5% for FY2008. Funding for the Department of Justice decreased 17.1% from FY2002 to FY2003. This decrease largely reflects the transfer of the former Immigration and Naturalization Service to the newly formed Department of Homeland Security. Justice funding has increased by 20.1% from FY2003 to FY2008. Funding for the science agencies has gradually increased by 15.8% from FY2002 to FY2006, decreased by 2.7% for FY2007, and increased by 5.3% for FY2008. A number of key issues relating to the diverse collection of responsibilities in the Department of Commerce may be considered during the deliberations of the FY2008 budget. The Department's trade and technology programs may be focal points in discussions of export promotion in part because the deficit in the U.S. current account has nearly doubled from $98.8 billion in January 2000 to $192.6 billion in January 2007. The constitutional requirement to redistrict the House of Representatives in 2010 involves increased preparations for the upcoming census. The anniversary of hurricanes Katrina and Rita may draw attention to the Department's weather and ocean-stewardship programs. Some selected, key issues affecting funding priorities included the following: proposed increases in funds for the Census Bureau to prepare for the 2010 Census; the ability of U.S. trade agencies and PTO to fight intellectual property infringement abroad; the efficacy of U.S. trade agency enforcement of U.S. trade remedy laws against unfair foreign competition; for the third consecutive year, the Administration included in its budget request a proposal that would revamp some of the programs administered by the Department of Commerce by consolidating the activities currently funded under the Economic Development Administration's Public Works, Technical Assistance, Research and Evaluation, Economic Adjustment Assistance and Defense Economic Adjustment Assistance programs under a Regional Development Administration (RDA); proposals to limit the access that the U.S. Patent and Trademark Office has to the fees it collects each fiscal year; funding of the Advanced Technology Program, whereby the federal government invests in applied research activities of private entities; proposals to fund all of National Oceanic and Atmospheric Administration (NOAA) programs under a single authorizing law, an Organic Act; funding levels for NOAA satellite programs, ocean and coastal research-related projects, and Tsunami research systems; and implementation of the American Competitiveness Initiative, announced in February 2006, intending to provide $50 billion in research and $86 billion in research tax incentives over 10 years across several Commerce and related agencies, to increase U.S. leadership in technological research, development, and education. Several issues were in play during consideration of the FY2008 DOJ appropriations. They included the following. During the past few Congresses, the appropriation for the Bureau of Alcohol, Tobacco, Firearms and Explosives has included language that prohibits ATF from sharing federal gun-trace data with state and local law enforcement agencies except under limited circumstances. Modified language was included in the Consolidated Appropriations Act, 2008 ( P.L. 110-161 ). Declining levels of federal funding for state, local, and tribal law enforcement assistance continued to be an important concern for many in the Congress, particularly in light of recent upticks in violent crime rates. As has been the case for the last several years, the Administration's budget request included proposals to significantly reduce funding for state, local, and tribal law enforcement assistance programs, and consolidate most of the targeted grant programs into a single, multi-purpose, competitive grant with a significantly lower funding level. Congress rejected the Administration's proposals to consolidate those grant programs and further reduce funding for state and local law enforcement assistance grants. DEA was under an FY2007 hiring freeze and the Administration proposed further reductions in the number of agents. For FY2008, Congress rejected the Administration's proposal to reduce "hollow" DEA positions and provided additional funding to lift the hiring freeze and restore DEA's ability to support state and local law enforcement in the fight against drugs. Key issues were as follows: President Bush's "Vision for Space Exploration" and its consequent reprioritization of NASA programs, and potential personnel cuts (especially in aeronautics research); Whether to use the space shuttle to service the Hubble Space Telescope; and Funds for programs to research and address global warming, including a new study by the National Science Foundation and improved data collection by National Polar-Orbiting Operational Environmental Satellite System (NPOESS). The origin of the Department of Commerce dates back to 1903 with the establishment of the Department of Commerce and Labor (32 Stat. 825). The separate Department of Commerce was established on March 4, 1913 (37 Stat. 7365; 15 U.S.C. 1501). The department's responsibilities are numerous and quite varied, but its activities center on five basic missions: (1) promoting the development of U.S. business and increasing foreign trade; (2) improving the nation's technological competitiveness; (3) encouraging economic development; (4) fostering environmental stewardship and assessment; and (5) compiling, analyzing, and disseminating statistical information on the U.S. economy and population. The following agencies within the Commerce Department carry out these missions: International Trade Administration (ITA) seeks to develop the export potential of U.S. firms and to improve the trade performance of U.S. industry; Bureau of Industry and Security (formerly the Bureau of Export Administration) enforces U.S. export laws consistent with national security, foreign policy, and short-supply objectives; Economic Development Administration (EDA) provides grants for economic development projects in economically distressed communities and regions; Minority Business Development Agency (MBDA) seeks to promote private and public sector investment in minority businesses; Economic and Statistical Analysis Programs provide: (1) timely information on the state of the economy through preparation, development, and interpretation of economic data; and (2) analytical support to department officials in meeting their policy responsibilities. Much of this analysis is conducted by the Bureau of Economic Analysis (BEA); Bureau of the Census collects, compiles, and publishes a broad range of economic, demographic, and social data; National Telecommunications and Information Administration (NTIA) advises the President on domestic and international communications policy, manages the federal government's use of the radio frequency spectrum, and performs research in telecommunications sciences; Patent and Trademark Office (PTO) examines and approves applications for patents for claimed inventions and registration of trademarks; Technology Administration , through the Office of Technology Policy, advocates integrated policies that seek to maximize the impact of technology on economic growth, conducts technology development and deployment programs, and disseminates technological information; National Institute of Standards and Technology (NIST) assists industry in developing technology to improve product quality, modernize manufacturing processes, ensure product reliability, and facilitate rapid commercialization of products based on new scientific discoveries; and National Oceanic and Atmospheric Administration (NOAA) provides scientific, technical, and management expertise to (1) promote safe and efficient marine and air navigation; (2) assess the health of coastal and marine resources; (3) monitor and predict the coastal, ocean, and global environments (including weather forecasting); and (4) protect and manage the nation's coastal resources. As Table 4 shows, the FY2008 enacted appropriation ( P.L. 110-161 ) included $6.856 billion for the Department of Commerce, which was $231 million more than the FY2007 appropriation of $6.625 billion, a 3.5% increase. FY2008 enacted amount was 3.9% more than the President's request of $6.596. The President's request had represented a decrease of $29.0 million, or 0.4%, from the FY2007 appropriation for the department. By comparison, the Senate had passed ( S. 1745 ) a total of $7.289 billion for FY2008, or $664.5 million more than the FY2007 enacted level and $693.4 million more than the President's FY2008 request. The House had passed ( H.R. 3093 ) a total of $7.018 billion for FY2008, or $393.7 million more than the FY2007 enacted level, $422.6 million above the President's FY2008 request, although $270.8 million less than the Senate. ITA's mission is to improve U.S. prosperity by strengthening the competitiveness of U.S. industry, promoting trade and investment, and ensuring fair trade and compliance with trade laws and agreements. ITA strives to accomplish this through the Executive and Administrative Directorate and the following four policy units: (1) Manufacturing and Services Unit, responsible for certain industry analysis functions, and promoting the competitiveness and expansion of the U.S. manufacturing sector; (2) Market Access and Compliance Unit, responsible for monitoring foreign country compliance with trade agreements, identifying compliance problems and market access obstacles, and informing U.S. firms of foreign business practices and opportunities; (3) Import Administration Unit, responsible for administering the trade remedy laws of the United States; (4) Trade Promotion/U.S. Foreign Commercial Service program, responsible for conducting trade promotion programs, providing U.S. companies with export assistance services, and leading interagency advocacy efforts for major overseas projects; and (5) the Executive and Administrative Directorate, responsible for providing policy leadership, information technology support, and administration services for all of ITA. The FY2008 enacted appropriation for ITA is $413.2 million. This amount includes $405.2 million in a direct appropriation and $8 million in anticipated fee receipts. The direct appropriation is $9.6 million more than the FY2007 enacted level of $395.6 million and $6.8 million less than the Administration's request of $412.4 million. The amount for ITA's FY2008 anticipated fee collections was $5 million less than the Administration's request. The President's FY2008 request for ITA was $412.4 million, a $16.8 million (4.2%) increase over the FY2007 funding level of $395.6 million. The request anticipated the collection of $13 million in fees, raising available funds to $425.4 million. The Senate passed the committee-recommended $417.4 million for ITA, $21.8 million more than the FY2007 enacted level, and $5 million more than the budget request. The Senate recommendation also anticipated the collection of $8 million in fees, $5 million less than the budget request, which would raise available budget authority to $425.4 million. The House passed the committee-recommended $422.4 million, $26.8 million more than the FY2007 enacted level, and $10 million more than the budget request. The House recommendation anticipated the collection of $8 million in fees as well, the same as the Senate amount and $5 million less than the budget request, which would have raised available budget authority to $430.4 million. The BIS administers export controls on dual-use goods and technology through its licensing and enforcement functions. It cooperates with other nations on export control policy and provides assistance to the U.S. business community to comply with U.S. and multilateral export controls. It also administers U.S. anti-boycott statutes, and it is charged with monitoring the U.S. defense industrial base. Authorization for the activities of BIS, the Export Administration Act (50 U.S.C. 2401, et seq. ), expired in August 2001. On August 17, 2001, President Bush invoked the authorities granted by the International Economic Emergency Powers Act (50 U.S.C. 1703(b)) to continue in effect the system of controls contained in the act and by the Export Administration Regulations (15 C.F.R., Parts 730-799) and has renewed that authority yearly. The FY2008 enacted appropriation ( P.L. 110-161 ) is $72.9 million, which is $2.5 million less than the FY2007 enacted amount and $5.9 million less than the administration request. The President's FY2008 request for BIS was $78.8 million, a 4.5% increase from the FY2007 enacted funding level of $75.4 million. The FY2008 funding request for BIS was divided between licensing activity ($39.0 million), enforcement activities ($34.1 million), and management and policy coordination ($5.7 million). Of these amounts, $14.8 million was requested for Chemical Weapons Convention (CWC) enforcement. The FY2008 request also included a proposal to consolidate the contract management functions of the Export Control and Border Assistance Programs in the Department of State, which provides the funds for these activities. The BIS envisioned a reduction of its management and policy coordination budget by $955 thousand by this action. Both the House and Senate Appropriations Committees recommended the same level of funding for FY2008 as the President's request, $78.8 million, and both the House and the Senate approved the committees' recommendations of $78.8 million. The EDA was established under the Public Works and Economic Development Act of 1965, as amended. The EDA's mission is to assist communities and regions generate new jobs and help retain existing jobs by stimulating industrial and commercial growth in economically distressed areas. EDA assistance emphasizes the needs of urban areas with high unemployment, low income, or other severe conditions of economic distress. For the third consecutive year, Congress has rejected Administration proposals to consolidate EDA assistance programs and reduce funding for those programs. In the Consolidated Appropriations Act, 2008 ( P.L. 110-161 ), Congress appropriated $279.9 million for EDA, providing $30.8 for salaries and expenses and $249.1 million for assistance programs. The latter amount includes $148.2 million for public works grants; $42.3 million for economic adjustment assistance; $25.5 million for planning assistance; $14.1 for trade adjustment assistance; $9.4 million for technical assistance; $470 thousand for research; and $9.4 million (the House bill included $10 million) for the new Global Climate Change Mitigation Incentive Fund (GCCMIF). The enacted amount of $249.1 million for EDA assistance programs is $79.1 million more than the Administration's FY2008 request, but $1.6 million less than the FY2007 appropriation. By comparison, the House-passed bill would have provided $20.9 million more than the FY2008 appropriation, and the Senate-passed bill, $900 thousand more. The $30.8 million for salaries and expenses is $2 million less than requested by the Administration or recommended by the House and the Senate. The explanatory statement accompanying the Consolidated Appropriations Act directs EDA to distribute all economic development assistance program funds to the six regional offices within 30 days after enactment of this act. This directive reflects concerns raised during last year's appropriations cycle about Administration efforts to consolidate or eliminate a number of regional offices. Last year, during its consideration of FY2007 EDA funding, the House Appropriations Committee included similar report language that directed EDA to maintain all six regional offices in response to concerns that EDA was considering eliminating three of the six offices. This year, similar concerns were raised in the report accompanying the Senate-approved bill. In addition, the explanatory statement accompanying the act directed EDA to give greater consideration to projects that (1) diversify the local and regional economies; (2) support the development of new regional economic drivers and emerging industry clusters; (3) advance innovation, entrepreneurship and technology transfer; and (4) encourage the commercialization of university-led research and development. The explanatory statement, however, does not include Senate report language that would have directed the department to undertake a study of the impact of the 2005 hurricanes on industry clusters in the Gulf Coast region. For FY2008, the Administration requested $202.8 million for EDA: $32.8 million for salaries and expenses and $170 million for a proposed Regional Development Account (RDA), under which EDA's public works grant, economic adjustment and defense economic adjustment assistance, planning assistance, technical assistance, and research and evaluation programs would have been consolidated. The Administration's request of $170 million for EDA assistance programs was $80.7 million less than the FY2007 appropriation of $250.7 for those programs. The Administration maintained that the proposed RDA program consolidation would have created a streamlined application process allowing EDA grantees, including economic development districts and universities and colleges, to promote comprehensive strategies in support of regional economic development efforts in distressed rural communities. In addition, the Administration's proposal would have eliminated EDA's Office of Strategic Initiatives and created an Office of Regional Affairs (ORA), that would have been charged with administering the new RDA program and would have included EDA's six regional offices, possibly leading to their consolidation. For FY2008, the Senate-approved bill would have provided $282.8 million for EDA: $32.8 million for salaries and expenses and $250 million for assistance programs. The latter amount would have provided $154 million for public works grants; $45 million for economic adjustment grants; $27 million for planning assistance; $15 million for trade adjustment assistance; $8.5 million for technical assistance; and $500 thousand for research and evaluation activities. The Senate-approved appropriation level of $250 million for EDA programs was $80 million more than requested by the Administration, but $700 thousand less than appropriated for FY2007. For FY2008, the Senate Appropriations Committee report included language rejecting the Administration's RDA proposal. In addition, Senate report language expressed concern about the distribution of EDA funds among the six regional offices. The Senate report also included language that directed the Administration to disperse FY2008 funding to the six regional offices in accordance with the funding levels for each account. It also included a requirement that EDA notify the Senate Appropriations Committee in writing when all grant funds had been distributed to regional offices in order to monitor compliance with this directive. For FY2008, the House-passed bill would have provided $302.8 million for EDA: $32.8 million for salaries and expenses and $270 million for assistance programs. The latter amount would have provided $160 million for public works grants; $49 million for economic adjustment grants; $27 million for planning assistance; $13.5 million for trade adjustment assistance; $10 million for technical assistance; $500 thousand for research and evaluation activities; and $10 million for a new initiative GCCMIF. The House-approved funding level of $270.0 million for EDA assistance programs was $20 million more than recommended by the Senate ( S. 1745 ), $100 million more than requested by the Administration, and $19.3 million more than appropriated in FY2007. The House bill, as with its Senate counterpart and the Administration's request, recommended $32.8 million for salaries and expenses. As with its Senate counterpart, the House report included language rejecting the Administration's RDA consolidation proposal. The House bill also included a new initiative (GCCMIF) that would fund projects that incorporate mitigation strategies and technologies that promote sustainable resource conservation and reduce energy consumption and harmful gas emissions. The House bill also directed EDA to develop criteria to evaluate GCCMIF applications within 90 days of enactment of the act. This directive was included in the explanatory statement accompanying P.L. 110-161 . The MBDA, established by Executive Order 11625 on October 13, 1971, is charged with the lead role in coordinating all the federal government's minority business programs. As part of its strategic plan, the MBDA seeks to develop a more industry-focused, data-driven technical assistance approach to give minority business owners the tools essential for becoming first or second tier suppliers to private corporations and the federal government in the new procurement environment. Progress will be measured in relation to entrepreneurial parity and strategic growth through increased gross receipts, number of employees, and size and scale of firms associated with minority business enterprise. The FY2008 enacted appropriation ( P.L. 110-161 ) is $28.6 million, which is $1.1 million less than the FY2007 enacted amount and $0.1 million less than the President's request. For FY2008, the President's budget had requested $28.7 million for the MBDA, which was a 3.4% decrease from the FY2007 appropriation of $29.7 million. The Senate had passed its committee-recommended $30.2 million for FY2008, which was $0.5 million more than the FY2007 enacted amount and $1.5 million more than the President's request. The House-passed bill included $31.2 million for FY2008. Both the Senate and House had made specific reference to keeping funds available to maintain current Native American Business Development Centers. Economic and Statistical Analysis (ESA) provides economic data, analysis, and forecasts to government agencies and, where appropriate, to the public. ESA includes the Census Bureau (discussed separately), the Bureau of Economic Analysis (BEA), and STAT-USA. The ESA has three core missions: (1) compile a system of economic data; (2) interpret and communicate the forces at work in the economy; and (3) support the information and analytical needs of the executive branch. The FY2008 enacted appropriation ( P.L. 110-161 ) is $81.1 million, excluding Census. The President's non-Census FY2008 request for ESA was $85.0 million, a 6.5% increase over the comparable FY2007 enacted figure of $79.8 million. The Senate passed the same funding amount for ESA as the President's request, $85.0 million. The Senate included an amendment by Senator Harry Reid ( S.Amdt. 3225 , agreed to by voice vote), which required $950 thousand of the appropriated funds to be used to contract with the National Academy of Sciences to conduct a study to see if the economic data currently being collected accurately reflect the economic condition of the United States. The House committee recommended $86.5 million, which included an additional $1.5 million to expand and improve regional datasets that benefit state and local officials and economic development organizations. The House passed its committee's recommendation of $86.5 million. The Bureau of Economic Analysis (BEA) accounted for $81 million of the $85 million FY2008 administration request for Economic and Statistical Analysis. The BEA comprises four core programs, each of which supports other agencies and policymakers. The National Economic Accounts support federal budget projections and macroeconomic policy. Balance-of-Payments data are required by international agreements on exchange rates. Regional data are used to allocate federal funds and state budget forecasts. Industry accounts are used to compile the other datasets and also by the Bureau of Labor Statistics for the Producer Price Index. The Bureau of the Census, established as a permanent office on March 6, 1902 (32 Stat. 51), is authorized by the Constitution (Article I, Section 2, clause 3, as modified by Section 2 of the 14 th Amendment) to conduct a census of population every 10 years, and by Title 13 U.S.C. to collect and compile a wide variety of other demographic, economic, housing, and governmental data. Under the Consolidated Appropriations Act, 2008 ( P.L. 110-161 ), the Census Bureau is to receive the Administration's requested $1.230 billion, including $202.8 million for salaries and expenses and $1.027 billion for periodic programs. By comparison, the FY2007 enacted amounts were $196.6 million for salaries and expenses, and $696.4 million for periodic programs, totaling $893 million for the Bureau as a whole. The large difference (+$337.2 million) between the FY2008 and FY2007 enacted amounts for the Bureau largely reflects heightened preparations, or the "ramp up," for the 2010 census. About 78%, or $797 million, of the periodic programs account was for these activities. In FY2008, the Bureau will conduct a dress rehearsal to test all aspects of 2010 operations. The Bureau also will improve its geographic database—essential for getting census questionnaires to the right addresses—by correcting and aligning information on street locations with Global Positioning System coordinates. The re-engineered 2010 census will consist of a short form to collect data from all households for, among other purposes, House reapportionment and within-state redistricting. In addition, the American Community Survey (ACS), which the Bureau will continue to implement fully, nationwide, in FY2008, will replace the census long form in 2010 and will provide detailed demographic data annually to meet various legislative and programmatic requirements. Highlights of the congressional deliberations on the Bureau's FY2008 appropriations follow below. The House Appropriations Committee recommended an FY2008 amount of $1.232 billion for the Bureau. The recommendation for salaries and expenses was $196.8 million. Regarding this account, the committee instructed the Bureau to discontinue work on its proposed Dynamics of Economic Well-being Survey (DEWS)—which was to have replaced the longitudinal Survey of Income and Program Participation (SIPP)—and direct its efforts toward restoring SIPP. The Bureau made this change ahead of the committee's instruction. For periodic programs, the committee recommended $1.035 billion, with the stipulation that the Bureau continue to include "some other race" as a category when collecting census data on racial identification. During House consideration of H.R. 3093 , Representative Shelley Moore Capito offered an amendment (agreed to 229-196, Roll Call No. 722) to reduce funding for the Bureau's FY2008 periodic programs account by $10 million from the Committee-recommended $1.035 billion and increase, by $10 million, funding for the Justice Department's Southwest Border Prosecutor Initiative. The House thus approved $1.222 billion, not the committee-recommended $1.232 billion, for the Bureau. The reduction, according to Commerce, Justice, and Science Appropriations Subcommittee Chairman Mollohan, "would eliminate the current Industrial Reports Program"; "would eliminate the quarterly financial reports which are the government's most current and comprehensive reports on corporate financial activity"; and "would eliminate the Survey of Business Owners and Self-Employed Persons...." Of the Senate Appropriations Committee's recommended $1.246 billion for the Bureau in FY2008, the salaries and expenses account was to receive $226.2 million and periodic programs, $1.020 billion. In discussing salaries and expenses, the committee expressed concern about the Bureau's attempt to phase out SIPP and replace it with DEWS, a switch that would have been associated with, in the Committee's words, a "lack of continuity of poverty measures." The Committee, "aware that the Census Bureau has decided not to initiate DEWS, but to return to the SIPP," recommended an additional $26 million that, combined with $15.9 million "in funds from DEWS," was to fund a SIPP sample size of 45,000 in 25 states. The full Senate approved the committee-recommended amounts for salaries and expenses, and periodic programs. These amounts were, respectively, $29.4 million more and $5 million less than those passed by the House. The Senate also approved, by voice vote, an amendment by Senator Richard Shelby to prevent $10 million of the Commerce Department's FY2008 appropriations from becoming available for obligation until, among other matters: the Secretary, within 120 days of ... enactment ..., shall provide a report to Congress that is publicly available on the Bureau's website on the steps that the ... Bureau will take to allow citizens the opportunity to complete the decennial census and the American Community Survey over the Internet. The National Telecommunications and Information Administration (NTIA) is the executive branch's principal advisory office on domestic and international telecommunications and information technology issues and policies. Its mandate is to: provide greater access for all Americans to telecommunications services; support U.S. attempts to open foreign markets; advise on international telecommunications negotiations; fund research grants for new technologies and their applications; and assist nonprofit organizations converting to digital transmission in the 21 st century. The NTIA also manages federal use of radio frequency spectrum domestically and internationally. The FY2008 enacted appropriation ( P.L. 110-161 ) is $36.3 million, or $3.5 million less than the FY2007 enacted and $17.7 million more than the President's request. There are two major components to the NTIA appropriated budget (a third program, which is a revolving fund based on spectrum auctions, is discussed below). The first is Salaries and Expenses. For FY2008, the Bush Administration recommended $18.6 million; Congress approved $17.5 million for FY2008. In the past, a large part of this program has been for the management of various information and telecommunications policies both domestically and internationally. For the second NTIA component, the Public Telecommunications and Facilities Program (PTFPC), the Bush Administration has requested that this program's funding be eliminated, arguing that most of the construction and refurbishing of public telecommunications facilities has already been done, and that any remaining support that is needed should come from local public broadcasting entities. However, for FY2008, Congress disagreed, citing the ongoing need for upgrading of public broadcasting facilities, particularly as the deadline of converting all analog broadcasts to digital in 2009 approaches. For FY2008, Congress funded this program at $18.8 million. The third NTIA program that is administered by NTIA but not directly funded by appropriated money comes out of the 2005 Deficit Reduction Act. That law ( P.L. 109-171 ) called for the creation of a Digital Transition and Safety Public Fund, which would offset receipts from the auction of licenses to use the electromagnetic spectrum recovered from discontinued analog signals. The initial auction was held on January 24, 2008. The receipts from the auction will fund the following programmatic functions at NTIA: a digital-analog converter box program to assist consumers in meeting the February 2009 deadline for receiving television broadcasts in digital format; public safety interoperable communications grants (which would be made to ensure that public safety agencies have a standardized format for sharing voice and data signals on the radio spectrum); New York's 9/11 digital transition funding (until the Freedom Tower is completed); assistance to low-power television stations for converting from analog to digital transmission; a national alert and tsunami warning program; and funding to enhance a national alert system as stated in the ENHANCE 911 Act of 2004 ( P.L. 108-494 ). The USPTO examines and approves applications for patents on claimed inventions and administers the registration of trademarks. It also assists other federal departments and agencies to protect American intellectual property in the international marketplace. The USPTO is funded by user fees paid by customers that are designated as "offsetting collections" and subject to spending limits established by the Appropriations Committee. For FY2007, the USPTO was provided with the budget authority to spend $1.771 billion. P.L. 110-161 , the Consolidated Appropriations Act, FY2008, gives the U.S. Patent and Trademark Office the budget authority to spend $1.916 billion in fees collected (an increase of 8.2% over the previous fiscal year) and mandates that existing fee increases be continued. This amount is the same as that included in the Administration's FY2008 budget proposal, which also stated that the Office be permitted "full access" to its fee collections and that fee increases passed in 2005 and 2006 be maintained. H.R. 3093 , the FY2008 appropriations bill initially passed by the House, and the version passed by the Senate, also would have provided the USPTO with the budget authority to spend $1.916 billion. In addition, the bill mandated that earlier fee increases remain in effect during FY2008. Beginning in 1990, appropriation measures have limited the ability of the USPTO to utilize the full amount of fees collected in each fiscal year. This is an area of controversy. Opponents of this approach argue that agency operations are supported by payments for services that must be financed in the year the expenses are incurred. Proponents of methods to limit USPTO fee usage maintain that the fees are necessary to help balance the budget and the fees appropriated back to the Office are sufficient to cover operating costs. The Technology Administration and the Office of the Under Secretary for Technology in the Department of Commerce advocated national policies that foster technology development to stimulate economic growth, conduct technology development and deployment programs, and disseminate technological information. The Office of the Under Secretary for Technology also managed and supervised the activities of the National Institute of Standards and Technology and the National Technical Information Service. For FY2007, the Office was appropriated $2 million, a 66% decrease in funding from FY2006. The Consolidated Appropriations Act, 2008 ( P.L. 110-161 ), did not include any funding for the Technology Administration. The Presidents's FY2008 budget proposed financing of $1.6 million for the Technology Administration, 20% less than FY2007. The FY2008 appropriations bill initially passed by the House, H.R. 3093 , would have provided $1 million in funds for the Technology Administration, to allow for the "...necessary costs associated with the elimination of the position of Under Secretary for Technology, as proposed in the budget request." The version of H.R. 3093 passed by the Senate did not include financing for the Technology Administration. The NIST is a laboratory of the Department of Commerce. The organization's mandate is to increase the competitiveness of U.S. companies through appropriate support for industrial development of pre-competitive generic technologies and the diffusion of government-developed technological advances to users in all segments of the American economy. NIST research also provides the measurement, calibration, and quality assurance techniques that underpin U.S. commerce, technological progress, improved product reliability, manufacturing processes, and public safety. The FY2007 appropriation for NIST was $676.9 million. Funding for internal research and development under the Scientific and Technical Research and Services (STRS) account increased from the previous year to $434.4 million (including the Baldrige National Quality Program). The Advanced Technology Program (ATP) was financed at $79.1 million, while $104.7 million was provided for the Manufacturing Extension Partnership (MEP) program. The construction budget was $58.7 million. The Consolidated Appropriations Act, 2008 ( P.L. 110-161 ), provides NIST with $755.8 million, an increase of 11.7% more than FY2007 and almost 18.0% more than the Administration's request. Support for the STRS account increases 1.4% to $440.5 million (including the Baldrige National Quality Program). However, this amount is almost 12.0% less than the President's budget proposal. The Technology Innovation Program (formerly the Advanced Technology Program) was appropriated $65.2 million (with an additional $5 million from FY2007 unobligated balances under ATP), 17.6% less than the previous fiscal year. Funding for MEP totals $89.6 million, 14.4% less than FY2007, but 93.5% more than the budget request. Support for construction almost triples to $160.5 million, more than 1½ times that contained in the original budget proposal. The Administration's FY2008 budget request would have provided $640.7 million for NIST, 5.3% less than the FY2007 figure, due primarily to the absence of support for ATP and reduced funding for MEP. The STRS account would have increased 15.2% to $500.5 million (including the Baldrige National Quality Program). The FY2008 budget request included no funding for ATP and MEP would have been reduced 55.8% to $46.3 million. Construction expenses would have increased 60.0% to $93.9 million. The initial House-passed FY2008 appropriations bill, H.R. 3093 , would have provided NIST with $831.2 million, 22.8% more than FY2007. Included in this total was $500.5 million for the STRS account (with the Baldrige National Quality Program), an increase of 15.2% over the previous fiscal year. Under the House bill, funding for ATP would have increased 17.7% to $93.1 million, while funding for MEP would have increased 3.9% to $108.8 million. The construction budget would more than double to $128.9 million. Report language noted the House Appropriations Committee's support for then House-passed legislation that would reestablish ATP as the Technology Innovation Program and change program eligibility criteria and goals. The Senate-passed version of H.R. 3093 would have appropriated $863.0 million for NIST with $30.8 million of this amount directed to other non-NIST programs for a final appropriation of $832.2 million. Funding for the STRS account would have totaled $502.1 million (including the Baldrige National Quality Program), 15.6% more than the FY2007 figure. The Advanced Technology Program would have been financed at $100.0 million, with $30.8 million to be utilized by activities in the Federal Bureau of Investigations and the U.S. Marshals Service. The bill included a stipulation that no ATP applicant award was to be made to companies with revenues greater than $1 billion. Support for the Manufacturing Extension Program would increase 5.1% to $110.0 million. The construction budget would have totaled $150.9 million, more than 2½ over times the FY2007 funding amount. Continued support for the Advanced Technology Program has been a major funding issue. The ATP was created to provide "seed financing," matched by private sector investment, to businesses or consortia (including universities and government laboratories) for development of generic technologies that have broad applications across industries. Opponents of the program have cited it as a prime example of "corporate welfare," whereby the federal government invests in applied research activities that, they emphasize, should be conducted by the private sector. Others have defended ATP, arguing that it assisted businesses (and small manufacturers) in developing technologies that, while crucial to industrial competitiveness, would not or could not be developed by the private sector alone. Although Congress maintained (often decreasing) funding for the Advanced Technology Program, the initial appropriation bills passed by the House since FY2002 failed to include financing for ATP. During the 109 th Congress, the version of the measure reported from the Senate Committee on Appropriations also did not fund ATP. For FY2006, support again was provided for the program, but the amount was 41% less than that included in the FY2005 appropriations; FY2007 funding remained the same as the previous fiscal year. The Consolidated Appropriations Act, 2008, provides support, however reduced, for a new effort, the Technology Innovation Program, which replaces ATP and is focused on small and medium sized firms. The budget for the Manufacturing Extension Partnership , another extramural program administered by NIST, has been debated since the FY2004 appropriations deliberations. Although in the recent past congressional support for MEP remained constant, the Administration's FY2004 budget request, the initial House-passed bill, and the FY2004 Consolidated Appropriations Act substantially decreased federal funding for this initiative, reflecting the President's recommendation that manufacturing extension centers "...with more than six years experience operate without federal contribution." However, P.L. 108-447 restored financing for MEP in FY2005 to the level that existed prior to the 63% reduction taken in FY2004. Although the level of support decreased in FY2006, it remained significantly above the FY2004 figure; FY2007 funding remained at a similar level. As noted above, MEP funding has been reduced by 14.4% to $89.6 million for FY2008, as compared to the FY2007 program budget of $104.7 million. As part of the American Competitiveness Initiative , announced by the President in his 2006 State of the Union message, the Administration has indicated that it intends to double over 10 years funding for "innovation-enabling research" performed at NIST. This is to be accomplished through increased support of NIST's "core" programs, defined as internal research in the STRS account and the construction budget. To this end, the President's FY2007 budget requested an 18.3% increase in funding for intramural R&D at the laboratory. For FY2007, P.L. 110-5 provided approximately half this increase of 9.6% to $434.4 million in support research performed within the NIST facilities. For FY2008, P.L. 110-161 includes a smaller increase of 1.4% to $440.5 million for the STRS account. This was in contrast to the Administration's budget which included a 15.2% increase in funding, as did the House-passed version of H.R. 3093 , while the Senate-passed version included a 15.6% increase. The mission of NOAA in the Department of Commerce is to understand and predict changes in the Earth's environment and conserve and manage coastal and marine resources to meet the nation's economic, social, and environmental needs. For FY2008, Congress addressed major concerns about NOAA funding in certain key areas. These include restoring the meteorological and environmental satellite program, developing a national ocean research and management policy, implementing the Magnuson-Stevens Fishery Reauthorization Act of 2006, assisting fisheries that sustained hardships in the Gulf of Mexico since 2005, and developing a national ocean observation network. Table 5 shows funding levels for NOAA, including the FY2007 enacted, FY2008 requested, FY2008 House- and Senate-passed, and FY2008 enacted. The table is organized by the FY2008 NOAA budget structure, and includes the Operations, Research, and Facilities (ORF) account; the Procurement, Acquisition, and Construction (PAC) account; and "Other Accounts," composed of the Pacific Salmon Recovery Fund (PCSRF), the Coastal Zone Management Fund (CZMF), and fisheries financing. Also shown is offsetting budget authority for NOAA that is transferred to/from another agency; transferred internally, such as the CZMF; or authorized by Congress from previous fiscal year(s) unobligated appropriations. In some years, including FY2007, the agency received emergency appropriations or congressionally mandated rescissions. For FY2008, Congress approved $3.897 billion for NOAA. This includes $2.86 billion for the ORF account, $979 million for the PAC account, and a net total of $64 million for NOAA's Other Accounts. NOAA appropriations for FY2008 are 0.5% below FY2007 enacted levels of $3.91 billion (less emergency appropriations); 2.1% greater than the FY2008 request of $3.81 billion; 1.5% less than House-approved levels of $3.95 billion; and 6.9% less than Senate-approved levels of $4.18 billion. Final FY2008 appropriations for NOAA ORF, in general, appear to represent the middle ground between the FY2008 request and House-approved funding for NOAA, with some exceptions. Congress appropriated larger increases for the NOAA satellites program than were proposed across-the-board, except in the case of Geostationary Operational Environmental Satellite R-Series (GOES-R), for which funding was reduced commensurately with the cancellation of a planned suite of environmental remote sensing instruments. Among other amounts, Congress provided $5.4 million for the National Weather Service (NWS) to continue operations and expand the Urbanet III air quality, detection, and characterization network to at least 40 U.S. cities; however, there there is a slight decrease overall for the NWS of $2.3 million, as compared with the President's request of $807.8; $20.1 million for the NOAA Marine Fisheries Service (NMFS) to relieve fishermen previously operating in specific marine conservation areas, while also providing language encouraging NOAA to deliver Bycatch Reduction Devices (BRDs) to Gulf fisheries; $5.9 million for a National Academy of Sciences (NAS) study on establishing a Climate Study Committee and to hold a Summit on climate change on behalf of NOAA ( P.L. 110-161 , Div. B, Title I, Sec. 114); and $34.1 million for NOAA education programs and authorized agency involvement in science education at all levels of learning. In addition, NOAA's FY2008 appropriation includes language that was amended to the House-passed bill by Delegate Bordallo (Guam) that sets out that no less than $500 thousand of the FY2008 appropriation is to be provided to fund Western Pacific Fishery Demonstration Projects. The House-passed version of H.R. 3093 would have provided $3.95 billion for NOAA. This amount was $140.9 million, or 3.7% more than the FY2008 request, and $127.8 million, or 1.0% less than the FY2007 funding level (including supplemental appropriations of $107.4 million). Further, it was $230 million, or 5.5% less than the Senate-approved $4.18 billion (including emergency appropriations). The House had approved $2.851 billion for ORF, $1.039 billion for PAC, and a net $60.8 million for NOAA's Other Accounts. House report language indicated that provided for in the House-passed bill was $6 million for an exploratory study by NAS to establish a Climate Change Study Committee (there was no similar provision in the Senate bill report); a $23 million increase for NOAA Satellite Services for restoring critical sensors on future satellite missions to ensure continuity of weather data and environmental observations; and $31.2 million for coastal and outer continental shelf hydrographic surveys (the same amount as requested by the President), with the requirement that NOAA report on the status and composition of its ocean observation capabilities. Also included in the House-passed bill was $37.7 million (an increase of $18.3 million) for NOAA education and outreach programs, including $5 million that would provide for competitive education grants (almost double the President's request, but at the same level as for FY2007) and $140 million for competitive climate change research grants. In addition, the House bill included $64.8 million for the Pacific Coastal Salmon Recovery Fund, for which Congress has provided $67 million for FY2008; and $15 million more than requested by the President for the Coastal Estuarine Land Conservation Program (CELCP), for which Congress has provided an additional $8 million in NOAA's FY2008 appropriation. The Senate-passed version of H.R. 3093 would have provided $4.185 billion for NOAA, including $3.037 billion for ORF; $1.059 billion for the PAC account; and a net total of $86 million for NOAA's Other Accounts, $90 million of which would have been for the PCSRF. Senate report language was critical of NOAA efforts to reform ocean policy, for which the Senate-passed bill included almost $795 million to further implementation of the Joint Ocean Commission Initiative (JOCI) recommendations "for greater stewardship of our Oceans." The final tally approved by Congress for the JOCI was around $511 million and, as in the Senate, funding was mostly for existing programs and a few new starts. The Senate concurred with the House about reported NOAA satellite program deficiencies and sought to restore sensors critical for weather observations and climate change research on future launches of the polar orbiting satellite program (NPOESS). Although there were no references to such increases in the explanatory language accompanying P.L. 110-161 , the increased funding for total NOAA satellite system acquisitions would likely provide for such efforts. Senate report language indicated support for the development of new, and preservation of existing, climate data and information. Just as the House, the Senate called for grants for a number of "open competitive" research programs be established across the agency. Report language underscored that the Senate bill included $425 million for open, competitive grants, of which $140 million would be for climate change program activities. Both the Senate and the House approved $20.3 million to construct the Pacific Region Center at Pearl Harbor, Hawaii. In NOAA's FY2008 appropriation, Congress approved $20 million for the Pacific Region Center and also funded a Disaster Response Center for severe weather to be established in the Gulf of Mexico at $11.3 million. Finally, Senate report language called for certain NOS coastal ocean activities to attain program status, but similar language was not included in the explanatory statement accompanying P.L. 110-161 ; however, budget baselines for their parent programs, Marine Sanctuaries and the NOAA Coastal Service Center, appear to have been increased by conferees on H.R. 2764 in the explanatory statement tables for NOAA's FY2008 appropriation. On the Senate floor, the NOAA PAC account was reduced $30 million by S.Amdt. 3290 to H.R. 3093 —a reduction ultimately approved by Congress for FY2008. Other Senate amendments to H.R. 3093 adopted were reported in the explanatory statement as general provisions for Title I and include (1) Magnuson-Stevens Fishery Conservation and Management Act of 1976 ( P.L. 109-79 ) requirements for publishing of illegal, unreported, or unregulated fishing activities and the names of associated marine vessels; (2) safety requirements for NOAA scientific and occupational divers; (3) relief of fisheries operating in a presidentially-declared Marine National Monument in Hawaii; and (4) a systematic joint evaluation of the NOAA Satellite Program budget by Congress, the Secretary of Commerce, and the Office of Management and Budget (OMB). Still other Senate amendments to H.R. 3093 were incorporated in the explanatory statement as part of appropriations language, and include (1) encouragement of Congress for bycatch reduction devices for shrimpers in Gulf Coast waters ( S.Amdt. 3228 ); (2) regional coastal disaster assistance, and transition in the Northern Gulf of Mexico ( S.Amdt. 3314 ); and (3) funds for the National Research Council to conduct a study on oceans acidification ( S.Amdt. 3251 ). In terms of funding for FY2008, the NOAA request was the largest for the Department of Commerce, and accounted for about 58% of the department's FY2008 proposed budget ($6.596 billion). The President requested $3.809 billion for NOAA, which was $243.6 million less than FY2007 appropriations, or a 6% decrease. The President's budget proposed savings of $30.2 million from programs that were either "unrequested" by the Administration in FY2007 or were "performing poorly." NOAA's Administrator, Vice Admiral Conrad C. Lautenbacher, Jr. (Ret. Navy), indicated that the FY2008 budget request was a "national consensus" of requirements to fund ongoing activities at the agency. Of the $3.809 billion, the President requested $2.767 billion for NOAA's ORF account; $979.9 million for the PAC account; and, for NOAA's "Other Accounts," $62.8 million for the PCSRF. The President's funding priorities for NOAA were focused in the following areas. Enhance the Personnel and Core Mission, including administrative, custodial, and mission support-related functions, to improve safety of NOAA Corps officers who pilot marine vessels and perform research services. Reprogram funds within the NOAA Satellite Service to prioritize launch of the polar orbiting Prime (N') in 2009 so as to ensure continuity of meteorological and environmental observations; implement its replacement, the National Polar Orbiting Environmental Satellite System (NPOESS); advance the NPOESS preparatory project (NPP) by testing sensors and ground systems for future weather data collection and management; and keep on schedule for the launch of the first NPOESS-C1 satellite in 2013. Fund President Bush's Ocean Action Plan to conduct ocean-related activities and include $14 million for the International Ocean Observation System (IOOS) and $123 million for ocean research, fisheries management, and marine conservation. Request new funds to operate and maintain a third WP-3 Orion "hurricane hunter" plane acquired through Hurricane Katrina emergency appropriations ( P.L. 109-234 ) and deploy the last 19 tsunami detection (DART) buoys procured for Pacific waters. Promote an organic act to authorize all NOAA programs and activities under a single law. The House Committees on Resources and Science have considered legislation to establish NOAA in the Department of Commerce statutorily; define the agency's mission, functions, and authorities; and place greater emphasis on marine ecosystem-based management at the agency. In the final outcome of FY2008 appropriations, it appears that Congress was amenable to most of the President's requests for national funding for NOAA. In some cases, however, it went steps further to provide more resources than was requested for certain key programs and activities of importance in their home districts, including regional economic issues and disaster recovery, and other issues of national concern such as long-term observation and assessment of the the state of the environment, with respect to atmospheric pollution, climate change, and the health of the oceans. In some cases, Congress avoided more drastic budget savings proposed for NOAA by the Bush Administration, and provided greater funding for NOAA activities as proposed by the the Senate to address needs and priorities at the agency. The enacted FY2008 amount for Departmental Management ( P.L. 110-161 ) is $70.0 million, which is $3.7 million less than the FY2007 enacted amount and $17.4 million less than the President's request. The President's FY2008 budget request included $87.4 million for Departmental Management: $58.7 million for salaries and expenses, $23.4 million for the Office of Inspector General (IG), and $4.3 million for renovation to the department's headquarters, the Herbert C. Hoover Building. The $87.4 million requested for Departmental Management was $13.8 million more than the FY2007 appropriation, a 18.7% increase. The $58.7 million for salaries and expenses would have been approximately $11.6 million more than the FY2007 appropriation, a 24% increase. The $23.4 million for the IG would have been a slight increase from the FY2007 appropriation of $22.6 million. The President's FY2008 budget included $1 million for the Coordination Council, which did not receive any funding in FY2007. The President's FY2008 request did not include any funding for United States Travel and Tourism Promotion, compared with $3.9 million enacted in FY2007. The Senate passed its committee's recommendation of $82.7 million for Departmental Management, which was $4.7 million less than the President's request. The House bill, as passed, included $46.5 million for Departmental Management after several amendments reduced the House committee's recommendation by $40 million by transferring that funding to Department of Justice programs. Consequently, the $46.5 million for Departmental Management included in the House-passed bill was $40.9 million less than the Administration's request and $36.2 million less than the Senate recommendation. The House-passed bill had included $3.4 million for renovations to the Herbert C. Hoover Building, while the Administration had included $4.3 million. Neither the Senate nor the House recommendation included any funds for United States Travel and Tourism Promotion. P.L. 110-69 ( H.R. 2272 ) America COMPETES Act. Title III authorizes funding for the National Institute of Standards and Technology (NIST) through 2010 and creates several new manufacturing R&D programs in that organization. Among the new programs established within NIST would be a Technology Innovation Program to replace the Advanced Technology Program. Introduced on May 10, 2007; referred to the House Committee on Science and Technology. Passed House on May 21, 2007, and received in the Senate on May 22, 2007. Placed on Senate Legislative Calendar under General Orders. Senate struck out all after the Enacting Clause and substituted the language of S. 761 . Passed Senate, with the amendment, on July 19, 2007. Conference held and conference report agreed to on July 31, 2007. House and Senate agreed to conference report on August 2, 2007. Signed into law by the President on August 9, 2007. H.R. 21 (Farr) The Oceans Conservation, Education, and National Strategy for the 21 st Century Act was introduced on January 4, 2007 and referred to the House Committees on Resources and Science. Title II of this act would repeal the executive order that created NOAA in 1970, establish the National Oceanic and Atmospheric Agency (NOAA) within the Department of Commerce, and authorize all of its programs and activities under a single law, or organic act. It would maintain the current leadership structure and preserve the status of extant NOAA rules, regulations, and other legal matters with few exceptions. The act lays out the mission and programs required to be maintained by NOAA to support operations, research, and, services. It identifies research and development (R&D) and education and outreach part of NOAA's mission. It would authorize a NOAA Science Advisory Board. It would require National Academy of Sciences reviews of NOAA activities, including adequacy of environmental data and information systems, a strategic plan for R&D, and extramural support of NOAA operations. A reorganization plan would be required 18 months after enactment and an annual internal assessment of NOAA's effectiveness and efficiency. The Administrator of NOAA would be required to notify Congress and the public prior to closing, transferring, changing, or establishing any NOAA facility. Conditions are set for developing major programs to include determining cost baseline and notifying Congress when cost increases or schedule delays occur in major programs. Finally, the act places greater emphasis on ecosystem-based management as part of NOAA research and operations. A hearing on H.R. 21 was held by the House Resources Subcommittee on Fisheries, Wildlife, and Oceans on April 26, 2007. Sponsor's remarks on H.R. 21 were included in the Congressional Record , June 6, 2007: H6104. H.R. 1868 (Wu) The Technology Innovation and Manufacturing Stimulation Act of 2007, as passed by the House, would authorize funding for NIST through 2010 and create several new manufacturing R&D programs within NIST. S. 761 (Reid) The America Creating Opportunities to Meaningfully Promote Excellence in Technology, Education, and Science Act, as passed by the Senate, would authorize appropriations for NIST through FY2011, as well as provide for the creation of a new manufacturing R&D program within NIST, among other things. CRS Report 95-36, The Advanced Technology Program , by [author name scrubbed]. CRS Report RL31832, The Export Administration Act: Evolution, Provisions, and Debate , by [author name scrubbed]. CRS Report 97-104, Manufacturing Extension Partnership Program: An Overview , by [author name scrubbed]. CRS Report 95-30, The National Institute of Standards and Technology: An Appropriations Overview , by [author name scrubbed]. CRS Report RS22614, The National Oceanic and Atmospheric Administration (NOAA): A Review of the FY2008 Budget and Congressional Appropriations , by [author name scrubbed]. CRS Report RL32739, Tsunamis: Monitoring, Detection, and Early Warning Systems , by [author name scrubbed]. CRS Report RS21469, The National Telecommunications and Information Administration (NTIA): Budget, Programs, and Issues , by [author name scrubbed]. CRS Report RS20906, U.S. Patent and Trademark Office Appropriations Process: A Brief Explanation , by [author name scrubbed] (pdf). Established by an act of 1870 (28 U.S.C. 501) with the Attorney General at its head, the Department of Justice provides counsel for citizens and protects them through law enforcement. It represents the federal government in all proceedings, civil and criminal, before the Supreme Court. In legal matters, generally, the Department provides legal advice and opinions, upon request, to the President and executive branch department heads. The major functions of DOJ agencies and offices are described below. United States Attorneys prosecute criminal offenses against the United States, represent the federal government in civil actions, and initiate proceedings for the collection of fines, penalties, and forfeitures owed to the United States. United States Marshals Service provides security for the federal judiciary, protects witnesses, executes warrants and court orders, manages seized assets, detains and transports unsentenced prisoners, and apprehends fugitives. Federal Bureau of Investigation (FBI) investigates violations of federal criminal law; helps protect the United States against terrorism and hostile intelligence efforts; provides assistance to other federal, state, and local law enforcement agencies; and shares jurisdiction with Drug Enforcement Administration (DEA) over federal drug violations. Drug Enforcement Administration (DEA) investigates federal drug law violations; coordinates its efforts with state, local, and other federal law enforcement agencies; develops and maintains drug intelligence systems; regulates legitimate controlled substances activities; and conducts joint intelligence-gathering activities with foreign governments. Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) enforces federal law related to the manufacture, importation, and distribution of alcohol, tobacco, firearms, and explosives. It was transferred from the Department of the Treasury to the Department of Justice by the Homeland Security Act of 2002 ( P.L. 107-296 ). Federal Prison System provides for the custody and care of the federal prison population, the maintenance of prison-related facilities, and the boarding of sentenced federal prisoners incarcerated in state and local institutions. Office on Violence Against Women coordinates legislative and other initiatives relating to violence against women and administers grant programs to help prevent, detect, and stop violence against women, including domestic violence, sexual assault, and stalking. Office of Justice Programs (OJP) manages and coordinates the activities of the Bureau of Justice Assistance, Bureau of Justice Statistics, National Institute of Justice, Office of Juvenile Justice and Delinquency Prevention, Community Oriented Policing Services (COPS), and the Office of Victims of Crime. Office of Community Oriented Policing Services (COPS) administers grants to assist law enforcement agencies in enhancing public safety through the implementation of community policing strategies. COPS grants support, among other things, the enhancement of law enforcement officers' problem-solving and community interaction skills to foster working relationships with community members that are focused on improving crime prevention within communities. Most crime control has traditionally been a state and local responsibility. With the passage of the Crime Control Act of 1968 (P.L. 90-351), however, the federal role in the administration of criminal justice has increased incrementally. Since 1984, Congress has approved five major omnibus crime control bills, designating new federal crimes, penalties, and additional law enforcement assistance programs for state and local governments. The Government Performance and Results Act (GPRA) required the Department of Justice, along with other federal agencies, to prepare a five-year strategic plan, including a mission statement, long-range goals, and program assessment measures. The Department's Strategic Plan for FY2007-FY2012 sets forth six goals: detect and prevent terrorism; combat violent crime; combat computer crime, especially child pornography, obscenity, and intellectual property theft; combat illegal drugs; attack corporate and public corruption; and promote civil rights and civil liberties. For the Department of Justice (DOJ), the Consolidated Appropriations Act, 2008 ( P.L. 110-161 ) provides $23.592 billion in FY2008 funding, an increase of $381.5 million over the FY2007 appropriation (see Table 6 ). This funding exceeds the President's FY2008 budget request of $22.348 billion by nearly $1.244 billion. The FY2008 request, moreover, would have been $862.5 million less than the FY2007 DOJ appropriation of $23.210 billion. By comparison, for FY2008, the Senate-passed bill would have provided $24.493 billion for DOJ, $1.282 billion more than the FY2007 enacted level and almost $2.145 billion more than the FY2008 request. The House-passed bill would have provided $23.974 billion, $764 million more than the FY2007 appropriation and $1.626 billion more than the FY2008 request, although $518.6 million less than the proposed amount in the Senate-passed bill. In recent years, as a part of the DOJ appropriations process there has been controversy over the appropriate level of assistance the Department provides to states and localities for law enforcement and crime prevention grants. The divergence between the Administration's and Congress' perspectives on this issue is evident in the relatively large differences in the funding levels requested by the President and the amounts appropriated by Congress for programs under the Office of Justice Programs (OJP). Generally, Congress has provided higher funding levels for these activities compared to the President's budget request. For FY2008, Congress has appropriated $2.282 billion for all OJP programs, $246.5 million less than the FY2007 enacted level. This amount exceeds the President's FY2008 budget request of $1.105 billion for OJP programs by $1.177 billion. The President's proposed reduction of $1,105 would have been nearly $1.424 billion less then the FY2007 appropriation of $2.529 billion. The Senate-passed bill would have provided $2.80 billion for these programs, an amount that is $271.6 million more than the FY2007 appropriation, and nearly $1.695 billion more than the FY2008 request. The House-passed bill would have provided $2.830 billion, $301.5 million more than the FY2007 appropriation, $1.725 billion more than the FY2008 request, and $29.9 million more than in the Senate-passed bill. (For a more detailed discussion, see the " Office of Justice Programs (OJP) " section, below.) The General Administration account for DOJ provides funds for salaries and expenses, the Attorney General's office, the Inspector General's office, as well as other programs designed to ensure that the collaborative efforts of DOJ agencies are coordinated to help fight crime as efficiently as possible. One example of such activities and programs is the Joint Automated Booking System and the Automated Biometric Identification System, which is designed to integrate fingerprint identification systems (e.g., IAFIS and IDENT). In addition, DOJ continues to enhance its counterterrorism and intelligence capabilities through infrastructure improvements and initiatives, including the Law Enforcement Wireless Communications (LEWC, formerly known as Narrowband Communications) for developing and implementing nation-wide integrated wireless networks to support the federal law enforcement and homeland security missions of DOJ. Additionally, funding for the Justice Information Sharing Technology (JIST) account provides for investments in information technology to further support the Department's strategic goals. The General Administration appropriation is $1.795 billion for FY2008. This amount is $41.3 million less than the enacted FY2007 appropriation of $1.836 billion; however, it is $106.8 million less than the President's FY2008 budget request of $1.902 billion. The Senate-passed bill would have funded this account at $1.829 billion for FY2008, $7.2 million less than the FY2007 appropriation and $72.6 million less than the FY2008 request. The House-passed bill would have funded this account at nearly $1.819 billion, $16.7 million less than the FY2007 appropriation level, $82.1 million less than the FY2008 request, and $9.5 million less than the Senate-passed bill. The House-passed amount was $50.3 million less than the House-reported amount as several amendments would have offset funding for other programs by reducing funding for General Administration. For JIST, the FY2008 General Administration appropriation includes $85.5 million, a $38 million reduction from FY2007 enacted appropriations and $15 million less than the President's FY2008 request of $100.5 million. The Senate-passed bill would have provided $90.8 million, $27.8 million less than the FY2007 appropriation of $123.6 million, and $4.7 million less than the FY2008 request. The House-passed bill would have provided the same amount requested in the President's budget. The OFDT provides overall management and oversight for federal detention services relating to federal prisoners in non-federal institutions or otherwise in the custody of the U.S. Marshals Service. The FY2008 appropriation for OFDT is almost $1.226 billion. Although this amount is $104 thousand more than the FY2007 appropriation, it is $68.3 million less than the President's FY2008 budget request of $1.294 billion in funding. The Senate-passed bill would have provided OFDT with approximately $1.266 billion, $40 million more than the FY2007 appropriation, but $28.4 million less than the FY2008 request. The House-passed bill would have provided OFDT funding of $1.261 billion,$35 million more than the FY2007 appropriation, but $33.4 million less than the FY2008 request, and $5.0 million less than in the Senate-passed bill. The OIG is responsible for detecting and deterring waste, fraud, and abuse involving DOJ programs and personnel and promoting economy and efficiency in DOJ operations. The OIG also investigates allegations of departmental misconduct. For FY2008, Congress has appropriated of $70.6 million for the DOJ OIG, a funding level equal to the amount enacted in FY2007, although $2.6 million less than the FY2008 President's request of $73.2 million. The Senate-passed bill would have provided $73.7 million for the OIG, $3.1 million greater than the FY2007 appropriation and $492 thousand greater than the FY2008 request. The House-passed bill would have provided $74.7 million, $4.1 million greater than the FY2007 appropriation, $1.5 million greater than the FY2008 request, and $1.0 million greater than the amount in the Senate-passed bill. The U.S. Parole Commission adjudicates parole requests for prisoners who are serving felony sentences under federal and District of Columbia code violations. The FY2008 appropriation for the Parole Commission is nearly $11.5 million, an amount that is $47 thousand less than the FY2007 appropriation, and $732 thousand less than the FY2008 request of $12.2 million. For FY2008, the Senate- and House-passed bills would have provided an appropriation equal to the amount requested by the President. The Legal Activities account includes several subaccounts: (1) general legal activities, (2) U.S. Attorneys, (3) U.S. Marshals Service, (4) prisoner detention, and (5) other legal activities. For FY2008, Congress has appropriated $3.584 billion for Legal Activities, $190.9 million greater than the FY2007 appropriation of $3.393 billion, although it is $80.9 million less than the President's budget request of $3.665 billion. The Senate-passed bill would have provided nearly $3.711 billion for this account, $317.5 million more than the FY2007 appropriation and $45.7 million more than the FY2008 request. The House-passed bill would have provided $3.609 billion, $216 million greater than the FY2007 appropriation; however, that amount would have been $55.8 million less than the FY2008 request and almost $101.5 million less than the Senate-passed bill. The General Legal Activities account funds the Solicitor General's supervision of the department's conduct in proceedings before the Supreme Court. It also funds several departmental divisions (tax, criminal, civil, environment and natural resources, legal counsel, civil rights, and antitrust). The FY2008 general legal activities appropriation is $735.5 million, an increase of $58.4 million over the FY2007 appropriation of $678.8 million, but $15 million less than the President's FY2008 budget request of $750.6 million. The Senate-passed bill would have provided $753 million for General Legal Activities, $74.2 million more than the FY2007 appropriation and $2.4 million more than the FY2008 request. The House-passed bill would have provided $750.6 million, an amount equal to the FY2008 request. The U.S. Attorneys enforce federal laws through prosecution of criminal cases and represent the federal government in civil actions in all of the 94 federal judicial districts. For FY2008, the U.S. Attorneys' appropriated budget is almost $1.755 billion. This amount is $94.9 million more than FY2007 enacted budget and $7.0 million more than the President's FY2008 budget request of almost $1.748 billion. The Senate-passed bill would have provided the U.S. Attorneys Office with $1.778 billion, $30 million more than the FY2008 request and $118 million more than the FY2007 appropriation. The House-passed bill would have provide $1.749 billion for the U.S. Attorneys, $88.7 million more than the FY2007 appropriation, $750 thousand more than the FY2008 request, and $29.3 million less than the amount in the Senate-passed bill. The USMS is responsible for the protection of the federal judicial process, including protecting judges, attorneys, witnesses, and jurors. In addition, USMS provides physical security in courthouses, safeguards witnesses, transports prisoners from court proceedings, apprehends fugitives, executes warrants and court orders, and seizes forfeited property. For FY2008, the appropriation for the USMS is $866.5 million. Although this amount is $41.2 million more than the FY2007 appropriation of $825.4 million, it is $33.4 million less than the $899.9 million included in the FY2008 President's budget request. For FY2008, the Senate-passed bill would have provided $912.7 million for the USMS, $87.4 million more than the FY2007 appropriation, and $12.8 million more than the FY2008 request. For construction, the Senate-bill would have created a separate account that would have been funded at just over $8.0 million for FY2008. The House-passed bill would have provided $886.2 million for USMS, almost $60.9 million greater than the FY2007 appropriation, although nearly $13.7 million less than the FY2008 request and $26.5 million less than the Senate-passed bill. For other legal activities—the Community Relations Service, the U.S. Trustee Fund (which is responsible for maintaining the integrity of the U.S. bankruptcy system by, among other things, prosecuting criminal bankruptcy violations), and the Asset Forfeiture program—the FY2008 appropriation is $227.2 million. This amount is $1.8 million less than the FY2007 appropriation and $39.4 million less than the President's FY2008 budget request of $266.6 million. The Senate-passed bill would have provided $267.1 million for other legal activities, $38.1 million greater than the FY2007 appropriation and $500 thousand greater than the FY2008 request. The House-passed bill would have provided $223.7 million for this account, $5.3 million less than the FY2007 appropriation, $42.9 million less than the FY2008 request, and $43.4 million less than the amount in the Senate-passed bill. The NSD coordinates DOJ's national security and terrorism missions through law enforcement investigations and prosecutions. The NSD was established in DOJ in response to the recommendations of the Commission on the Intelligence Capabilities of the United States Regarding Weapons of Mass Destruction (WMD Commission), and authorized by Congress on March 9, 2006, in the USA PATRIOT Improvement and Reauthorization Act of 2005 ( P.L. 109-177 ). Under the NSD, the DOJ resources of the Office of Intelligence Policy and Review and the Criminal Division's Counterterrorism and Counterespionage Sections are consolidated to coordinate all intelligence-related resources and ensure that criminal intelligence information is shared, as appropriate. For FY2008, Congress has appropriated nearly $73.4 million for NSD. This funding level is $4.7 million more than the FY2007 appropriation of $68.7 and $4.7 million less than the $78.1 million requested in the President's FY2008 budget. The Senate- and House-passed bills would have provided the same amount requested in the President's FY2008 budget. The Interagency Law Enforcement account reimburses departmental agencies for their participation in the Organized Crime Drug Enforcement Task Force (OCDETF) program. Organized into nine regional task forces, this program combines the expertise of federal agencies with the efforts of state and local law enforcement to disrupt and dismantle major narcotics-trafficking and money-laundering organizations. From DOJ, the federal agencies that participate in OCDETF are the Drug Enforcement Administration; the Federal Bureau of Investigation; the Bureau of Alcohol, Tobacco, Firearms and Explosives; the U.S. Marshals Service; the Justice, Tax and Criminal Divisions of DOJ; and the U.S. Attorneys. From the Department of Homeland Security, the U.S. Bureau of Immigration and Customs Enforcement and the U.S. Coast Guard participate in OCDETF. In addition, the Internal Revenue Service and Treasury Office of Enforcement also participate from the Department of the Treasury. State and local law enforcement agencies participate in approximately 87% of all OCDETF investigations. For FY2008, the OCDETF appropriation is $497.9 million, an amount equal to the FY2007 appropriation level. However, this funding amount is $11.2 million less than the $509.2 million level requested in the President's FY2008 budget and included in both the Senate- and House-passed bills. The FBI is the lead federal investigative agency with the mission of protecting and defending the country against terrorist and foreign intelligence threats; enforcing federal laws; and providing leadership and criminal justice services to federal, state, municipal, tribal, and territorial law enforcement agencies and partners. Following the September 11, 2001 terrorist attacks, however, the FBI has reorganized and reprioritized to focus more sharply on preventing terrorism and related criminal activities. The enacted FY2008 FBI budget is $6.658 billion, including $2.309 billion for counterterrorism investigations, foreign counterintelligence, and other activities related to national security; as well as $164.2 million for construction. The FY2008 appropriation exceeds the enacted FY2007 budget of $6.299 billion by $359.1 million and the President's FY2008 budget request of $6.525 billion by $132.8 million. The Senate-passed bill would have provided almost $6.602 billion for the FBI, almost $303.1 million greater than the FY2007 appropriation, $76.8 million greater than the FY2008 request, and $69.8 million greater than the House-passed bill. For construction, the Senate bill included $206.4 million, including a subaccount of $63.7 million for sensitive compartmented information facilities (SCIFs). The House-passed bill would have provided $6.532 billion for the FBI, $233.2 million more than the FY2007 appropriation and almost $7.0 million more than the FY2008 request. The House bill's funding level, however, would have been $69.8 million less than the amount included in the Senate-passed bill for FY2008. The House bill included almost $148.2 million for additional positions to increase the Bureau's capacity for counter-terrorism and crime fighting; $80 million for SENTINEL, the FBI's new case management system; and $47 million to improve the speed and accuracy of IAFIS and help support the integration of the FBI's IAFIS with the Department of Homeland Security's IDENT system. In addition, the House bill included $28.2 million for FBI's Construction account, $23.2 million less than the FY2007 appropriation, $53.2 million less than the FY2008 President's request, and $178.2 million less than the Senate bill. The DEA is the lead federal agency tasked with reducing the illicit supply and abuse of dangerous narcotics and drugs through drug interdiction and seizing of illicit revenues and assets from drug trafficking organizations. According to DEA, the agency's efforts to reduce the drug supply has contributed to a 23% drop in national drug use over the past five years. By 2009, one of DEA's goals is to take $3 billion each year from the ill-gotten proceeds of international drug trafficking networks operating in the United States. In Congressional testimony on April 17, 2007, DEA noted that they continue to face evolving challenges in limiting the supply of illicit drugs such as the illicit use of pharmaceutical drugs available through the Internet; enforcement along the Southwest border with Mexico where DEA estimates that 85% of illicit drugs are smuggled into the United States; and DEA's limited intelligence infrastructure inability to keep pace with the well-financed use and sophistication of communications technology used drug trafficking organizations in their smuggling operations. The enacted FY2008 DEA appropriation is $1.858 billion. This amount exceeds the FY2007 appropriation of $1.761 million by $96.5 million and the President's FY2008 budget request of $1.805 billion by $53 million. The Senate-passed bill would have provided $1.854 billion for DEA, $93.1 million more than the FY2007 appropriation and $49.6 million more than the FY2008 request. The House-passed bill would have provided almost $1.843 billion, $81.5 million more than FY2007 appropriations, $38.0 million more than the President's request, but $11.6 million less than the amount included in the Senate bill. The ATF enforces federal criminal law related to the manufacture, importation, and distribution of alcohol, tobacco, firearms, and explosives. ATF works both independently and through partnerships with industry groups, international, state and local governments, and other federal agencies to investigate and reduce crime involving firearms and explosives, acts of arson, and illegal trafficking of alcohol and tobacco products. For FY2008, Congress has appropriated $1.008 billion for ATF, including $23.5 million for construction. Although this amount is $23.5 million greater than the FY2007 appropriation, it is $6.4 million less than the amount proposed in the President's FY2008 budget request. The FY2008 request of $1.014 billion for ATF was $29.9 million more than the FY2007 appropriation of $984.1 million. The request included $10 million for the Arson and Explosives decision unit to make up for a previous budget reduction; $6.3 million to expand ATFs domestic firearms trafficking enforcement efforts nationwide; $2.2 million for the Project Safe Neighborhoods (PSN) initiative to expand gang and firearms enforcement efforts nationally; and $400 thousand for ATF agents dedicated to the National Gang Targeting Enforcement and Coordination Center (GangTECC), a national task force designed to coordinate anti-gang strategies and operations across agency lines. The Senate-passed bill would have provided almost $1.049 billion for ATF, an increase of $35.0 million over the Administration's FY2008 budget request as well as $64.9 million over the FY2007 appropriation. The Senate-passed bill directed that $35 million of the ATF FY2008 appropriation would have been provided for the construction of the National Center for Explosives Training and Research. The House-passed bill would have provided almost $1.014 billion for ATF, an amount equal to the FY2008 request, and similarly included specified amounts to be directed at the same initiatives found in the request for the Firearms Trafficking/Gun Runner Program, PSN/Firearms Violence Reduction program, and GangTECC. In addition, the House bill would have directed ATF to submit a report on recommended improvements to upgrade its information technology systems and the bill included $1.0 million for this purpose. The FPS is administered by the Bureau of Prisons (BOP), which maintains penal institutions nationwide and contracts with state, local, and private concerns for additional detention space. The Administration estimates that as of January 11, 2007, there were nearly 193,616 federal inmates in 114 institutions. Of the total number of federal inmates, 163,000 are in facilities operated by BOP, while the remaining 16% of federal inmates were in contract care at privately operated secure facilities that are managed by state and local governments, residential reentry centers, or serving a sentence of home confinement. BOP projects that the total federal prison population will continue to increase, reaching 202,584 by 2008, 207,885 by 2009, and reach 212,987 by the year 2010. According to BOP, the increased federal prison population can be attributed to stepped-up law enforcement efforts, tougher federal criminal laws, and altered sentencing in the federal criminal justice system, with the largest increases of FY1998-FY2000 due to higher number of prosecutions of drug defendants, immigration cases, and weapons offenses. Systemwide, BOP facilities are estimated to be operating at 36% above capacity in FY2007 and are projected to continue operating at this level in FY2008. For FY2008, Congress has appropriated $5.425 billion for the Federal Prison System. This funding level includes $372.7 million for buildings and facilities costs for penal and correctional use. Compared to the FY2007 enacted level of funding, the FY2008 appropriation represents a decrease of $22.7 million. However, the enacted FY2008 funding for BOP is $61.6 million more than the President's FY2008 budget request. The Administration's FY2008 budget request included $5.364 billion for funding the Federal Prison System, nearly $84.3 million less than the FY2007 appropriation of $5.448 billion. The Senate-passed bill would have provided the BOP with nearly $5.649, or an increase of $200.7 million above the FY2007 appropriation and $285 million above the FY2008 request. The House-passed bill would have provided BOP with $5.269 billion, a decrease of $179.3 million below the FY2007 appropriation, $95 million below the FY2008 request, and almost $380 million below the amount in the Senate-passed bill. The OVW administers programs providing financial and technical assistance to communities around the country to facilitate the creation of programs, policies, and practices designed to improve criminal justice responses related to domestic violence, dating violence, sexual assault, and stalking. For FY2008, the OVW appropriation is $400 million. This amount increases funding for OVW programs by $17.4 million over the Office's FY2007 appropriation and exceeds the amount requested in the FY2008 President's budget request by $30 million. In addition, Congress did not sanction the Administration's proposal to create a single consolidated, competitive grant program (described below). By comparison, the President's budget request for FY2008 included $370 million for OVW, $12.6 million less than FY2007 appropriations of $382.6 million. The Administration's FY2008 budget request for the OVW also included a proposal to consolidate all of OVW's current formula and discretionary grant programs into a single grant program. Grants under the proposed consolidated program would be awarded on a competitive basis to state, local, and tribal governments. State, local, and tribal governments receiving grants could use the funding in one or more of several proposed purpose areas, including combating violent crimes against women; encouraging arrest policies and enforcement of protection orders; providing legal assistance to victims; combating domestic violence, dating violence, sexual assault, and stalking on college campuses; preventing victimizations in rural areas; enhancing training and services to end violence and abuse towards elderly and disabled women; supporting safe haven programs; supporting violence and abuse prevention program on tribal lands; funding stalking databases; and supporting comprehensive approaches to sex offender management. Grants awarded under the proposed program could be used to support state, local, territorial and tribal efforts to develop and coordinate prevention efforts and prosecution of domestic violence, dating violence, sexual assault and stalking, along with supporting related victim services. The Senate-passed bill would have provided $400 million for OVW, $30 million more than the President's FY2008 budget request and $17.4 million over the FY2007 appropriation. The House-passed bill would have provided $459 million for OVW in FY2008, an amount that would have exceeded the FY2007 appropriation by $76.4 million, the FY2008 request by almost $89 million, and the Senate bill by $59 million. Neither the Senate- nor House-passed bills included endorsements of the Administration's proposal to create a consolidated, competitive grant program, and instead stated that the current OVW program operations were proven and successful programs as established by Congress when OVW was reauthorized in 2005. The OJP manages and coordinates the National Institute of Justice, Bureau of Justice Statistics, Office of Juvenile Justice and Delinquency Prevention, Office of Victims of Crimes, Bureau of Justice Assistance, and related grant programs. For FY2008, the Consolidated Appropriations Act, 2008 ( P.L. 110-161 ) provides $2.282 billion for OJP programs and activities, $247 million less than what was appropriated for OJP in FY2007. By comparison, the Administration's FY2008 request included just under $1.105 billion in total funding, nearly $1.424 billion less than the FY2007 appropriation of $2.529 billion. Hence, the FY2008 enacted level of funding provided by Congress for OJP is $1.177 billion greater than the Administration's request. The Senate-passed bill would have provided just over $2.800 billion for OJP, an amount $1.695 billion greater than proposed under the President's FY2008 budget request and $272 million greater than the FY2007 appropriation. The House-passed bill would have provided $2.830 billion for OJP programs and activities, a funding level that would have exceeded the FY2007 appropriation by $301.5 million and the FY2008 request by $1.725 billion. The House-passed bill would have also exceeded the Senate-passed bill by $30 million. The FY2008 enacted amount for Justice Assistance is $196 million, $42 million less than the FY2007 appropriation, but about $29 million more than the FY2008 request. The enacted amount includes $37 million for the National Institute of Justice (NIJ); $35 million for the Bureau of Justice Statistics (BJS); $40 million for the Regional Information Sharing Systems (RISS); and $50 million for missing and exploited children. This amount also includes $11 million under the Justice Assistance account to support state and local law enforcement agencies in the prevention, investigation and prosecution of Internet, high-tech and economic crimes. The Administration's FY2008 budget request included nearly $167.3 million in funding for Justice Assistance, $70.7 million less than appropriated in FY2007. This requested amount would have provided $55.7 million for NIJ: $61.5 million for BJS, $38.5 million for RISS, and $11.6 million for the administration of the Office of Victims of Crime. The FY2008 request included a proposal to transfer the Victim Notification and National White Collar Crime Center from Justice Assistance to the Byrne Memorial Justice Assistance Grants (JAG) program account, and the missing and exploited children program account to the Juvenile Justice program account. The Senate-passed bill would have provided $240 million for Justice Assistance, almost $1.7 million more than the FY2007 appropriation and $72.7 million more than the President's FY2008 request. The Senate bill included $60 million for NIJ, $10 million for BJS, $60 million for RISS, $25 million for the State Automated Victim Notification System, $10 million for the Office of Victims of Crime, and $65 million for missing and exploited children. The House-passed bill would have provided $250 million for Justice Assistance, $11.7 million more than the FY2007 appropriation, $82.7 million more than the FY2008 budget request, and $10 million more than the Senate-passed bill. The House bill included $60 million for NIJ, $45 million for BJS, $50 million for RISS, $12 million for the State Automated Victim Notification System, $61.4 million for the Missing Children Program. The House-passed bill also included $10 million under the Justice Assistance account to support state and local law enforcement agencies in the prevention, investigation and prosecution of Internet, high-tech and economic crimes, including fraud and identity theft, as well as anti-piracy and counterfeiting enforcement. The FY2008 enacted amount for state and local law enforcement assistance is $1.008 billion. This amount is $278.7 million less than the FY2007 appropriation, but almost $458 million more than the Administration's FY2008 request. In the joint explanatory statement, Congress included the following FY2008 funding allocations: $170.4 million for the Byrne Memorial JAG program, of which $2 million would be provided for NIJ and $2 million would be for training to improve state and local law enforcement's intelligence capabilities; $187.5 million for Byrne Discretionary Grants; $16 million for Byrne Competitive Grants; $22.4 million for Indian Tribal Assistance; $410 million for the State Criminal Alien Assistant Program (SCAAP); $30.1 million for the Southwest Border Prosecutor Initiative; $2.8 million for the Northern Border Prosecutor Initiative; $9.4 million for Victims of Trafficking; $9.4 million for State Prison Drug Treatment; $15.2 million for Drug Courts; $7 million for a Prescription Drug Monitoring Program. $17.9 million for Prison Rape Prevention and Prosecution; $940 thousand for Missing Alzheimer's Patients Program; $6.5 million for the Mental Health Courts; $2.5 million for the Capital Litigation Improvement Grant Program (§§421, 422, 426 of P.L. 108-405 ); and $100 million for 2008 Presidential Conventions Security. As reflected in both the House- and Senate-passed bills, Congress did not follow the Administration's proposal to consolidate state and local law enforcement programs into a single competitive grant program. As part of its FY2008 budget package, the Administration proposed consolidating programs and funding under the State and Local Law Enforcement Assistance account into two new grant programs: the Violent Crime Reduction Partnership Initiative and the Byrne Public Safety and Protection (Byrne) program. Under the Violent Crime Reduction Partnership Initiative, OJP would have awarded grants on a competitive basis to communities seeking to establish partnerships between federal, state, and local law enforcement to investigate and reduce violent crime. Partnerships funded under the proposed grant program could include efforts to address drug trafficking and gang crime. Under the Byrne program, most OJP law enforcement assistance grant programs would have been consolidated into a single grant program that would also have been awarded to state, local, and tribal governments on a competitive basis. Under the proposed Byrne program, OJP would have focused its assistance on those jurisdictions experiencing significant criminal justice problems and assist state and local governments in addressing a number of high-priority criminal justice concerns, such as: reducing violent crime at local levels through Project Safe Neighborhoods; addressing the criminal justice issues involving substance abuse treatment through drug courts, residential treatment programs for inmates, prescription drug monitoring programs, methamphetamine lab clean-up, and cannabis eradication efforts; promoting and enhancing law enforcement information sharing efforts; improving the capacity of state and local law enforcement and justice system personnel to make use of forensic evidence and reducing the DNA backlog; addressing trafficking of persons; improving and expanding prisoner re-entry initiatives; and improving services to victims of crime to facilitate their participation in the legal process. Under the proposed Byrne program, state, local, and tribal governments would have been allowed to use funding for several proposed program purpose areas, most of which would have been derived from current OJP grant programs to address arguably the particular needs of their jurisdiction. For state and local law enforcement assistance, the Administration's FY2008 request included $550.0 million, of which $200 million was for the Violent Crime Reduction Partnership and $350 million was for the Byrne program. This amount was $736.8 million below FY2007 enacted level of $1.287 billion for state and local law enforcement. The Senate-passed bill would have provided FY2008 funding of $1.430 billion for state and local law enforcement assistance, $143.2 million more than the FY2007 appropriation and $880 million more than the FY2008 budget request. In report language, Senate appropriators included the following allocations: $660 million for Byrne Memorial JAG program, of which $75 million would be allocated to the Boys and Girls Clubs and $5 million would be allocated to state and local law enforcement anti-terrorism training; $420 million for SCAAP, of which $30 million was for the Southwest Border Prosecution Initiative and $20 million was for a Northern Border Prosecutor Initiative; $190 million for Byrne Discretionary Grants; $5 million for a Prescription Drug Monitoring Program; $1 million for the Missing Alzheimer's Patients Program; $15 million for Victims of Trafficking; $10 million for State Prison Drug Treatment; $40 million for Drug Courts; $15 million for Court Appointed Special Advocates; $4 million for child abuse training programs for judicial personnel and practitioners; $5 million for Prison Rape Prevention and Prosecution; $5 million for National Crime Victim Law Institute; $28 million for Indian Tribal Assistance; $2 million for National Sex Offender Registry; $10 million for Mental Health Courts; and $25 million for Capital Litigation. The House-passed bill would have provided $1.380 billion for state and local law enforcement assistance, $93.2 million more than the FY2007 appropriation, and $830 million more than the FY2008 budget request, but $50 million less than the Senate-passed bill. In report language, House appropriators included the following allocations: $600 million for the Byrne Memorial JAG program, of which $10 million would be provided for NIJ and $25 million would be for security associated with the 2008 Presidential Candidate Nominating Conventions; $31 million for Indian Tribal Assistance; $460 million for SCAAP; $40 million for the Southwest Border Prosecutor Initiative; $124.5 million for Byrne Discretionary Grants; $40 million for Drug Courts; $1 million for Missing Alzheimer's Patients Program; $15 million for Victims of Trafficking; $7.5 million for a Prescription Drug Monitoring Program; $25 million for Prison Rape Prevention and Prosecution; $10 million for State Prison Drug Treatment; $5 million for intelligence sharing; $1 million for Capital Litigation; $10 million for the Mental Health Courts; and $10 million for Sex Offender Management Assistance. The Weed and Seed program is designed to provide grants to help communities build stronger, safer neighborhoods by implementing local-level approaches to solve and prevent crime problems. The program provides assistance for community-based strategies of "weeding and seeding" activities based on the premise that leaders from neighborhood and community organizations, including faith-based organizations, law enforcement and private enterprise, must be involved in leveraging resources to solve community problems at the local level. Site funding generally provides resources for "weeding" activities, which include joint law enforcement operations and community policing, and "seeding" activities, which range from prevention activities, including physically improving the neighborhood and economic development. For FY2008, the enacted level of funding for the Weed and Seed program is $32 million, $17 million less than the FY2007 appropriation. The Administration's FY2008 budget request did not include specific funding for the Weed and Seed program. The Senate-passed bill would have provided $50 million for the Weed and Seed program, an increase of $639 thousand over the FY2007 appropriation of $49.4 million. The House-passed bill would have provided $49.7 million for Weed and Seed for FY2008, $331 thousand more than the FY2007 appropriation, but $308 thousand less than the Senate-passed bill. The enacted FY2008 budget for the Community Oriented Policing Services (COPS) Office is $587 million. This amount is $45 million more than the FY2007 appropriation and $555 million more than the Administration's FY2008 request. In the joint explanatory statement, for various COPS programs and initiatives, Congress included the following allocations: $20 million for COPS hiring grants ( Cops on the Beat ); $205.4 million for Law Enforcement Technology and Interoperability grants; $20 million for a violent gang and gun crime reduction program; $61.2 million for the Meth Hot Spots program; $25.9 million for Bulletproof Vests; $15 million for Tribal Law Enforcement; $9.4 million for the Criminal History Record Upgrades program; $11.8 million for Offender Re-entry; $152.3 million for DNA backlog reduction; $19 million for the Paul Coverdell forensic science grant program; $11.8 million for offender reentry; $15.6 million for child sexual predator elimination and sex offender management; $3.8 million for training and technical assistance; and 28.2 million for management and administration. The Administration's FY2008 budget request included $32.3 million for the COPS Office, of which $28.3 million was for program management and administration and $4 million for training and technical assistance. For FY2007, Congress appropriated $541.8 million for the COPS. For COPS, the Senate-passed bill would have provided $660 million, nearly $118.2 million more than appropriated in FY2007 and almost $627.7 million more than the President's FY2008 budget request. In report language, Senate appropriators included the following FY2008 funding allocations: $25 million for Bullet Proof Vests; $35 million for Tribal Law Enforcement; $80 million for the Meth Hot Spots program; $110 million for Law Enforcement Technology and Interoperability grants; $5 million for the Criminal History Records Upgrade program; $10 million for Offender Re-entry; $169 million for DNA Backlog and Crime Lab improvement; $40 million for Paul Coverdell Forensic Sciences Improvement grants; $5 million for the National District Attorneys Association to conduct prosecutorial training by the National Advocacy Center; $55 million for Child Sexual Predator Elimination grants; $110 million for the COPS hiring program; $6 million for training and technical assistance; and $11 million for program management and administration. The House-passed bill would have provided $725.0 million in FY2008 funding for COPS, an amount that would have included $49.7 million for the Weed and Seed program (described above). In report language, House appropriators included the following allocations: $30 million for Bulletproof Vests; $18 million for Tribal Law Enforcement; $85 million for the Meth Hot Spots program; $128 million for Law Enforcement Technology and Interoperability grants; $12 million for the Criminal History Record Upgrades program; $15 million for Offender Re-entry; $175 million for DNA backlog reduction; $100 million for the COPS hiring program; $80 million for Violent Gang and Gun Crime Reduction; $4 million for training and technical assistance; and $28.3 million for program management and administration. Compared to the Senate-passed bill, the House-passed bill would have provided $65 million more in FY2008 funding for COPS. The enacted FY2008 funding level is $384 million for Juvenile Justice programs. This amount is nearly $45 million more than the FY2007 appropriation and it is $103.5 million more than the Administration's FY2008 request. In the joint explanatory statement, Congress included the following FY2008 Juvenile Justice program funding allocations: $51.7 million for the Juvenile Accountability Block Grant (JABG); $74.3 million for the State Formula Grants; $93.8 million for Discretionary Grants under Part E - Demonstration Programs; $61.1 million for Title V Incentive Grants, which includes $19 million for Gang Prevention through the Gang Resistance Education and Training (GREAT), $14 million for the Tribal Youth Program, and $25 million for Enforcing Underage Drinking Laws; $15 million for the Secure Our Schools Act to ensure school safety and crime deterrence; $16.9 million for programs authorized under the Victims of Child Abuse Act (P.L 101-647); and $70 million for the Juvenile Mentoring Programs. As reflected in both the House- and Senate-passed bills, Congress did not approve of the Administration's proposal to consolidate Juvenile Justice programs into a single competitive grant program. For FY2008, the Administration's proposal would have consolidated existing juvenile justice and exploited children grant programs into a single Child Safety and Juvenile Justice program. Grants under the proposed Child Safety and Juvenile Justice program would have been awarded to state and local governments through a competitive award process. Grants awarded to state and local governments under the proposed program would have allowed state and local government to fund a multitude of juvenile justice and child safety programs. Grant funds under the proposed program would have been used by state and local governments in one or more of several proposed program purpose areas, including preventing online exploitation of children (Project Child Safe); controlling and apprehending sex offenders; supporting efforts to prevent and control juvenile delinquency and improve the juvenile justice system; improving school security; preventing the misuse of guns by juveniles; funding the Missing and Exploited Children Program; funding Internet Crimes Against Children (ICAC) task forces; supporting AMBER alert programs; supporting the Boys and Girls Club of America; supporting the development and use of Closed Circuit Television (CCTV) testimony of children in child abuse cases; and supporting the Court Appointed Special Advocate (CASA) program. For FY2008, the President's budget request included $280 million for the proposed consolidated juvenile justice program, an amount that was $119.9 million less than FY2007 enacted appropriations of $338.4 million. The Senate-passed bill would have provided Juvenile Justice programs with $345 million, $6.6 million more than the enacted appropriation for FY2007 and $65 million more than the FY2008 budget request. In report language, Senate appropriators included the following allocations: $80 million for JABG; $73 million for the State Formula Grants; $76.5 million for Discretionary Grants under Part E - Demonstration Programs; $65 million for Title V Incentive Grants, which includes $5 million for Big Brothers and Big Sisters, $25 million for Incentive Grants, $10 million for the Tribal Youth Program, and $25 million for Enforcing Underage Drinking Laws; $10 million for the GREAT program; $10 million for the Secure Our Schools Act to ensure school safety and crime deterrence; $20 million for programs authorized under the Victims of Child Abuse Act (P.L 101-647); and $10 million for Juvenile Mentoring programs. The House-passed bill would have provided FY2008 funding for Juvenile Justice programs of $399.9 million, $61.5 million more than enacted appropriations for FY2007, $119.9 million more than the Administration's FY2008 budget request, and $54.9 million more than the Senate-passed bill. In report language, House appropriators included the following allocations: $60 million for JABG; $81.2 million for the State Formula Grants; $53 million for Discretionary Grants under Part E - Demonstration Programs; $70 million for Title V Incentive Grants, which includes $25 million for the GREAT program, $17.5 million for the Tribal Youth Program, and $25 million for Enforcing Underage Drinking Laws; $20 million for the Secure Our Schools Act to ensure school safety and crime deterrence; $15 million for programs authorized under the Victims of Child Abuse Act (P.L 101-647); and $100 million for the Juvenile Mentoring Programs. P.L. 110-180 ; H.R. 2640 (McCarthy) NICS Improvement Amendment Act 2007. H.R. 2640 was introduced by Representative Carolyn McCarthy and co-sponsored by Representative John Dingell. As passed by the House, by a voice vote, on June 13, 2007, H.R. 2640 reportedly reflected a compromise between groups favoring and opposing greater gun control. The Senate Judiciary Committee approved similar, but not identical, NICS improvement amendments as part of the School Safety and Law Enforcement Improvement Act of 2004 on August 2, 2007, and reported this bill on September 21, 2007 ( S. 2084 ; S.Rept. 110-183 ). Following lengthy negotiations, the Senate amended and passed the NICS Improvement Amendments Act of 2007 ( H.R. 2640 ), as did the House, on December 19, 2007, clearing that bill for the President's signature. President Bush signed this bill into law on January 8, 2008 ( P.L. 110-180 ). P.L. 110-180 strengthens a provision in the Brady Handgun Violence Prevention Act ( P.L. 103-159 ) that require federal agencies to provide, and the Attorney General to secure, any government records with information relevant to determining the eligibility of a person to receive a firearm. As a condition of federal assistance, P.L. 110-180 requires states to make available to the Attorney General certain records that disqualify persons from acquiring a firearm for inclusion in NICS, particularly those records related to convictions for misdemeanor crimes of domestic violence and persons adjudicated as mentally defective. P.L. 110-180 also requires states, as a condition of federal assistance, as well as federal agencies like the Department of Veterans Affairs (VA), to establish administrative relief procedures under which a person who has been adjudicated mentally defective could apply to have his firearms possession and transfer eligibility restored. In addition, P.L. 110-180 includes two authorizations to increase appropriations for federal assistance for improving access to disqualifying records by $1.313 billion over five years, including $187.5 million for FY2009. H.R. 660 (Conyers)/ S. 378 (Leahy) Court Security Improvement Act of 2007. Amends current law to strengthen and improve judicial security through measures that would (1) improve judicial security measures and increase funding for judicial security, (2) amend the criminal code to provide greater protection for judges, their family members and witnesses, and (3) provide grant funding for states to provide protection for judges and witnesses. H.R. 660 was ordered to be reported by the House Judiciary Committee on June 13, 2007, and the House passed this bill on July 10, 2007. S. 378 was considered and reported by the Senate Judiciary Committee on April 18, 2007 and passed by the Senate on April 19, 2007. H.R. 1592 (Conyers)/ S. 1105 (Kennedy) Local Law Enforcement Hate Crimes Prevention Act of 2007. Authorizes grants for state, local, and tribal law enforcement for extraordinary expenses of investigating hate crimes. Provides technical, forensic, prosecutorial, and other forms of assistance to local law enforcement agencies for investigating and prosecuting hate crimes. Following hearings on the bill on April 17, 2007, the bill was reported by the House Judiciary Committee on April 30, 2007, and passed by the House on May 3, 2007. Language similar to S. 1105 was amended to the FY2008 Defense Authorization Act ( H.R. 1585 ). The Senate passed this bill on October 1, 2007, but the hate crime provisions were not included in the H.R. 1585 conference agreement. H.R. 1593 (Conyers)/ S. 1060 (Biden) Second Chance Act of 2007. Amends current law to reauthorize the adult and juvenile state and local reentry demonstration projects; provides for improvements in the offender residential substance abuse treatment for state offenders; establishes state and local reentry courts, establishes grants for state and local prosecutors to develop, implement, or expand qualified drug treatment program alternatives to imprisonment; and provides grants for the establishment of family substance abuse treatment alternatives to incarceration. After hearings on H.R. 1593 on March 20, 2007, the bill was marked up by the Subcommittee on Crime, Terrorism, and Homeland Security on March 28, 2007, and reported by the House Judiciary Committee on May 9, 2007. H.R. 1700 (Weiner)/ S. 368 (Biden) COPS Improvements Act of 2007. Amends current law to expand the scope of COPS grant programs, change the COPS program into a multi-grant program instead of a single-grant program, and authorize additional funding for COPS. H.R. 1700 , as amended by the House Judiciary Committee, was reported on May 2, 2007, and passed by the House on May 15, 2007. S. 368 was referred to the Senate Judiciary Committee and reported out of the Committee without amendment on May 24, 2007. H.R. 1759 (Bono) Managing Arson Through Criminal History (MATCH) Act of 2007. Establishes guidelines and incentives for states to establish arsonist registries and to require the Attorney General to establish a national arsonist registry and notification program. After a hearing on H.R. 1759 on October 6, 2007, the bill was marked up by the Subcommittee on Crime, Terrorism, and Homeland Security, and reported by the House Judiciary Committee on December 4, 2007. The bill was passed by the House on December 5, 2007 by voice vote. The bill has been referred to the Senate Committee on Judiciary. S. 456 (Feinstein) Gang Abatement and Prevention Act of 2007. Amends current law to create new criminal penalties for gang-related crimes, authorize grants for gang prevention activities, as well as for federal, state, and local law enforcement cooperation in fighting gangs, and for hiring 94 assistant U.S. Attorneys to be deployed in "high intensity interstate gang activity" areas. S. 456 , was passed by the Senate on September 21, 2007. CRS Report RL33308, Community Oriented Policing Services (COPS): Background, Legislation, and Issues , by [author name scrubbed]. CRS Report RS22416, Edward Byrne Memorial Justice Assistance Grant Program: Legislative and Funding History , by [author name scrubbed]. CRS Report RL32824, Federal Crime Control: Background, Legislation, and Issues , by Kristin M. Finklea and Lisa M. Seghetti. CRS Report RL32842, Gun Control Legislation , by [author name scrubbed]. CRS Report RS22458, Gun Control: Statutory Disclosure Limitations on ATF Firearms Trace Data and Multiple Handgun Sales Reports , by [author name scrubbed]. CRS Report RL33403, Hate Crime Legislation , by [author name scrubbed]. CRS Report RL34050, Missing and Exploited Children: Background, Policies, and Issues , by Adrienne L. Fernandes. CRS Report RL33400, Youth Gangs: Background, Legislation, and Issues , by [author name scrubbed]. CRS Report RL33033, Intelligence Reform Implementation at the Federal Bureau of Investigation: Issues and Options for Congress , by [author name scrubbed]. CRS Report RS22070, Juvenile Justice: Overview of Legislative History and Funding Trends , by [author name scrubbed]. CRS Report RS22655, Juvenile Justice Funding Trends , by [author name scrubbed]. CRS Report RL33947, Juvenile Justice: Legislative History and Current Legislative Issues , by [author name scrubbed]. CRS Report RL32800, Sex Offender Registration and Community Notification Law: Recent Legislation and Issues , by [author name scrubbed]. CRS Report RL33011, Terrorist Screening and Brady Background Checks for Firearms , by [author name scrubbed]. CRS Report RL32579, Victims of Crime Compensation and Assistance: Background and Funding , by [author name scrubbed]. CRS Report RL30871, Violence Against Women Act: History and Federal Funding , by [author name scrubbed]. Science agencies include the White House's Office of Science and Technology Policy, National Aeronautics and Space Administration (NASA), and National Science Foundation. For these Science agencies, as Table 7 shows, Congress has appropriated $23.38 billion for FY2008, or $1.173 billion more than the FY2007 appropriation of $22.207 billion (a 5.3% increase), but $364 million less than the Administration's budget request of $23.744 billion. NASA accounts for 74% of the total amount enacted for FY2008 for science agencies. The FY2008 request for science agencies was $23.744 billion, or $1.537 billion more than the FY2007 enacted amount for those agencies (a proposed 6.9% increase). The House-passed bill would have provided $24.127 billion, or $1.920 billion more than that FY2007 amount (an 8.6% increase). The Senate-passed bill would have provided $25.019 billion, or $2.812 billion more than the FY2007 amount (a 12.7% increase). The Senate-passed amount for NASA included $1 billion in emergency funding. The OSTP is one of two offices in the Executive Office of the President (EOP) that are funded in the CJS appropriations bill. Established in 1976 by P.L. 94-282 , the OSTP provides advice within the EOP on scientific and technical aspects of policy issues, assists in the development of the federal R&D budget, coordinates and evaluates federal R&D programs, and consults with non-federal entities on science and technology matters. Dr. John H. Marburger, III is the Director of OSTP and Science Adviser to the President. The Consolidated Appropriations Act, 2008 ( P.L. 110-161 ), as passed by Congress, provides $5.2 million for the OSTP, less than the President's request. An additional $2.2 million appropriated to the National Science Foundation is to be subsequently transferred to the OSTP for costs related to the Science and Technology Policy Institute, OSTP's federally funded research and development center. As also required in Senate report language, the joint explanatory statement accompanying P.L. 110-161 directs the OSTP to provide to the committees, within 90 days of enactment, a five year strategic budget plan in response to the National Research Council's decadal survey on earth science and space applications. For FY2008, the President's budget requested $5.5 million for OSTP, $13 thousand less than the FY2007 enacted funding level. The House committee supported funding at the President's request. The House committee report directed the OSTP to provide to the committee a report on current and future needs regarding U.S. icebreaking capability. The House-passed bill included $5.5 million for the OSTP, the same as the President's request. The Senate committee recommended $5.7 million for the OSTP, $200 thousand more than the President's request. Report language directed that $200 thousand be used for the creation of an Associate Director for Earth Science and Applications, who would coordinate all federal assets directed at understanding the Earth's oceans and climate. The Senate-passed bill included $5.7 million for the OSTP. Policy issues related to OSTP include its oversight and coordination of interagency R&D activities, such as the National Nanotechnology Initiative and the American Competitiveness Initiative, its role in maintaining the nation's international scientific stature, and its leadership in federal support of science and mathematics education. NASA was created by the 1958 National Aeronautics and Space Act (P.L. 85-568) to conduct civilian space and aeronautics activities. The agency is managed from headquarters in Washington, DC. It has nine major field centers around the country, plus the Jet Propulsion Laboratory, which is operated under contract by the California Institute of Technology. Dr. Michael Griffin became NASA Administrator in April 2005. NASA requested $17.309 billion for FY2008, a 6.3% increase over its FY2007 appropriation. The House-passed bill would have provided $17.623 billion. The Senate-passed bill would have provided $18.460 billion. The final appropriation equals the requested amount, $17.309 billion. See Table 8 for a breakdown by appropriations account. A change in how NASA accounts for overhead expenses complicates comparisons between FY2008 and previous years. The new system, implemented in September 2006 and known as "full cost simplification," increases the stated cost of some programs and decreases the stated cost of others, without affecting actual program content. The increases and decreases exactly balance, so that NASA's total budget is unchanged, but, for any particular account or program, amounts expressed in the new system are not directly comparable with amounts expressed in the previous system. In Table 8 and in the discussion of specific NASA programs that follows, all FY2007 amounts have been adjusted for the accounting change to make them comparable with FY2008. Budget priorities throughout NASA are being driven by the Vision for Space Exploration, announced by President Bush in January 2004 and endorsed by Congress in the NASA Authorization Act of 2005 ( P.L. 109-155 ). The Vision includes returning the space shuttle to flight status (already accomplished) then retiring it by 2010; completing the space station, but discontinuing U.S. use of it by 2017; returning humans to the moon by 2020; and then sending humans to Mars and "worlds beyond." The President did not propose significantly increased funding for NASA to accomplish the Vision. Instead, most of the funding was to come from redirecting funds from other NASA activities. Moreover, subsequent NASA funding has been less than was projected at the time of the Vision announcement. The funding requirements of the Vision thus constrain other NASA programs. NASA officials stress, however, that their strategy is to "go as we can afford to pay," with the pace of the exploration program set, in part, by the available funding. In the Science, Aeronautics, and Exploration (SA&E) account, funding for Constellation Systems, the program responsible for developing the Orion spacecraft and Ares I launch vehicle to return humans to the moon, would have increased from $2.550 billion in FY2007 to $3.068 billion in the FY2008 request. The House bill would have provided the requested amount. The Senate bill would have provided a $50 million increase for Ares I. The final FY2008 appropriation is $2.991 billion. An initial operating capability for Orion and Ares I (i.e., a first crewed flight) is planned for early 2015. Also in SA&E, the request for Science was $5.516 billion, an increase of 2.7%. In late 2006, responding to concern in Congress and the scientific community about NASA support for earth science, the Science Mission Directorate (SMD) created a separate Earth Science Division. The FY2008 request included increased funding for earth science and projected further increases in FY2009 and FY2010 relative to previous plans, although most of the requested increases were to cover cost increases and schedule delays in existing missions. In SMD's Astrophysics Division, the request deferred the Space Interferometer mission (SIM) beyond FY2012 but reinstated funding for the SOFIA airborne infrared telescope. The House bill would have provided $5.696 billion, including increases for new earth science missions, SIM, and research and analysis throughout the directorate. The Senate bill would have provided $5.655 billion, with the bulk of its increase devoted to earth science. The enacted FY2008 NASA budget includes $5.547 billion, including increases for earth science, SIM, and research and analysis; these increases were partly offset by reductions in other SMD programs. The request for Aeronautics Research in SA&E was $554 million. This was a 23% decrease relative to the FY2007 appropriation, but both the FY2008 request and the accompanying projections through FY2011 were increased by about $50 million per year relative to NASA's previous plans. The House bill would have provided $700 million, while the Senate bill would have provided the requested amount. The final appropriation is $622 million. The request for Exploration Capabilities consisted of $6.792 billion for the Space Operations Mission Directorate, including the space shuttle, the space station, and the Space and Flight Support program. This was an 11% increase above the FY2007 appropriation. Most of the requested increase was an expected consequence of the space station construction schedule. In addition, the request included $150 million for two new Tracking and Data Relay System (TDRS) satellites, which are required for ground communications with near-earth spacecraft. The increase for these satellites was approximately offset by reductions in planned reserves for the shuttle and the station. A key issue for Congress is the expected gap between the end of shuttle flights in 2010 and the planned initial availability of Orion and Ares I in 2015. Retaining NASA's skilled workforce during the transition period will be a major challenge, especially if development of the new vehicles takes longer than planned and the gap lengthens. Some analysts worry that placing a fixed termination date on the shuttle will create schedule pressure, which was identified as a contributing factor in the 2003 Columbia disaster. Some also are uncomfortable with the fact that Russian spacecraft will be the only way to launch U.S. astronauts to the space station during the gap period. The House bill would have provided $6.692 billion for Exploration Capabilities, or $100 million less than the request. The bulk of the House reduction was from the TDRS procurement request. The House report stated that "this reduction should not affect the viability of the system." The Senate bill would have provided the requested amount for Exploration Capabilities. The final bill provides $6.734 billion. The Senate bill would have provided an additional $1 billion in emergency funding for expenses associated with returning the space shuttle to flight following the Columbia disaster. This funding is not included in the final bill. For more on NASA's FY2008 budget, see CRS Report RS22625, National Aeronautics and Space Administration: Overview, FY2008 Budget in Brief, and Key Issues for Congress , by [author name scrubbed] and [author name scrubbed]. The NSF was created by the National Science Foundation Act of 1950, as amended (P.L. 81-507). The NSF has the broad mission of supporting science and engineering in general and funding basic research across many disciplines. The majority of the research supported by the NSF is conducted at U.S. colleges and universities. In addition to helping to ensure the nation's supply of scientific and engineering personnel, the NSF promotes academic basic research and science and engineering education across many disciplines. Other federal agencies, in contrast, support mission-specific research. The NSF provides support for investigator-initiated, merit-reviewed, competitively selected awards, state-of-the-art tools, and instrumentation and facilities. Also, NSF provides almost 30% of the total federal support for science and mathematics education. Support is provided to academic institutions, industrial laboratories, private research firms, and major research facilities and centers. Although the NSF does not operate any laboratories, it does support Antarctic research stations, selected oceanographic vessels, and national research centers. In addition, the NSF supports university-industry relationships and U.S. participation in international scientific ventures. As shown in Table 9 , the Consolidated Appropriations Act, 2008 ( P.L. 110-161 ), provides $6.065 billion for NSF, $147.8 million above the enacted FY2007 level, but $364.0 million below the FY2008 budget request. Nonetheless, the act funds the Research and Related Activities (R&RA) at $4.822 billion in FY2008, $155.5 million above the FY2007 level, and $310.2 million below the Administration's request. In the explanatory language accompanying the act, Appropriators agreed with the Administration's request to transfer the Experimental Program to Stimulate Competitive Research (EPSCoR) from the Education and Human Resources (EHR) to the R&RA. House report language directs NSF to review its polices concerning transformative research, research that is described as "cutting edge" and revolutionary. Several reports have been released recommending that NSF allocate funds specifically for this type of research. Appropriators have directed the agency to issue a report suggesting how transformative research can be included in NSF's portfolio of research activities. Additional report language directs NSF to increase its support for physical infrastructure improvements of its academic research fleet and for aging facilities. P.L. 110-161 funds Major Research Equipment and Facilities Construction (MREFC) at $220.7 million and the EHR at $725.6 million for FY2008. The FY2008 request for the NSF was $6.429 billion, an 8.7% increase over the FY2007 enacted level of $5.917 billion. The President's American Competitiveness Initiative (ACI) included a proposal to double the NSF budget over the next 10 years. The FY2008 request would have been another installment toward that doubling effort. NSF asserted that international research partnerships are critical to the nation in maintaining a competitive edge, and capitalizing on global economic opportunities. To address these needs, the Administration requested $45.0 million for the Office of International Science and Engineering. Also, NSF is the lead agency supporting polar research. A focus of planned polar research, requested at $464.9 million in FY2008, is to be in climate change and environmental observations. Included in the FY2008 request was $5.132 billion for R&RA, a 10% increase over the FY2007 enacted level of $4.666 billion. R&RA funds research projects, research facilities, and education and training activities. Partly in response to concerns in the scientific community about the imbalance between support for the life sciences and the physical sciences, the FY2008 request included increased funding for the physical sciences. The FY2008 request also included a proposal to transfer support for EPSCoR from EHR to Integrative Activities. The FY2008 request included $107 million for EPSCoR. The FY2008 request for the EHR Directorate was $750.6 million, 5.8% below the FY2007 enacted level of funding. The EHR portfolio is focused on increasing the technological literacy of all citizens, preparing the next generation of science, engineering, and mathematics professionals, and closing the achievement gap in all scientific fields. Support at the various educational levels in the FY2008 request was: precollege, $222.5 million; undergraduate, $210.2 million; and graduate, nearly $169.5 million. The Math and Science Partnership Program, a crosscutting program with the Department of Education, was proposed at $46 million in the FY2008 request. The MREFC account was funded at $244.7 million in the FY2008 request, a 28.2% increase over the FY2007 enacted level of funding. Projects to be supported in the FY2008 request included Atacama Large Millimeter Array Construction ($102.1 million), Ice Cube Neutrino Observatory ($22.4 million), National Ecological Observatory Network ($8.0 million), South Pole Station Modernization project ($6.6 million), Alaskan Region Research Vessel ($42.0 million), Ocean Observatories Initiative ($31.0 million), and Advanced Laser Interferometer Gravitational Wave Observatory ($32.8 million). The Senate-passed bill would have provided a total of $6.553 billion for the NSF in FY2008, $124.4 million above the request and $636.2 million above the FY2007 enacted level of funding. Included in the total was $5.156 billion for R&RA, $24.4 million above the FY2008 request and $490.1 million above FY2007. The Senate bill would have funded the EHR at $850.6 million and the MREFC at $244.7 million. The House-passed bill would have provided $6.499 billion for the NSF in FY2008, $70 million more than the request, and $54.4 million less than the Senate version. The House would have funded the R&RA at approximately $5.140 billion, $8 million more than the request and $16.1 million less than the Senate bill. For the MREFC and the EHR, the House would have provided $244.7 million and $822.6 million, respectively. H.R. 1867 (Baird) The National Science Foundation Authorization Act of 2007, as passed by the House, would authorize appropriations for NSF for FY2008-FY2010. Among other things, it would require an increase in funding for the Research Experiences for Undergraduates programs; would direct the National Science Board to evaluate the role of NSF in supporting interdisciplinary research; and would require the creation of a pilot program to award one-year grants to individuals to assist them in improving research proposals previously submitted to NSF but not selected for funding. CRS Report RS21767, Hubble Space Telescope: NASA's Plans for a Servicing Mission , by [author name scrubbed]. CRS Report RS21267, U.S. National Science Foundation: Major Research Equipment and Facility Construction , by [author name scrubbed]. CRS Report 95-307, U.S. National Science Foundation: An Overview , by [author name scrubbed]. CRS Report RL30930, U.S. National Science Foundation: Experimental Program to Stimulate Competitive Research (EPSCoR) , by [author name scrubbed]. The FY2008 appropriations for related agencies is $809 million as Table 10 shows. This amount is $46.3 million more than the Administration's request and $8 million more than the FY2007 appropriations for those agencies. FY2008 funding was appropriated for all related agencies except for the Antitrust Modernization Commission, for which the authorization has expired (as discussed below). The FY2008 budget request included nearly $763 million for these agencies, $38.2 million less than the amount appropriated by Congress for these agencies for FY2007. However, the request included no additional funding for the Antitrust Modernization Commission, the National Veterans Business Development Corporation, or the State Justice Institute. The Senate-passed bill included funding for the State Justice Institute, but would not have funded the other two agencies. Nevertheless, the Senate-passed bill would have provided nearly $99.0 million over the FY2007 enacted level for Title IV agencies for FY2008, with the largest increases going to the Equal Employment Opportunity Commission and the Legal Services Corporation. By comparison, the House-passed bill would have provided $45 more than the FY2007 enacted level for FY2008. The Antitrust Modernization Commission Act ( P.L. 107-273 , enacted 11/2/02) created a 12-person commission to evaluate U.S. antitrust laws. The commission issued its final report on April 3, 2007. The Commission expired at the end of May, 2007. The President's FY2008 request does not include any continued funding for the Antitrust Modernization Commission. This follows $1.2 million enacted in FY2006 and $0.5 million in FY2007. Neither the House- nor the Senate-passed bills include any funding in FY2008. The final product was the Antitrust Modernization Commission: Report and Recommendations . In preparation for this report, the commission held 18 hearings and interviewed 117 witnesses. The topics included merger enforcement, exclusionary conduct, international antitrust, and criminal remedies, among others. The final report included recommendations organized under (1) substantive law, (2) enforcement institutions, (3) civil and criminal penalties, and (4) government exceptions to free-market competition. The report also included separate statements submitted by the individual commissioners. Congress appropriated no additional funding for this commission for FY2008. The U.S. Commission on Civil Rights (Commission), established by the Civil Rights Act of 1957, investigates allegations of citizens, who may have been denied the right to vote based on color, race, religion, or national origin; studies and gathers information on legal developments constituting a denial of the equal protection of the laws; assesses federal laws and policies in the area of civil rights; and submits reports on its findings to the President and Congress when the Commission or the President deems it appropriate. For FY2008, the Bush Administration requested $8.8 million for the U.S. Commission on Civil Rights, or $172 thousand less than the FY2007 enacted level of nearly $9 million for the Commission. Both the House- and Senate-passed bills would have provided $9 million for the Commission. The Commission's enacted FY2008 budget is $8.5 million. In report language, the House Appropriations Committee expressed concern that 36 of the 51 State Advisory Committees are inoperative because their authorizing charters have expired. The House committee directed the Commission to give priority to reconstituting the State Advisory Committees and to make appointments that reflect a balance of viewpoints and a diversity in membership, especially in terms of gender, disability, party affiliation, and civil rights experience with affected communities. Further, the Committee stated that no one should be denied an opportunity to serve on a State Advisory Committee because of race, age, sex, sexual orientation, religion, national origin, disability, or political persuasion. The EEOC enforces laws banning employment discrimination based on race, color, national origin, sex, age, or disability. In recent years, appropriators have been particularly concerned about the agency's implementation of a restructuring plan. The plan includes the National Contact Center (NCC) pilot project that began in March 2005; the January 2006 commencement of field structure and staff realignment that the Commission approved in mid-2005; and the examination of headquarters' structure and operations to streamline functions and clarify roles and responsibilities. For FY2008, P.L. 110-161 provides $329.3 million for the EEOC, which is an increase of $6.5 million from the FY2007 enacted level and $1.6 million from the President's request. This amount also includes $29.1 million for payments to state and local entities that work with the agency. The act requires that the EEOC must notify the House and Senate Appropriations Committees of any proposal for workforce repositioning, restructuring, or reorganization. Further, the joint explanatory statement directs the EEOC: to provide a spending plan within 60 days after enactment highlighting the changes the Commission plans to make to reduce backlog and handle calls after the termination of the NCC, to use a portion of the funds to upgrade the EEOC's telephone technology and to hire staff in field offices to handle calls, and to notify and consult Congress if the NCC extends beyond February 1, 2008. The President's FY2008 budget request for the EEOC was $327.7 million, which was $1 million below the FY2007 enacted level of $322.8 million. The budget included $28 million for payments to state and local entities with which the agency has work-sharing agreements to address workplace discrimination within their jurisdictions (i.e., Fair Employment Practices Agencies, FEPAs, and Tribal Employment Rights Organizations, TEROs); this was the same amount requested last year and less than the $33 million to which the Congress typically has raised the allocation. The request also included $1 million to relocate the EEOC's headquarters in Washington, D.C. In addition, the Administration proposed reconfiguring or relocating field offices to comply with reduced space requirements. The House Appropriations Committee directed the EEOC to use the increase to reduce its backlog of discrimination complaints and to report to the Committee on steps that will be taken to cut the backlog. Reflecting previously expressed concerns about the NCC pilot, the Committee eliminated the $2.5 million that had been requested for it. It recommended that those funds instead be used to update current telephone technology and hire additional field staff to handle phone calls or locate an in-house call center in surplus space at EEOC offices. In report language, the Senate Appropriations Committee also expressed concern about the large backlog of employment discrimination charges and pointed to findings in the Inspector General's report on the NCC to support prohibiting the use of funds in S. 1745 to operate it. The Committee also called upon the Inspector General (IG) to evaluate the effect of the Commission's repositioning plan on the delivery of core services and any cost savings associated with it; the IG is directed to submit a report within 90 days of the act's enactment. In addition, the Senate Appropriations Committee included an amendment to H.R. 3093 by Senator Alexander previously approved by the Committee barring the EEOC from using its appropriation to initiate or participate in a civil action against an employer who requires an employee to speak English while at work. Representative Frelinghuysen offered a motion to instruct House conferees to agree to the amendment that Senator Alexander originally had proposed; the motion was approved. Some members of the Congressional Hispanic Caucus protested in response. However, P.L. 110-161 did not include the English at work provision. The ITC is an independent, quasi-judicial agency that advises the President and Congress on the impact of U.S. foreign economic policies on U.S. industries and, along with the Import Administration Unit of ITA, is charged with administering various U.S. trade remedy laws. Its six commissioners are appointed by the President for nine-year terms. As a matter of policy, its budget request is submitted to Congress by the President without revision. For FY2008, P.L. 110-161 provides ITC with $68.4 million, or $6.4 million over the FY2007 enacted budget level and the same amount requested by the Administration. The LSC is a private, non-profit, federally funded corporation that provides grants to local offices that, in turn, provide legal assistance to low-income people in civil (non-criminal) cases. The LSC has been controversial since its incorporation in the early 1970s and has been operating without authorizing legislation since 1980. There have been ongoing debates over the adequacy of funding for the agency and the extent to which certain types of activities are appropriate for federally funded legal aid attorneys to undertake. In annual appropriations bills, Congress traditionally has included legislative provisions restricting the activities of LSC-funded grantees, such as prohibiting any lobbying activities or prohibiting representation in certain types of cases. Current LSC funding remains below the LSC's highest funding level of $400 million in FY1994 and FY1995. The Consolidated Appropriations Act, 2008 ( P.L. 110-161 ) includes $350.5 million for the LSC for FY2008. This amount is $1.9 million above the FY2007 appropriation ($348.6 million) for the LSC and $39.6 million above the Administration's FY2008 budget request for the LSC. The FY2008 appropriation for the LSC includes $332.4 million for basic field programs and required independent audits; $12.5 million for management and administration; $2.1 million for client self-help and information technology; $3.0 million for the Office of the Inspector General; and $0.5 million for loan repayment assistance. For FY2008, the Bush Administration requested $310.9 million for the LSC. The Administration's budget request included $289 million for basic field programs and required independent audits; almost $13 million for management and administration; $5 million for client self-help and information technology; and $3 million for the Office of the Inspector General. For FY2008, the Senate Appropriations Committee recommended $390 million for the LSC, a $41.4 million increase above the FY2007 LSC appropriation, and $79.1 million above the Administration's FY2008 budget request for the LSC. During the Senate debate on the bill, an amendment by Senator Jeff Bingaman was passed that would have permitted LSC-funded legal services programs to provide legal assistance to "H2B" workers—temporary foreign workers employed in the forestry industry—in matters directly related to their employment. LSC-funded programs are currently prohibited from serving H2B workers. The Senate-passed bill would have provided $390 million for the LSC for FY2008. The House-passed bill, by comparison, would have provided $377 million for the LSC, a $28.4 million increase above the FY2007 appropriation, $66.1 million above the Administration's FY2008 budget request, and $13 million below the Senate-passed bill. The MMC is an independent agency of the executive branch, established under Title II of the Marine Mammal Protection Act (MMPA; P.L. 92-522). The MMC reviews and makes recommendations on domestic and international actions and policies of all federal agencies with respect to marine mammal protection and conservation and with carrying out a related research program. As funding permits, the MMC supports research to further the purposes of the MMPA. In 2005, the MMC awarded seven competitive grants totaling approximately $252 thousand plus an additional three non-competitive grants totaling approximately $40 thousand. The FY2007 Revised Continuing Appropriations Resolution ( P.L. 110-10 ) provided the MMC with nearly $2.9 million for FY2007. In its report on FY2007 appropriations for the MMC ( H.Rept. 109-520 ), the House Appropriations Committee urged the MMC to continue prioritizing activities related to minimizing the direct and indirect effects of chemical contaminants, marine debris, noise, and other forms of ocean pollution on marine mammals and other marine organisms. The President's FY2008 budget request for the MMC was $2.3 million. The Senate-passed bill included $3 million for the MMC. The Senate committee stated that the proposed increase would ... cover the costs of inflation, and for necessary expenses including the hiring of one full-time equivalent [FTE] to help ensure the Commission meets its responsibilities. This increase will allow the Commission to address a variety of challenges including climate change and the continued study of endangered species. The Senate committee also stated that the MMC would ... also pursue a number of projects including, but not limited to, completing a report on Federal spending for marine mammal research over the past three decades, reviewing cumulative effects of risk factors on marine mammals, and the continuance of work with National Marine Fisheries Service, and the Fish and Wildlife Service to assess issues related to marine mammal and fishery interactions. The House-passed bill would have provided $3 million for the MMC to increase funding to monitor marine mammal adaptation to climate change. The House committee expressed its expectations that the MMC ... continue its efforts to minimize the direct and indirect effects of fisheries, noise, disease, chemical contaminants, harmful algal blooms, climate change, habitat alteration, boating and commercial shipping, marine debris, and other factors that may pose a risk of sublethal and lethal effects on marine mammals or that may affect the health and stability of the marine ecosystem. The enacted FY2008 MMC appropriation is $2.8 million. The VBC was established under the Veterans Entrepreneurship and Small Business Development Act of 1999 ( P.L. 106-50 ). The corporation's mission is to foster entrepreneurship and business opportunities for veterans, including service-disabled veterans. The VBC provides veterans with access to capital and business services, entrepreneurial education, surety bonding, insurance and prescription coverage, as well as a veterans business directory. Congress provided the corporation with $1.5 million in funding for each year, FY2006 and FY2007. For FY2008, the Administration requested no funding for the VBC, however. Nor did the Senate-passed bill include any funding for the VBC. The House-passed bill would have provided $2.5 million for the VBC. House report language also directs the corporation to submit a spending plan to the Committee within in 30 days of enactment that breaks out funding for overhead costs, salary, benefits and places of operation for all of its community based organizations. The enacted FY2008 VBC appropriation is $1.4 million. USTR, located in the Executive Office of the President (EOP), is responsible for developing and coordinating U.S. international trade and direct investment policies. The USTR is responsible for advancing U.S. interests at the WTO and negotiating bilateral and regional free trade agreements (FTAs). In 2006 and 2007, the Administration concluded FTAs with Peru, Colombia, Oman, Panama, and South Korea. The Administration has ongoing negotiations with Thailand, Malaysia, and the United Arab Emirates. In 2006, USTR obtained congressional approval of FTAs with Bahrain, the Dominican Republic, and Central American countries. The Office had 229 full-time employees in FY2007. For FY2008, Congress has appropriated $44.1 million for USTR, or $100 thousand less than the FY2007 enacted level of $44.2 million and $300 thousand less than the Administration's request. By comparison, the House-passed bill included $48.4 million for the USTR, and the Senate-passed bill included $47.8 million. The SJI is a private, nonprofit corporation that makes grants to state courts and funds research, technical assistance, and informational projects aimed at improving the quality of judicial administration in state courts across the United States. Under the terms of its enabling legislation, SJI is authorized to present its budget request directly to Congress, apart from the President's budget. The FY2008 SJI appropriation is $3.76 million, an 8.7% increase over the $3.46 million appropriated for both FY2007 and FY2006. The Bush Administration, as in its budgets for the previous five years, did not request any appropriated funds for the institute in FY2008. The House-passed bill included $4.64 million for SJI in FY2008, while the Senate-passed bill included $3.5 million for SJI. | This report monitors actions taken by the 110th Congress for the FY2008 Commerce, Justice, Science, and Related Agencies (CJS) appropriations bill. In the Consolidated Appropriations Act, 2008 (P.L. 110-161), Congress has provided $54.637 billion in CJS appropriations, a 3.4% increase over the FY2007 enacted level and a 2.2% increase over the Administration's request. This amount includes $6.857 billion for the Department of Commerce (a 3.5% increase over the FY2007 enacted level), $23.592 billion for the Department of Justice (a 1.6% increase), $23.38 billion for science agencies (a 5.3% increase) and $808.8 million for related agencies (a 1.0% increase). The Administration's FY2008 request included $53.450 billion for those departments and agencies funded through the CJS appropriation, or about a 1.1% increase over the FY2007 appropriation ($52.843 billion). The request included $6.596 billion for Commerce (a 0.4% decrease compared to the FY2007 enacted level), $22.348 billion for Justice (a 3.7% decrease), $23.744 billion for science agencies (a 6.9% increase), and $762.5 million for related agencies (a 4.8% decrease). In addition to these amounts, the Administration has requested another $146.7 million for Justice as part of the FY2008 Global War on Terror Supplemental. The House passed an FY2008 CJS appropriations bill (H.R. 3093) on July 26, 2007. The House bill would have provided $55.965 billion for FY2008, or a 5.9% increase over the FY2007 appropriation and a 4.7% increase over the FY2008 request. The House amount would have provided Commerce with $7.018 billion (a 5.9% increase over the FY2007 enacted level), Justice with $23.974 billion (a 3.3% increase), science agencies with $24.127 billion (an 8.6% increase), and related agencies with $845.7 million (a 5.6% increase). The Senate passed an FY2008 CJS appropriations bill (H.R. 3093, as amended) on October 16, 2007. The Senate bill would have provided $57.7 billion, or a 9.2% increase over the FY2007 appropriation and an 8.0% increase over the FY2008 request. The Senate amount would have provided Commerce with $7.289 billion (a 10.0% increase over the FY2007 enacted level), Justice with $24.493 billion (a 5.5% increase), science agencies with $25.019 billion (an increase of 12.7%), and related agencies with $899.7 million (a 12.4% increase). The Senate bill included $1 billion in emergency funding for NASA's return to flight initiative. Conference negotiations on H.R. 3093 broke down, however. In lieu of further action on that bill, congressional leaders opted to use the Department of State, Foreign Operations, and Related Appropriations bill, 2008 (H.R. 2764) as a vehicle for the CJS appropriations, as well as the other 10 remaining appropriations bills, in addition to emergency spending for military operations in Iraq and Afghanistan. On December 17-19, 2007, Congress completed action on H.R. 2764 through an exchange of amendments between the two chambers. The President signed H.R. 2764 into law on December 26, 2007 (P.L. 110-161). This report will not be updated. |
Conferees on the FY2002 legislative branch appropriations bill agreed to $2.97 billion forlegislative branch operations, an 8.9% increase over the FY2001 funding level of $2.73 billion ( P.L.107-68 ). Total FY2002 funding made available for the legislative branch is $3.23 billion, whenincluding emergency response funds transferred pursuant to P.L. 107-117 , the FY2002 EmergencySupplemental Appropriations for Recovery from and Response to Terrorist Attacks (in Division B,chapter 9). P.L. 107-68 contains funds for 79 new Capitol Police positions, funds for Capitol Policetraining programs, language providing comparability in the pay of the Capitol Police with theUniformed Division of the Secret Service and the Park Police, an 18.1% increase in the policebudget, an additional $70 million for construction of the Capitol visitors' center, and severalmeasures to recruit and retain employees of the Senate and the congressional support agencies. The Senate version, S. 1172 , passed on July 19, contained $1.9 billion forlegislative activities. (1) This was a 5.6% ($103.1 million) increase over FY2001's funding level of $1.8 billion and 5.0%($103.9 million) below the request considered by the Senate of $2.1 billion ( S.Rept. 107-37 ). (2) On July 31, the Senate tookup H.R. 2647 and amended it to contain the language of S. 1172 , as passedon July 19. (3) The House version, H.R. 2647 , passed on July 31, contained $2.2 billion, (4) a 4.4% ($95 million) increase,from $2.144 billion in FY2001 to $2.239 billion in FY2002. (5) The FY2002 appropriationwas a 2.5% decrease from the budget request considered by the House of $2.296 billion ( H.Rept.107-169 ). The terrorists' attacks of September 11, 2001, prompted moves toward an even more stringentsecurity environment on Capitol Hill. On September 18, President Bush signed a $40 billionFY2001 terrorist supplemental appropriations bill ( H.R. 2888 ) into P.L. 107-38 . Pursuant to P.L. 107-38 , the President has released $376.9 million in terrorist emergency funds forincreased security at the Capitol. The President requested the release of an additional allocation forlegislative branch security of $265.1 million, which unlike the other allocations for security, requiredcongressional approval. Congress approved the funds, as requested, as part of the FY2002 defensedepartment appropriations bill, which was signed into P.L. 107-117 on January 10, 2002. Effective in FY1978, the legislative branch appropriations bill was divided into two titles. Title I, Congressional Operations, contains budget authorities for activities directly serving Congress. Included in this title are the budgets of the House, the Senate, Joint Items (joint House and Senateactivities), the Office of Compliance, the Congressional Budget Office (CBO), the Architect of theCapitol (AOC) (except the Library of Congress (LOC) buildings and grounds), the CongressionalResearch Service (CRS) within the Library of Congress, and congressional printing and bindingactivities of the Government Printing Office (GPO). Title II, Related Agencies, contains budgets for activities not directly supporting Congress. Included in this title are the budgets of the Botanic Garden, the Library of Congress (except theCongressional Research Service), the Library buildings and grounds maintained by the Architect ofthe Capitol, the Government Printing Office (except congressional printing and binding costs), andthe General Accounting Office (GAO). Periodically since FY1978, the legislative bill has containedadditional titles for such purposes as capital improvements and special one-time functions. As Figure 1 illustrates, in FY2001, Title I budget authority was 68% of the totalappropriation of $2.730 billion, including a rescission and supplementals. Title II budget authoritywas 32% of the total appropriation. In addition, there was legislative budget authority that was notincluded in the annual legislative branch appropriations act or supplemental appropriations acts. Itincluded permanent budget authority for both federal funds and trust funds, and other budgetauthority. (6) Figure 1. Title I and Title II of the FY2001 LegislativeBranch Appropriations Act (Including P.L. 106-554, a0.22% Rescission, and Supplementals) Permanent federal funds are available as the result of previously enacted legislation and donot require annual action. (7) Permanent trust funds are monies held in accounts credited with collections from specificsources earmarked by law for a defined purpose. Trust funds do not appear in the annual legislativebill since they are not budget authority. They are included in the U.S. Budget either as budgetreceipts or offsetting collections. (8) The Budget also contains non-legislative entities within the legislative branch budget. Theyare funded in other appropriation bills, but are placed in the legislative section by the Office ofManagement and Budget for bookkeeping purposes. (9) Table 1. Status of Legislative Branch Appropriations, FY2002(P.L. 107-68; H.R. 2647; S. 1172) a. Mark up was held by the full Senate Committee on Appropriations. b. Subsequently, on July 31, the Senate too up the companion measure ( H.R. 2647 ),which it had received from the House, and amended it to incorporate the provisions of the Senatemeasure ( S. 1172 ). Submission of FY2002 BudgetRequest. On April 9, 2001, the President submitted the FY2002 U.S. Budget which contained a request prepared by legislative branch entities of$2.954 billion (10) for activities funded in the annual legislativebranch appropriations bill. The requests of some entities were revised, increasing thetotal legislative branch request to $2.977 billion. (11) Therevised budget request represents an increase of $247 million (9.1%) over theFY2001 appropriation of $2.730 billion. (12) Passage of the Senate Version of the FY2002 Bill(S. 1172). On July 19, the Senate approved S. 1172 , which contains $1.9 billion for legislative activities, exceptthose of the House. The appropriation is $103.9 million (5.0%) below the request of$2.1 billion, excluding House funds, and $103.1 million (5.6%) more than theFY2001 appropriation of $1.8 billion, excluding House funds. Subsequently, on July31, the Senate took up the companion measure ( H.R. 2647 ), which it hadreceived from the House earlier in the day, and amended it to incorporate theprovisions of S. 1172 . Earlier, on July 12, the Senate Committee on Appropriations marked up andreported S. 1172 ( S.Rept. 107-37 ). Two amendments were agreed toduring markup. The first contained $1 million for the Capitol Visitors' Center, andthe second, $5.2 million for the General Accounting Office (GAO) to implement theTruth in Regulating Act of 2000. There is language within the Capitol Policeaccount directing GAO to study the feasibility of consolidating "all Capitol Hillpolice forces," and to report its findings no later than six months after enactment ofthe FY2002 legislative branch appropriations bill. Among other elements, S. 1172 contained $1 million for theCapitol Visitors' Center, defers funds for continuation of rehabilitation of the CapitolDome, addresses management concerns in the operations of the Architect of theCapitol, and authorizes student loan repayments in certain legislative entities. Passage of the House Version of the FY2002 Bill(H.R. 2647). On July 31, the House passed H.R. 2647 containing $2.2 billion, excluding funds for Senate activities. This represents a 4.4% ($95 million) increase over FY2001, to $2.239 billion inFY2002 from $2.142 billion in FY2001. (13) The FY2002 figure is a 2.5% decrease from the$2.296 billion budget request considered by the Committee. According to a press release issued by the House Appropriations Committeeon July 20, the bill funded a 4.6% cost of living pay increase for House staff, atwo-thirds and one-third staff ratio for House committees, a staff transit subsidyprogram, and demolition of the House O'Neill office building; and it containedlanguage directing the chief administrative officer (CAO) of the House to studyalternatives for a self-sustaining staff fitness center. The bill did not contain fundsfor the Capitol Visitors' Center. H.R. 2647 was reported on July 26( H.Rept. 107-169 ). Conference Version of the FY2001 Supplemental(H.R. 2216). On July 20, 2001, both houses agreed to theconference report on H.R. 2216 , containing a $79.5 million FY2001legislative branch supplemental appropriation ( P.L. 107-20 , signed July 24). Mostof the funds ($61.7 million) were available for internal operations of the House,including $44.2 million for Members' representational allowances, committees, andallowances and expenses, and $17.5 million for officers and employees. Of thisamount, $20.7 million was available for Members' representational allowances toenable Members to meet the expenses of increases in Members' office allowancesand office staff salaries that were authorized earlier in 2001. (14) The supplemental also contained $1 million for the Capitol Police, $35,000for the Office of Compliance, $15.9 million for the Government Printing Office, and$600,000 for the Library of Congress, and $290,000 for Representatives' deathgratuities. House Version of the FY2001 Supplemental(H.R. 2216). On June 20, the House passed H.R. 2216 containing $80.5 million, with $61.7 million available forinternal House operations. The $61.7 million was made available for the Houseaccount, "salaries and expenses," to be divided as follows: $44.2 million for three appropriations headings, "Members'representational allowances, including Members' clerk hire, official expenses ofMembers, and official mail," "committee employees," and "allowances andexpenses;" and $17.5 million for the heading "salaries, officers andemployees," including $3.2 million for the Office of the Clerk and $14.3 million forthe Office of the Chief Administrative Officer (CAO). Funds for the Office of theClerk included $2.5 million to continue replacement of the Legislative InformationManagements Systems (LIMS) and $650,000 for the Office of the HouseEmployment Counsel. Funds for the CAO were to be made available for "upgradesto hardware and infrastructure for improved and higher speed network connectivitybetween Member Washington and district offices and within the House campus." (15) In addition, the House version of H.R. 2216 contained thefollowing funds: $35,000 for the Office of Compliance "for unexpected requestsfor counseling and mediation services;" (16) $9.9 million for the "congressional printing and binding"account of the Government Printing Office (GPO) "to fund a shortfall based on theincreased volume of printing of publications and associated information products andservices ordered by Congress during fiscal years 2000 and 2001;" (17) $6.0 million for the "Government Printing Office revolvingfund" for improvements in the agency's lighting and air conditioning systems,including the replacement of chillers; $290,000 for a death gratuity to the widows of laterepresentatives; and $600,000 to the Library of Congress for a telecommunicationsproject. Senate Version of the FY2001 Supplemental(S. 1077). On July 10, the Senate passed its version ofthe FY2001 supplemental appropriations bill, S. 1077 , containing $15.9million to be made available as follows: $35,000 for the Office of Compliance;and $15.9 million for the Government Printing Office (GPO), thesame as passed by the House, with $9.9 million for the "congressional printing andbinding account" and $6 million for the GPO revolving fund. In addition, the Committee's report on S. 1077 containedlanguage that: (18) deferred without prejudice the House request of $61.7 millionfor its internal operations; directed the General Accounting Office (GAO) to undertake a"general management review" of the operations of the Architect of the Capitol (AOC)that "would be helpful in evaluating and determining appropriate levels ofcompensation for AOC management." (19) The review is to include (1) "an overallassessment of the agency's organizational structure, strategic planning, skills,staffing, systems, accountability reporting, and execution of its statutory and assignedresponsibilities," and (2) "recommendations for enhancing the overall effectivenessand efficiency of AOC operations along with recommendations as to how toimplement such improvements...no later than April 2002"; explained that the Committee did not provide funds to theGeneral Accounting Office (GAO) to carry out its responsibilities under the Truth inLending Act of 2000, stating that implementation was not "an urgent need at thistime;" (20) authorized a consultant for the President pro tempore emeritus;and amended the Abraham Lincoln Bicentennial Commission Actto transfer administrative support responsibilities from the General ServicesAdministration to the Library of Congress. On September 14, 2001, both Houses passed a FY2001 terrorism emergencysupplemental appropriations bill, H.R. 2888 , containing $40 billion. H.R. 2888 was signed into P.L. 107-38 on September 18. The Actprovided that $20 billion be made available for release by the President withoutfurther congressional action, and $20 billion be available for the President to useupon congressional approval. (21) Of the $20 billion not requiring congressional approval, the President released$376.9 million for legislative branch security, as follows: On September 21, the President released $3.25 million of thosefunds for "increased security measures, including overtime compensation for the U.S.Capitol Police and the installation of protective window film for the U.S.Capitol." (22) On September 28, the President released an additional $83.20million for the legislative branch to "support increased security measures, includingpaying overtime compensation for the Capitol Police, preparing for future terroristevents, and performing actions that can be taken to reduce the risk and potentialdamage to life and property caused by future terrorist events." (23) On December 3, the President released an additional $290.4million to "support increased security measures, including constructing the CapitolVisitors Center, paying overtime compensation for the Capitol Police, preparing forfuture terrorists events, and performing actions that can be taken to reduce the riskand potential damage to life and property caused by future terrorist events. (24) Of the $20 billion requiring congressional approval, the President requestedthe obligation of $256.1 million on October 17 for security enhancements to theCapitol Complex, the Government Printing Office, and the General AccountingOffice, and for efforts to reduce damage to life and property by future terroristattacks. His request also contained $10 million for additional security of theSupreme Court building. (25) For more details, see the section in this report on Capitol Hill security. Among elements that Congress considered during discussions on the FY2002bill were proposals to: review public and private funds currently available forconstruction of the U.S. Capitol visitors' center and determine what additional fundsare necessary to complete the project; S. 1172 contained $1 million forthe center; the House bill did not contain funds; conferees approved $70 million; merge the Capitol Hill, Library of Congress, and GovernmentPrinting Office police into a consolidated force; Senate report language containedlanguage directing the General Accounting Office to study the issue; authorize and fund programs to enhance staff retention andrecruitment, such as repayment of student loans, and implementation ofperformance-based recognition and compensation proposals; P.L. 107-68 containslanguage authorizing student loan repayments for employees of the Senate andCongressional Budget Office; and approve $42.5 million for repair of the Capitol dome; P.L.107-68 contains $1.6 million for painting. Figure 2. Legislative BranchAppropriations, FY1995-FY2001 Figure 3. Legislative BranchAppropriations, FY1995-FY2001 In the aftermath of the first-ever evacuation of the Capitol and surroundingoffice buildings on September 11, the U.S. Capitol Police Board created a specialtask force to fully review Capitol Hill security. New evacuation procedures were alsoquickly established. Additional actions included the establishment of a terrorist andsecurity "working group" in the House of Representatives, the release of $377.0million in terrorist emergency funds for increased security at the Capitol, and thetransfer of an additional $256.1 million to legislative branch agencies. Special Task Force/House WorkingGroup. Shortly after the terrorist attacks, a special task forcecomposed of congressional leaders and officers, Members of the appropriationscommittees, and representatives of the Capitol Police, Department of Defense (DoD),and Federal Emergency Management Agency (FEMA) was created to develop plansfor communications and security upgrades, and emergency evacuation arrangementsfor the Capitol complex, the Supreme Court, and the Library of Congress. (26) In addition,the Committee on House Administration created a working group that includedHouse officers, the Architect of the Capitol, and representatives from the Committeeon House Administration and the House Committee on Appropriations,Subcommittee on Legislative, to study Capitol Hill security and recommendupgrades. (27) Funding for the Capitol PoliceBoard. Conferees agreed to $126.2 million for the Capitol PoliceBoard, an increase of 18.1% over $106.9 million appropriated for FY2001. Theconference figure was agreed to in lieu of the Senate proposal of $125.3 million (anincrease of $18.4 million, or 17.2%, over the FY2001 level of $106.9 million), andthe House proposal of $123.7 million (an increase of $16.8 million, or 15.7%, overFY2001). Funds for the Capitol Police Board are contained under two headings,"Capitol Police salaries," and "Capitol Police, general expenses." For Capitol Policesalaries, conferees agreed to $113.0 million, compared with the Senate proposal of$112.9 million and the House proposal of $112.6 million. The FY2002appropriations was divided between the House and Senate with $55.2 millionprovided to the Senate Sergeant at Arms and $57.8 million to the House Sergeant atArms. For Capitol Police general expenses, the conference figure was $13.2 million,compared with the Senate proposed $12.4 million and the House proposed $11.1million. Conferees noted that the increase over the House figure allows: $65,000 for card readers; and $2 million for "the accelerated upgrade and installation of anew networked in-place monitoring system." The general expenses appropriation also contained $1.5 million for thepurchase of 40 vehicles for canine officers to transport police dogs, in order to bringthe Capitol Police canine unit on an "operational-parity to other federal lawenforcement agencies." The conference also contained administrative provisions that: authorized the Capitol Police to purchase goods and servicesin emergency situations, with the requirement that they report such transactions,along with the reasons, to the House and Senate Committees onAppropriations; authorized the Capitol Police to accept donations of meals andrefreshments in emergency situations; limited the pay for the chief administration office of the CapitolPolice; and authorized the payment of certain expenditures made inconnection with the September 11 terrorist acts, and subsequentthreats. The final bill also restored pay parity for the Capitol Police with the UnitedStates Park Police and the Uniformed Division of the Secret Service. Conferees allowed for 79 new police positions, the number suggested by theCapitol Police as the maximum that could be recruited and trained during the fiscalyear. The additional FTEs brought the total number of Capitol Police FTES to 1,481in FY2002, as proposed by both the House and Senate. Based on a 1998 study ofCapitol security, and a subsequent review of the study in 2000, the FTE goal was setat 1,694, the number considered necessary to place two officers at each access pointin the Capitol and House and Senate office buildings, a key priority of the policeforce. The FY2002 request contained funds for an additional 49 FTEs to bring thetotal number of authorized FTEs to 1,530 in FY2002. During his testimony beforethe Senate Subcommittee on Legislative Branch earlier this year, the chief of theCapitol Police noted that this proposed increase followed a reduction in FY2001 of30 FTEs, to 1,481 from 1,511. (28) Subsequently, Congress authorized an additional 269 FTEs for FY2002, fora total FY2002 authorized FTE level of 1,750. (29) Theauthorization was contained in P.L. 107-117 , the FY2002 EmergencySupplemental. (30) The House bill and report on FY2002 legislative branch appropriations alsoprovided funding for training, and increased the training per officer from 40 hoursa year to 80 hours a year; purchase of a visual alarm monitoring system "with thecapability to superimpose over realistic 3D and 2 D views;" and a pilot program forcard access at certain House office building entrances ($130,000). Senate language in the bill and report on FY2002 legislative branchappropriations also contained -- (1) $5 million for pay adjustments to provide forcomparability in pay with that of employees of the U.S. Park Service and theUniformed Secret Service; (2) funds for additional training of officers and civilianpersonnel, including overtime funding to allow officers to receive an additional 40hours in-service training related to their specified duties; (31) (3) fundsfor recruitment of new officers; (4) funds for changes in the administration of theCapitol Police; and (5) language directing the General Accounting Office to study thefeasibility of merging the police forces of the Library of Congress and theGovernment Printing Office with the Capitol Police force, with completion of thestudy within six months of enactment of the FY2002 legislative branchappropriations bill. FY2001 Terrorism Emergency Supplemental (P.L.107-38). On September 18, 2001, President Bush signed P.L. 107-38 , which included $40 billion in FY2001 emergency supplementalappropriations approved by Congress in response to the terrorist attack of September11. The Act provided that $20 billion be made available for release by the Presidentwithout further congressional action, and $20 billion be available for the Presidentto use upon congressional approval. (32) Of the $20 billion not requiring congressional approval, the President released$376.9 million for legislative branch security. Four days after he signed P.L.107-38 ,the President released $3.25 million for "increased security measures, includingovertime compensation for the U.S. Capitol Police and the installation of protectivewindow film for the U.S. Capitol." (33) On September 28, the President released an additional $83.20 million to"support increased security measures, including paying overtime compensation forthe Capitol Police, preparing for future terrorist events, and performing actions thatcan be taken to reduce the risk and potential damage to life and property caused byfuture terrorist events" as follows: (34) Senate, $5,265,000; House of Representatives, $1,265,000; Office of Attending Physician, $1,500,000; Capitol Police, $40,300,000; Architect of the Capitol, $32,373,000; and Library of Congress, $2,500,000. On December 3, the President released an additional $290.4 million to"support increased security measures, including constructing the Capitol VisitorsCenter, paying overtime compensation for the Capitol Police, preparing for futureterrorists events, and performing actions that can be taken to reduce the risk andpotential damage to life and property caused by future terrorist events" asfollows: (35) Senate, $18,750,000; House of Representatives, $22,648,000; Capitol Police, $37,950,000; and Architect of the Capitol, $211,047,000. Of the $20 billion requiring the approval of Congress, the President submitteda request on October 17 to obligate $256.1 million for security enhancements to theCapitol Complex, the Government Printing Office, and the General AccountingOffice, and for efforts to reduce damage to life and property by future terroristattacks. His request also contained $10 million for additional security of theSupreme Court building. (36) Congress agreed to the President's request in December, 2001, as part of theFY2002 defense department appropriations bill, H.R. 3338 , in DivisionB, chapter 9, titled, "Legislative Branch, Joint items, Legislative Branch EmergencyResponse Funds (Including Transfer of Funds)." The President signed H.R. 3338 into law on January 10, 2002 ( P.L. 107-117 ). The Actauthorized the transfer of $256.1 million "to ensure the continuance of government;to enhance the safety and security of legislative branch offices, systems andemployees; and to meet the needs arising from the recent anthrax-related events." The Act authorized transfers as follows: (37) $34.5 million to the Senate; $41.7 million to the House; $350,000 to the Capitol Guide Service and Special ServicesOffice; $31.0 million to the Capitol PoliceBoard; $106.3 million to the Architect of theCapitol; $29.6 million to the Library of Congress; $4 million to the Government Printing Office; $7.6 million to the General Accounting Office;and $1.0 million as a grant to the United States Capitol HistoricalSociety. Additionally, conferees: directed that these funds could be obligated by any one of theseentities only with prior approval of an obligation plan submitted by the entity to theHouse and Senate Committees on Appropriations ( House and Senate were excludedfrom this requirement); directed the General Accounting Office to review the plans ofthese entities to obligate funds, and report on these plans, and to submit quarterlyreports on the status of expenditures to the House and Senate Committees onAppropriations; noted in their report that approximately $23 million wasincluded in the $256.1 million for the House, the Senate, the United States CapitolPolice, the Architect of the Capitol, the Library of Congress, and the GeneralAccounting Office to meet costs incurred in responding to the threat of anthrax in theCapitol complex; (38) authorized an additional 195 FTEs for the Capitol Police force,increasing the total authorized officer FTE level to 1,454 forFY2002; authorized an additional 74 civilian FTEs, increasing the totalauthorized civilian FTE level to 296 for FY2002, with the purpose of establishing anOffice of Emergency Management and a Chem-Bio Strike Team; noted that the transfer of $1 million to the United StatesHistorical Society reflected conferees' concerns for the impact of the loss of tourismon activities and the financial situation of the Society since September 11, 2001, and directed that the Society "submit a detailed spending plan and a plan for futureself-sufficiency" to the House and Senate Committees on Appropriations by February15, 2002; approved language establishing the House of RepresentativesOffice of Emergency Planning, Preparedness, and Operations to be responsible "forthe mitigation and preparedness operations, crisis management and response,resource services, and recovery operations," (39) with thedirector of the office to be supervised by the House of Representatives Continuity ofOperations Board, composed of the clerk, the sergeant at arms, the chiefadministrative officer; and authorized the Capitol Police Board to establish a student loanrepayment program to aid in recruitment and retention of officers and civilians, witha cap of $6,000 per calendar year, or a total of $40,000. Among other legislative branch provisions contained in P.L. 107-117 arethose: authorizing the Senate Sergeant at Arms to acquire buildingsand facilities in order to respond to an emergency situation; authorizing the Senate Sergeant at Arms to enter into amemorandum of understanding with an executive agency in an emergencysituation; authorizing the Chief Administrative Officer of the House toacquire buildings and facilities in response to emergencysituations; authorizing the Chief Administrative Officer of the House toenter into a memorandum of understanding with an executive agency in anemergency situation; authorizing anthrax contaminated mail that was delivered to theHouse by the U.S. Postal Service to be destroyed, or otherwise disposedof; authorizing an increase in the salaries of the chief and assistantchief of the Capitol police; authorizing the Capitol police to accept contributions ofincidental items and services in response to emergencies; authorizing the Capitol police to accept assistance inemergencies by executive agencies; authorizing the chief of police to deputize members of the D.C.National Guard and law enforcement personnel who have been dulysworn; authorizing the Capitol Police Board to permit the Capitolpolice chief to pay recruitment and relocation bonuses, retention allowances toofficers and civilians, lump sum incentive and merit bonus payments, service stepincreases for meritorious service for officers, and additional compensation for fieldtraining officers; and authorizing the U.S. Capitol Preservation Commission totransfer funds from the Capitol Preservation Fund to the Architect of the Capitol forthe Capitol visitors' center. Additionally, P.L. 107-117 transferred $30 million to the U.S. Supreme Courtfor security enhancements of its building and grounds (Division B, chapter 1, of P.L.107-117 ). Earlier, on November 14, the House Appropriations Committee reported H.R. 3338 , as part of Division B, ( H.Rept. 107-298 ), authorizing thetransfer of funds as follows: $34.5 million for the Senate Sergeant at Arms; $40.7 million for the House, including $12 million for mailhandling safeguards, and $21.7 million for securing computer facilities away fromthe Capitol Complex; $1 million for the U.S. Capitol Historical Society;and $179.9 million for the Capitol Police Board to transfer to otherlegislative agencies, with the Appropriations Committee anticipation that the amountwill be allocated as follows: $59.4 million for the Capitol Police, including funds forcompletion of a Capitol Police and other federal law enforcement officials trainingfacility; and reimbursements to the National Guard for expenses of additional CapitolComplex protection; $105.7 million for the Architect of the Capitol, including fundsfor a new Capitol Police center and headquarters facility; and $14.8 million for theLibrary of Congress. The supplemental also: directed the Capitol Police Chief to establish an Office ofEmergency Planning, Preparedness, and Operations in the House to be "responsiblefor mitigation and preparedness operations, crisis management and response, andresource services, and recovery operations;" directed the Capitol Police Chief to initiate a study on the "bestorganizational structure and mission to provide" for an enhanced capability torespond to chemical and biological attacks in the Capitol Complex, and authorizesup to 72 FTE positions to provide this capability; expanded the jurisdiction of the Capitol Police to the propertyof the Botanical Garden; authorized the House Chief Administrative Officer to acquirebuildings and facilities in response to emergency situations; authorized executive agencies to provide assistance to theCapitol Police; and established a House Continuity of Operations Board, comprisedof the House Clerk, Sergeant at Arms, and Chief AdministrativeOfficer. The House passed H.R. 3339 , with the supplemental onNovember 29, without amendment. Subsequently, H.R. 3338 wasreported by the Senate Appropriations Committee on December 4 ( S.Rept. 107-109 ),and passed on December 7. The conference report was filed on December 19, 2001( H.Rept. 107-350 ). Capitol Visitors' Center. Conferees on the FY2002 legislative branch appropriations bill, agreed to add $70million for the Capitol visitors' center, reflecting an increased interest by someMembers of Congress in making appropriations available so that construction couldbegin in early calendar year 2002. Prior to approval of $70 million for the center, the Senate Subcommittee onLegislative Branch made $1 million available during mark up of the FY2002 bill for"planning, engineering, design, and construction" of the center which is "to providegreater security for all persons working in or visiting the United States Capitol andto enhance the educational experience of those who have come to learn about theCapitol building and Congress." The funds were to remain available until expended. The mark up of the House Subcommittee on Legislative did not contain funds for thecenter. Subsequent to congressional approval of $70 million for the center inNovember 2001, the President released additional funds for construction of the centerin the FY2001 emergency terrorism funds ( P.L. 107-38 ). The construction fundswere contained in $211.1 million released to the Architect of the Capitol. Theamount of funds available for construction was not provided in the release. (40) The estimated cost of the center is more than $265 million. (41) Congressagreed to an FY1999 emergency supplemental appropriation of $100 million "forplanning, engineering, design, and construction" of a Capitol visitors' center. Thefunding was added in the conference on H.R. 4328 , the FY1999Omnibus Consolidated and Emergency Supplemental Appropriations Act ( P.L.105-277 ). The conference report on H.R. 4328 stipulated that appropriatedfunds for the project are to be supplemented by private funds, and the clerk of theHouse and the secretary of the Senate were directed by the Capitol PreservationCommission to develop a fund-raising plan. The clerk and secretary presented a planon February 9, 2000, which the commission accepted, to authorize the PewCharitable Trusts to establish a nonprofit 501(c)(3) foundation to seek privatefunds. (42) As of the end of calendar year 2001, an additional $64.3 million was availablefor the center. This included $26.6 million in Capitol Preservation Commissionfunds; (43) $35 million in private sector donations; (44) and $2.7 million (45) from thesale of a recently approved commemorative coin program marking the 200thanniversary of the convening of Congress in the Capitol. (46) Congressional leadership broke ground for the center on June 20, 2000. (47) Construction began in early 2002 and is expected to be completed in 2005. (48) Security of LegislativeInformation. Information security has been an element of interestduring consideration of the FY2002 bill. This was especially true during recenthearings by the Senate Subcommittee on Legislative Branch. Chairman Robert F.Bennett expressed his concern with the state of computer security and questioned theheads of legislative branch entities on attempts by hackers to infiltrate theircomputers. Those questioned were officials of the Library of Congress (LOC),Congressional Budget Office (CBO), Government Printing Office (GPO), GeneralAccounting Office (GAO), and Senate. Some officials reported a number ofunsuccessful attempts. The public printer of the Government Printing Office (GPO),for example, responded that over 300,000 attempts were made to infiltrate GPOACCESS within four months, but that no one was able to get beyond the agency'sprotective firewall. A number of legislative entities included funds for securityenhancement in their budget requests. The head of the General Accounting Office(GAO), for example, requested $750,000 to upgrade the agency's computer securityfacility. The LOC requested $686,088 and five FTEs to support its security program.Some legislative branch entities are conducting required technology security trainingfor their employees. The Congressional Research Service (CRS), for example, isrequiring its employees to attend a one-hour training session on ensuring security ofinformation provided to Congress. In calendar year 2000, the House Committee on Appropriations addressed itsconcern for the security of electronically formatted legislative information in itsreport language on the FY2001 legislative branch appropriations bill. The HouseCommittee directed the clerk of the House, in consultation with the secretary of theSenate, to meet with legislative entities that electronically create or store legislative information, to prepare information security standards and procedures forthese entities, and to establish a process to routinely evaluate security risks. The clerk was required to submit proposed standards and procedures to theCommittee on House Administration and the Senate Committee on Rules andAdministration for approval. Upon approval, the clerk's plans were to be submittedto the House and Senate Appropriations Committees. The Library of Congress (LOC) and the Government Printing Office (GPO) are directed to "work with the clerk and secretary of the Senate to test, develop, andimplement ... systems that will enable them to confirm the authenticity of suchlegislative information." (49) House Committee Funding. Theconference contained the House-passed $127.5 million for House committees, anincrease of $4.9 million (4.0%) over the FY2001 appropriation of $122.6 million,and an increase of $24,000 (0.01%) over the budget request. The appropriation for House committees was contained in the appropriationheading "committee employees" that comprises two subheadings. The firstsubheading contained funds for personnel and non-personnel expenses of Housecommittees, except the Appropriations Committee, as authorized by the House in acommittee expense resolution. The funding for this subheading was $104.5 million,an increase of $4.2 million (4.2%) over the FY2001 appropriation of $100.3 million. The second subheading contained funds for the personnel and non-personnelexpenses of the Committee on Appropriations. The FY2002 mark was $23 million,an increase of $674,000 (3.0%) over the FY2001 appropriation of $22.3 million. Senate Committee Funding. Appropriations for Senate committees are contained in two separate Senateaccounts. The first account is the Senate "Committee on Appropriations"; the secondis "Inquiries and Investigations," which contains funds for all other Senatecommittees. The conference contained the Senate-passed appropriation of $9.9 million forthe Senate Committee on Appropriations, a $1.1 million (12.9%) increase over theFY2001 level of $8.8 million, and $107.3 million for inquiries and investigations, anincrease of $24.3 million (29.3%) over the FY2001 appropriation of $83.0 million. Architect of the Capitol Appropriation forFY2002. Conferees agreed to $314.3 million, which contained aone-time appropriation of $70 million for the Capitol visitors' center. The FY2002level, excluding Capitol visitors' center funds, represented an increase of 15.9% overthe FY2001 appropriation of $210.8 million. Total FY2002 funds available to the Architect are $420.6 million, whenadding Capitol visitors' center funds and FY2002 emergency response fundstransferred pursuant to P.L. 107-117 , the FY2002 Emergency SupplementalAppropriations for Recovery from and Response to Terrorist Attacks (in Division B,chapter 9). The Office of the Architect of the Capitol's budget is contained in Title I andII of the legislative branch appropriations bill. Title I contains funds for the Capitolbuildings and grounds, Senate office buildings, House office buildings, and theCapitol power plant. Occasionally, funds for special projects are included in Title I. For Title I, the House and Senate consider separate requests because theHouse budget request does not include Senate office building funds (which aredetermined by the Senate), and the Senate budget request does not include Houseoffice building funds (determined by the House). Conferees agreed to a Title Iappropriation of $221.3 million, which increased to $327.6 million, when includingemergency response funds transferred pursuant to P.L. 107-117 , the FY2002Emergency Supplemental Appropriations for Recovery from and Response toTerrorist Attacks (in Division B, chapter 9). Title II contains funds for the Architect to maintain the buildings and groundsof the Library of Congress (LOC). From time to time, other projects of the Architectare funded in Title II. The conference version of H.R. 2647 contained$93.0 million, including $21.8 million for the Library of Congress buildings andgrounds; $1.3 million for the congressional cemetery; and $70.0 million for theCapitol visitors' center. Among administrative provisions included by conferees were those: directing the Architect to designate a position for securitymanagement functions; and requiring payment of liquidated damages in instances when thecompletion of projects costing more than $50,000 are delayed duecontractors. The Senate's FY2002 proposal contained $178.2 million for the Architect ofthe Capitol in Titles I and II of the bill, excluding funds for House office buildingsand funds for the Botanic Garden. Title I contained $155.9 million, excluding Houseoffice building funds, and Title II contained $22.3 million, excluding funds for theBotanic Garden. Title II contained $1 million for the Capitol Visitors' Center and$2.5 million for the congressional cemetery. The total FY2002 appropriation was anincrease of $9.1 million (5.4%) over the FY2001 level of $169.1 million. The Senatebill deferred funds for the second phase in the renovation of the Capitol Dome andaddresses management, worker safety, chief financial officer, recycling, parking, andbiobased products issues. The House bill contained $197.4 million for Titles I and II, excluding fundsfor Senate office buildings and funds for the Botanic Garden, an increase of $50.4million (34.3%) over the FY2001 level of $146.9 million. The FY2002 budget request for the Office of the Architect of the Capitol inTitle I and Title II combined was $292.8 million (excluding funds for the BotanicGarden), an increase of $82.0 million, or 38.9%, over the FY2001 appropriation of$210.8 million. The budget request contained $3.5 million for an additional 48 FTE positionsconsidered necessary for the Architect primarily to implement programs required bythe Congressional Accountability Act. Among these positions were five to supportfire safety programs; eight to support environmental and life safety programs; fiveto support an energy savings program; 19 to support preparation and issuance offinancial statements. Figure 4. Appropriations for theArchitect, FY1995-FY2001 The request also contained $102.6 million for 115 projects that werecontained in the Architect's "capital budget," which primarily funds maintenanceprojects. Seven projects accounted for $67 million, or 65%, of the request. Theywere repair of the Capitol dome ($42.5 million); purchase of property for an off-sitedelivery and screening center for the Capitol police ($6.8 million); construction ofa new Library of Congress audio visual conservation center in Culpepper Virginia($5 million); renovations to the Rayburn office building cafeteria ($3.5 million);design and purchase of land for a vehicle maintenance facility for the Capitol police($3.3 million); modernization of the elevators in House office buildings ($3 million);and preparation of construction drawings for a parking garage adjacent to the Capitolpolice headquarters ($3 million). Figure 5. Appropriations for theArchitect, FY1995-FY2001 Botanic Garden. Confereesagreed to $5.7 million, lower than both the House figure of $6.0 million, and theSenate figure of $5.8 million. The FY2002 appropriation is a 70.0% increase fromthe FY2001 appropriation of $3.3 million. The increase is due in part to inclusionof $1.5 million for capitol projects, including, among other funds, $200,000 fordesign of the renovation of the administration building, $615,000 for conservatorygalleries design exhibits, banners, and audio tours, and $400,000 for implementationand contractor support for conservatory courtyards. Congressional Budget OfficeBudget. Conferees agreed to an 8.6% increase in the budget of theCongressional Budget Office (CBO), to $30.8 million in FY2002 from $28.4 millionin FY2001. The Senate version contained $30.7 million for CBO, and the Houseversion, $30.8 million. An administrative provision contained new legislative authority for a studentloan repayment program for qualified personnel, capped at $40,000 for anyemployee, and limited to no more than $6,000 in a calendar year. CBO's directorrequested this authority in order to "recruit and retain qualified personnel," subjectto the limits required of executive branch agencies. (50) A secondadministrative provision authorized the director to establish regulations for employeetraining. The FY2002 CBO request was $30.7 million, an increase of $2.3 million, or8.1%, over FY2001. According to the director, 94% of the increase was due to payand related benefits, an increase "largely explained by our need to remain competitivein a tight labor market." (51) The agency's request included funds for fouradditional authorized FTE positions. General Accounting OfficeBudget. Conferees adopted the House-passed appropriation of$421.8 million for the General Accounting Office (GAO), an increase of 9.9% overlast year's funding of $384.0 million. The Senate FY2002 bill contained $419.8million. Total GAO funding is $429.4 million, when adding FY2002 emergencyresponse funds transferred pursuant to P.L. 107-117 , the FY2002 EmergencySupplemental Appropriations for Recovery from and Response to Terrorist Attacks(in Division B, chapter 9). Conferees directed the comptroller general to obligate up to $500,000 for atechnology assessment pilot program, to be determined by the Senate, and to submit a progress report on the program to the Senate by June 15, 2002. A Senate manager'samendment providing $1 million for technology assessment pilot projects wasstricken in conference; the money would have been offset by a reduction inappropriations for the Architect of the Capitol. GAO's FY2002 budget request was $427.8 million, an increase of $43.8million, or 11.4%, over the FY2001 appropriation. Most of the request was formandatory expenses, including increases in pay and related costs ($17.6 million), andin services ($1.6 million). (52) In addressing the need to recruit and retain staff,the comptroller general requested funds for performance-based recognition andcompensation programs ($1 million), repayments of education loans ($410,000),training ($400,000). He also requested $1.5 million for a mass transit subsidyallowance, required by law. The agency's request contained funds for 120 FTEpositions already authorized but not previously funded. Funding the 120 FTEs meantfull funding of GAO's authorized FTE level of 3,275 in FY2002. The Senate billcontained full funding of the 3,275 FTE level, while the House funded 3,269. Figure 6. Appropriations for GAO, FY1995-FY2001 Figure 7. Appropriations for GAO,FY1995-FY2001 Library of Congress Budget. Conferees agreed to $452.0 million for the Library of Congress (LOC) instead of$450.1 million approved by the House and $443.2 million approved by the Senate. The conference figure is an 11.7% decrease from the FY2001 appropriation of $511.7million, which contained a one-time supplemental appropriation of $100 million forthe Library's digitalization program. When excluding the digitalization supplemental,the conference figure represents an 11.7% increase over FY2001. Total FY2002 Library of Congress funding is $481.7 million, when adding FY2002 emergency response funds transferred pursuant to P.L. 107-117 , the FY2002Emergency Supplemental Appropriations for Recovery from and Response toTerrorist Attacks (in Division B, chapter 9). The budget of the LOC is contained in both Title I and Title II of thelegislative appropriations bill. Title I contains funds for the Congressional ResearchService (CRS); Title II contains funds for all other activities of the Library ofCongress. Library of Congress, Except CRS (in TitleII). Conferees agreed to a FY2002 level of $370.6 million,compared with the $368.6 million House figure and the $362.1 million Senate figure. The conference amount is a decrease of 15.5% over the FY2001 appropriation of$438.3 million, which also included a one-time appropriation of $100 million fordigitalization. Total Title II funding for FY2002 is $400.2 million, when adding FY2002emergency response funds transferred pursuant to P.L. 107-117 , the FY2002Emergency Supplemental Appropriations for Recovery from and Response toTerrorist Attacks (in Division B, chapter 9). The Library's FY2002 request was $363.2 million, and included among itsmajor elements funds for mandatory increases in pay and related expenses, andservices ($20 million); an increase for collections access, preservation, and security($11.8 million); and an increase for the Library's digital futures initiatives ($18.8million). An increase of 80 FTE positions was requested for the digital futureinitiative, including 58 for the National Digital Library, 17 for the CongressionalResearch Service (CRS), and five for computer security. Figure 8. Appropriations for LOC,Excluding CRS, FY1995-FY2001 Figure 9. Appropriations for LOC,Excluding CRS, FY1995-FY2001 Congressional Research Service (in TitleI). Conferees agreed to the House-passed appropriation of $81.5million, an increase of 10.9% over the FY2002 appropriation of $73.4 million; theSenate proposed $81.1 million. Approximately $4.2 million of the increase in theconference is to meet statutory obligations and to adjust for inflation. The remainderof the increase primarily funds technology advancements, including the hiring of fivesenior analysts to provide expertise on technology policy issues, and 12 technicalstaff to enhance technology research and security. Figure 10. Appropriations for CRS,FY1995-FY2001 Figure 11. Appropriations for CRS,FY1995-FY2001 Government Printing Office (GPO)Budget. Conferees agreed to $110.6 million for GPO operations,including $81.0 million in Title I, and $29.6 million in Title II, a decrease of 3.9%from the FY2001 total of $115.1 million. GPO is funded in Title I for congressionalprinting and binding, and in Title II for the Office of Superintendent of Documents.Title II also contains funding from time to time for the GPO revolving fund, as it didin the FY2002 request, with a request of $6 million for payment to the GPOrevolving fund. Total FY2002 Government Printing Office funding is $114.6 million, whenadding FY2002 emergency response funds transferred pursuant to P.L. 107-117 , theFY2002 Emergency Supplemental Appropriations for Recovery from and Responseto Terrorist Attacks (in Division B, chapter 9). Conferees on the regular annual bill agreed to administrative language,similar to that included in the Senate bill, extending the agency's authority to offerincentive payments for early retirement and voluntary separation. During testimonyon the FY2002 bill, the public printer requested decreased funds for staffing. Herequested funds for 3,260 FTEs, a decrease of 25 FTEs from the FY2001 authorizednumber of 3,285. To help achieve this reduction, the public printer requestedauthority to offer early-outs and buy-outs to staff. During his Senate testimony onthe FY2002 budget, the public printer noted that most of the reduction was neededin staff handling publication sales due to a decline in sales. (53) The agency's FY2002 request in both titles of the bill was $126.5 million, anincrease of 27.5%, or $27.3 million, over the FY2001 appropriation of $99.2 million(before a FY2001 supplemental). Most of the increase covered shortfalls in prioryear appropriations, including $9.9 million for FY2000 and $9.5 million for FY2001. According to the public printer, the actual increase in the FY2002 budget forcongressional printing and binding was $200,000, when not counting the fundsrequested to make up for shortfalls. (54) The FY2002 request for Title I was $90.9 million, an increase of $19.6million, or 25.0%, over the FY2001 appropriation of $71.3 million (before a FY2001supplemental). The Title II request was $35.6 million, an increase of $7.7 million,or 27.6 %, over the FY2001 appropriation of $27.9 million (before a FY2001supplemental). Figure 12. Appropriations for GPO,FY1995-FY2001 Figure 13. Appropriations for GPO,FY1995-FY2001 Table 2. Legislative Branch Appropriations,FY1995 to FY2001 (budget authority in billions of currentdollars) a a. These figures represent current dollars, exclude permanent budget authorities, andcontain supplementals and rescissions. Permanent budget authorities are notincluded in the annual legislative branch appropriations bill but, rather, areautomatically funded annually. b. Includes budget authority contained in the FY1999 regular annual legislativebranch appropriations act ( P.L. 105-275 ), the FY1999 emergencysupplemental appropriation ( P.L. 105-277 ), and the FY1999 supplementalappropriation ( P.L. 106-31 ). c. Includes budget authority contained in the FY2000 regular annual legislativebranch appropriations act ( P.L. 106-57 ); a supplemental and a 0.38%rescission in P.L. 106-113 ; and supplementals in P.L. 106-246 and P.L.106-554 . d. This figure contains: (1) FY2001 regular annual appropriations contained in H.R. 5657 , legislative branch appropriations bill; FY2001supplemental appropriations of $118 million and a 0.22% across-the-boardrescission contained in H.R. 5666 , miscellaneous appropriationsbill; and (3) FY2001 supplemental appropriations of $79.5 million containedin H.R. 2216 ( P.L. 107-20 ). H.R. 5657 and H.R. 5666 were incorporated by reference in P.L. 106-554 ,FY2001 Consolidated Appropriations Act. The first FY2001legislativebranch appropriations bill, H.R. 4516 , was vetoed Oct. 30, 2000. The second legislative branch appropriations bill, H.R. 5657 ,was introduced Dec. 14 and incorporated in P.L 106-554. in P.L. 106-554 . Table 3. Legislative Branch Appropriations, FY2002 (H.R.2647; S. 1172; P.L. 107-68; P.L.107-117) (in thousands of current dollars) Sources: FY2002 U.S. Budget , House and Senate Appropriations Committees, and public laws. Thelast column also contains emergency response funds authorized to be transferred pursuant to P.L.107-117 , the FY2002 Emergency Supplemental Appropriations for Recovery from and Responseto Terrorist Attacks (in Division B, chapter 9). a. This column contains: (1) FY2001 regular annual appropriations contained in H.R. 5657 , legislative branch appropriations bill; FY2001 supplemental appropriations of $118million and a 0.22% across-the-board rescission contained in H.R. 5666 ,miscellaneous appropriations bill; and (3) FY2001 supplemental appropriations of $79.5million contained in H.R. 2216 ( P.L. 107-20 ). H.R. 5657 and H.R. 5666 were incorporated by reference in P.L. 106-554 , FY2001Consolidated Appropriations Act. The first FY2001legislative branch appropriations bill, H.R. 4516 , was vetoed Oct. 30, 2000. The second legislative branchappropriations bill, H.R. 5657 , was introduced Dec. 14 and incorporated in P.L106-554. b. These numbers reflect revisions in the request contained in the President's FY2002 U.S. Budget . c. These figures do not contain appropriations for the Senate. The House does not considerappropriations in Title I for Senate internal activities and Senate activities funded under theArchitect of the Capitol. d. These figures do not contain appropriations for the House. The Senate does not considerappropriations in Title I for House internal activities and House activities funded under theArchitect of the Capitol. e. This figure contains not only $18,753,000 for Library buildings and grounds, but also $1,000,000for the Capitol Visitors' Center, and $2,500,000 for the Congressional Cemetery. Table 4. Senate Items, FY2002 (S. 1172, Incorporatedin H.R. 2647; P.L. 107-68; P.L. 107-117) (in thousands of current dollars) Sources: FY2002 U.S. Budget , House and Senate Appropriations Committees and public laws. The lastcolumn also contains emergency response funds authorized to be transferred pursuant to P.L.107-117 , the FY2002 Emergency Supplemental Appropriations for Recovery from and Responseto Terrorist Attacks (in Division B, chapter 9). a. There are six Senate appropriations headings; they are indicated in bold print. b. Office operations of the Office of the Secretary of the Senate are also funded under "Salaries, Officers,and Employees." c. Activities of the Office of Sergeant at Arms and Doorkeeper are also funded under "Salaries, Officers,and Employees." Table 5. House of Representatives Items, FY2002 (H.R.2647; P.L. 107-68; P.L. 107-117) (in thousands of current dollars) Source: House Appropriations Committee. The last column also contains emergency response fundsauthorized to be transferred pursuant to P.L. 107-117 , the FY2002 Emergency SupplementalAppropriations for Recovery from and Response to Terrorist Attacks (in Division B, chapter 9). a. The appropriations bill has two House accounts: (1) payments to widows and heirs of deceasedMembers of Congress and (2) salaries and expenses. b. This appropriation heading was new in the FY1996 bill. The heading represents a consolidation of (1)the former heading Members' clerk hire; (2) the former heading official mail costs; and (3) theformer subheading official expenses of Members, under the heading allowances and expenses. c.This appropriation heading was new in the FY1996 bill. The heading represents a consolidation of (1)the former heading committee employees; (2) the former heading standing committees, specialand select; (3) the former heading Committee on Budget (studies); and (4) the former headingCommittee on Appropriations (studies and investigations). Table 6. Legislative Branch Budget Authority Contained in Appropriations Acts, FY1995-FY2001 (Does not include permanent budget authority; in thousands of currentdollars) See notes at end of Table 7. Table 7. Legislative Branch Budget Authority Contained inAppropriations Acts, FY1995-FY2001 (Does not include permanent budget authority; in thousands of constant2001 (est.) dollars) Sources: Budget authorities for FY1995-FY2001 are from the House Appropriations Committee. FY1995 budget authorities reflect rescissions and a supplemental contained in P.L. 104-19 , 109 Stat.219-221, July 27, 1995, FY1995 Supplemental and Rescissions Act ( H.R. 1944 ). FY1996budget authorities reflect rescissions contained in P.L. 104-208 , 110 Stat. 3009-510-511, Sept. 30, 1996,FY1997 Omnibus Consolidated Appropriations Act ( H.R. 3610 ). FY1998 budget authoritiesrepresent supplementals contained in P.L. 105-174 , May 1, 1998, and an $11 million transfer to theGovernment Printing Office (GPO) from the GPO revolving fund. FY1999 budget authorities containemergency supplemental appropriations in P.L. 105-277 , and supplemental appropriations in P.L. 106-31 .FY2000 budget authorities contain a supplemental and a 0.38% rescission in P.L. 106-113 . Totals reflectrounding. FY1999 budget authority contains $223.7 million in emergency supplemental appropriations ( P.L.105-277 ), and $3.8 million for expenses of a House page dormitory and $1.8 million for expensesof life safety renovations to the O'Neill House Office Building ( P.L. 106-31 ). The FY1999appropriation also contains a rescission of $3.5 million, and a supplemental for the same amountin P.L. 106-31 . Excludes permanent federal funds (in thousands of current dollars): FY1995, $343,000; FY1996,$302,000; FY1997, $325,000; FY1998, $333,000; FY1999, $358,000; and FY2000, $279,000. Sources are the U.S. Budget and the House and Senate Committees on Appropriations. Excludes permanent trust funds (in current dollars, in thousands): FY1995, $16,000; FY1996, $31,000; FY1997, $29,000; FY1998, $29,999; FY1999, $47,000; and FY2000, $51,000. Sources are the U.S. Budget and the House and Senate Committees on Appropriations. The formula for conversion to constant dollars is as follows: 2001 Consumer Price Index (CPI) numberdivided by each year's CPI number multiplied by that year's budget authority. Source for1995-2000 index figures is the Bureau of Labor Statistics. Source for 2001 estimate is theCongressional Budget Office. a. Prior to FY1978, the legislative branch appropriations act contained numerous titles. Effective inFY1978, Congress restructured the legislative bill so that it would "more adequately reflect actualcosts of operating the U.S. Congress than has been true in the past years" (H.Rept. 95-450, FY1978Legislative Appropriations). As a result, the act was divided into two titles. Title I, CongressionalOperations, was established to contain appropriations for the actual operation of Congress. TitleII, Related Agencies, was established to contain the budgets for activities not considered asproviding direct support to Congress. Periodically, the act has contained additional titles for suchpurposes as capital improvements and special one-time functions. b. FY1996 figures contain rescissions in the Omnibus Consolidated Appropriations Act, FY1997 ( P.L.104-208 , Sept. 28, 1996). Provisions applicable to legislative branch budget authority in P.L.104-208 appear in Congressional Record , daily edition, vol. 142, Sept. 28, 1996, pp.H11778-H11779. c. Includesbudget authority contained in the FY1999 regular annual Legislative Branch AppropriationsAct ( P.L. 105-275 ), $223.7 million in FY1999 emergency supplemental appropriations in P.L.105-277 , and $5.6 million in FY1999 supplemental appropriations in P.L. 106-31 . d. Includes $5.5 million in emergency supplementals under the sergeant at arms for completion ofYear-2000 computer conversion ( P.L. 105-277 ). e. Includes $6.373 million in emergency supplementals under the chief administrative officer forcompletion of Year--2000 computer conversion ( P.L. 105-277 ), and includes a rescission of $3.5million from the House heading "salaries, officers, and employees" and a supplementalappropriation of $3.5 million for the chief administrative officer for replacement of the Housepayroll system ( P.L. 106-31 ). f. Includes $106,782,000 for emergency security enhancements funded under the Capitol Police Board'sgeneral expenses account ( P.L. 105-277 ). The total Joint Items figure also includes $2 million forthe Trade Deficit Review Commission. g. This figure includes $100 million for design and construction of a Capitol visitors' center, funded underthe Architect of the Capitol's Capitol buildings account, in "salaries and expenses" ( P.L.105-277 ), and includes $3.8 million for expenses of a House page dormitory and $1.8 million forexpenses for life safety renovations to the O'Neill House Office Building ( P.L. 106-31 ). h. Includes $1 million for the Congressional Cemetery. i. Includes $5 million in emergency supplemental appropriations under the salaries and expenses accountof the General Accounting Office for completion of the Year-2000 computer conversion ( P.L.105-277 ). j. Includes regular annual appropriations ( P.L. 106-57 ) and a 0.38% rescission and supplemental in P.L.106-113 . k. This column contains: (1) FY2001 regular annual appropriations contained in H.R. 5657 ,legislative branch appropriations bill; FY2001 supplemental appropriations of $118 million and a 0.22%across-the-board rescission contained in H.R. 5666 , miscellaneous appropriations bill; and(3) FY2001 supplemental appropriations of $79.5 million contained in H.R. 2216 ( P.L.107-20 ). H.R. 5657 and H.R. 5666 were incorporated by reference in P.L.106-554 , FY2001 Consolidated Appropriations Act. The first FY2001legislative branch appropriationsbill, H.R. 4516 , was vetoed Oct. 30, 2000. CRS Report RL30212 . Legislative Branch Appropriations for FY2001 , by PaulDwyer. CRS Report 98-212 . Legislative Branch Appropriations for FY2000 , by Paul Dwyer. These sites contain information on the FY2001 legislative branch appropriationsrequest and legislation, and the appropriations process. House Committee on Appropriations http://www.house.gov/appropriations Senate Committee on Appropriations http://www.senate.gov/~appropriations/ CRS Appropriations Products Guide http://www.crs.gov/products/appropriations/apppage.shtml Congressional Budget Office http://www.cbo.gov General Accounting Office http://www.gao.gov Office of Management & Budget http://www.whitehouse.gov/omb/ | Conferees on the FY2002 legislative branch appropriations bill agreed to $2.97 billion forlegislative branch operations, an 8.9% increase over the FY2001 funding level of $2.73 billion ( P.L.107-68 ). Total FY2002 funding made available for the legislative branch is $3.23 billion, whenincluding emergency response funds transferred pursuant to P.L. 107-117 , the FY2002 EmergencySupplemental Appropriations for Recovery from and Response to Terrorist Attacks (in Division B,chapter 9). P.L. 107-68 contains funds for 79 new Capitol Police positions, funds for Capitol Policetraining programs, language providing comparability in the pay of the Capitol Police with theUniformed Division of the Secret Service and the Park Police, an 18.1% increase in the policebudget, an additional $70 million for construction of the Capitol visitors' center, and severalmeasures to recruit and retain employees of the Senate and the congressional support agencies. In July, 2001, Congress also agreed to a $79.5 million FY2001 legislative branchsupplemental appropriation ( P.L. 107-20 ), containing $61.7 million for House internal operations,$1 million for the Capitol Police, and $15.9 million for the Government Printing Office. The terrorists' attacks of September 11, 2001, prompted moves toward an even more stringentsecurity environment on Capitol Hill, which affected the legislative branch budget. On September21, September 28, and December 3, the President released $376.9 million for Capitol Hill securitymeasures. These funds were part of a $40 billion FY2001 terrorism emergency supplemental billapproved by Congress on September 14, and signed into P.L. 107-38 on September 18. ThePresident proposed, and Congress approved, an additional allocation for Capitol complex securityof $265.1 million, which, unlike the other allocations for security, required approval by Congress. The $265.1 million supplemental was contained in P.L. 107-117 , the FY2002 Department of DefenseAppropriations Act, signed by the President on January 10, 2002. Among elements considered by Congress were proposals to: merge the Capitol Hill, Library of Congress, and Government Printing Officepolice into a consolidated force; Senate report language directed the General Accounting Office tostudy the issue; authorize and fund programs to enhance staff retention and recruitment, suchas repayment of student loans, and implementation of performance-based recognition andcompensation proposals; P.L. 107-68 contains language authorizing student loan repayments foremployees of the Senate and Congressional Budget Office; and approve $42.5 million for repair of the Capitol dome; P.L. 107-68 contains$1.6 million for painting. Key Policy Staff Division abbreviations: GOV/FIN = Government and Finance |
The "digital divide" is a term used to describe a gap between "information haves and have-nots," or in other words, between those Americans who use or have adequate access to telecommun ications and information technologies and those who do not. Whether or not individuals or communities fall into the "information haves" category depends on a number of factors, ranging from the presence of computers in the home, to training and education, to the availability of affordable internet access. Broadband technologies are currently being deployed primarily by the private sector throughout the United States. While the numbers of new broadband subscribers continue to grow, studies and data suggest that the rate of broadband deployment in urban/suburban and high-income areas is outpacing deployment in rural and low-income areas. Prior to the late 1990s, American homes accessed the internet at maximum speeds of 56 kilobits per second by dialing up an Internet Service Provider over the same copper telephone line used for traditional voice service. A relatively small number of businesses and institutions used broadband or high-speed connections through the installation of special "dedicated lines" typically provided by their local telephone company. Starting in the late 1990s, cable television companies began offering cable modem broadband service to homes and businesses. This was accompanied by telephone companies beginning to offer DSL service (broadband over existing copper telephone wireline). Growth in broadband service has been steep, rising from 2.8 million high-speed lines reported as of December 1999, to 409 million connections as of June 30, 2017. Of the 409 million high-speed connections reported by the FCC, 353 million serve residential users. Table 1 depicts the relative deployment of different types of broadband technologies. A distinction is often made between "current generation" and "next generation" broadband (commonly referred to as next generation networks or NGN). "Current generation" typically refers to initially deployed cable, DSL, and many wireless systems, while "next generation" refers to dramatically faster download and upload speeds offered by fiber technologies and also by successive generations of cable, DSL, and wireless technologies. In general, the greater the download and upload speeds offered by a broadband connection, the more sophisticated (and potentially valuable) the application that is enabled. FCC data indicate where fixed broadband service is and is not being deployed. The FCC has set a speed benchmark of 25 Mbps (download speed)/3 Mbps (upload speed) as the measure by which it determines whether a fixed service provides advanced telecommunications capability. Table 2 shows recent percentages of Americans in urban, rural, and tribal areas with access to terrestrial fixed broadband at speeds of 25 Mbps/3Mbps, as presented in the FCC's Communications Marketplace Report . According to the most recent FCC deployment data, as of December 2017, 94% of all Americans had access to fixed terrestrial broadband at speeds of at least 25 Mbps/3 Mbps, with over 19.4 million Americans still lacking fixed terrestrial broadband at those speeds. Table 3 shows the percentage of Americans as of December 2017 with access to fixed 25 Mbps/3Mbps terrestrial broadband by state. Another important broadband availability metric is the extent to which there are multiple broadband providers offering competition and consumer choice. Typically, multiple providers are more prevalent in urban than in rural areas or tribal areas (see Table 4 ). In contrast to broadband availability , which refers to whether or not broadband service is offered, broadband adoption refers to the extent to which American households actually subscribe to and use broadband. According to Census data from the 2016 American Community Survey, 81.4% of American households have a broadband internet subscription. Other Census data from July 2015 show that 68% of Americans use the internet at home. The Census data also show that Americans increasingly are connecting to the internet through other devices in addition to desktop computers: 52% of Americans used two or more devices to connect, including tablets, laptops, mobile phones, and TV connected boxes (gaming consoles and streaming video players). The most recent survey data from the Pew Research Center show that populations continuing to lag behind in internet adoption include people with low incomes, seniors, the less-educated, and households in rural areas (see Table 5 ). Pew has reported that the cost of monthly subscriptions is the main reason some people do not have broadband connections. In June 2015, GAO released a report ( Intended Outcomes and Effectiveness of Efforts to Address Adopti o n Barriers Are Unclear ) which found that affordability, lack of perceived relevance, and lack of computer skills are the principal barriers to broadband adoption. GAO examined adoption efforts by NTIA and the FCC, and identified three key approaches used to address broadband adoption barriers: discounts on computer equipment and broadband subscriptions; outreach efforts to promote broadband availability and benefits; and training to help people develop skills in using computers and broadband. While the number of new broadband subscribers continues to grow, the rate of broadband deployment in urban areas has outpaced deployment in rural and tribal areas. While there are many examples of rural communities with state of the art telecommunications facilities, recent surveys and studies have indicated that, in general, rural areas (and particularly tribal areas) tend to lag behind urban and suburban areas in broadband deployment. For example According to the FCC's Communications Market place Report , "As of year-end 2017, 94% of the overall population had coverage [of fixed terrestrial broadband at speeds of 25 Mbps/3 Mbps], up from 91.9% in 2016. Nonetheless, the gap in rural and Tribal America remains notable: over 24% of Americans in rural areas and 32% of Americans in Tribal lands lack coverage from fixed terrestrial 25 Mbps/3 Mbps broadband, as compared to only 1.5% of Americans in urban areas." Also according to the FCC's Communications Market place Report , rural areas continue to lag behind urban areas in mobile broadband deployment. Although evaluated urban areas saw an increase of 10 Mbps/3 Mbps mobile LTE (median speed) from 81.9% in 2014 to 92.6% in 2017, such deployment in evaluated rural areas remained relatively flat at about 70%. According to January 2018 survey data from the Pew Research Center, 58% of adults in rural areas said they have a high-speed broadband connection at home, as opposed to 67% of adults in urban areas and 70% of adults in suburban areas. A November 2017 Census Bureau survey reported by the National Telecommunications and Information Administration (NTIA) Digital Nation Data Explorer showed 72.9% of rural residents reporting using the internet, versus 78.5% of urban residents. According to NTIA, the data "indicates a fairly constant 6-9 percentage point gap between rural and urban communities' internet use over time." The comparatively lower population density of rural areas is likely the major reason why broadband is less deployed than in more highly populated suburban and urban areas. Particularly for wireline broadband technologies—such as cable modem and fiber—the greater the geographical distances among customers, the larger the cost to serve those customers. Thus, there is often less incentive for companies to invest in broadband in rural areas than, for example, in an urban area where there is more demand (more customers with perhaps higher incomes) and less cost to wire the market area. The terrain of rural areas can also be a hindrance, in that it is more expensive, for example, to deploy broadband technologies in a mountainous or heavily forested area. An additional added cost factor for remote areas can be the expense of "backhaul" (e.g., the "middle mile"), which refers to the installation of a dedicated line which transmits a signal to and from an internet backbone, which is typically located in or near an urban area. Some policymakers believe that disparities in broadband access across American society could have adverse consequences on those left behind, and that advanced telecommunications applications critical for businesses and consumers to engage in ecommerce are increasingly dependent on high-speed broadband connections to the internet. Thus, some say, communities and individuals without access to broadband could be at risk to the extent that connectivity becomes a critical factor in determining future economic development and prosperity. A February 2006 study done by the Massachusetts Institute of Technology for the Economic Development Administration of the Department of Commerce marked the first attempt to quantitatively measure the impact of broadband on economic growth. The study found that "between 1998 and 2002, communities in which mass-market broadband was available by December 1999 experienced more rapid growth in employment, the number of businesses overall, and businesses in IT-intensive sectors, relative to comparable communities without broadband at that time." Subsequently, other studies have attempted to assess the economic impact of broadband deployment. For example A June 2007 report from the Brookings Institution found that for every one percentage point increase in broadband penetration in a state, employment is projected to increase by 0.2% to 0.3% per year. For the entire U.S. private nonfarm economy, the study projected an increase of about 300,000 jobs. A July 2009 study commissioned by the Internet Innovation Alliance found net consumer benefits of home broadband on the order of $32 billion per year, up from an estimated $20 billion in consumer benefits from home broadband in 2005. A January 2009 study conducted by the Information Technology and Innovation Foundation (ITIF) found that investing an additional $10 billion in one year on broadband networks will create or retain 498,000 U.S. jobs for that year. A study (first published in 2013) funded by the National Agricultural and Rural Development Policy Center found that nonmetropolitan counties that had high levels of broadband adoption (greater than 60%) in 2010 had significantly higher growth in median household income—23.4% versus just over 22%—between 2001 and 2010 when compared to counties that had similar characteristics in the 1990s but were not as successful at adopting broadband. A 2016 study from the Hudson Institute found that rural broadband providers directly and indirectly added $24.1 billion to the U.S. economy in 2015. The rural broadband industry supported 69,595 jobs in 2015, both through its own employment and the employment that its purchases of goods and services generated. Section 706 of the Telecommunications Act of 1996 ( P.L. 104-104 ) requires the FCC to regularly initiate an inquiry assessing the availability of broadband to all Americans and to determine whether broadband is "being deployed to all Americans in a reasonable and timely fashion." If the determination is negative, the act directs the FCC to "take immediate action to accelerate deployment of such capability by removing barriers to infrastructure investment and by promoting competition in the telecommunications market." Starting in 1999, there have been eleven Section 706 reports, each providing a snapshot and assessment of broadband deployment. As part of this assessment, and to help determine whether broadband is being deployed in "a reasonable and timely fashion," the FCC has set a minimum broadband speed that essentially serves as the benchmark the FCC uses to determine what it considers broadband service for the purposes of its Section 706 determination. In 2015 the FCC, citing changing broadband usage patterns and multiple devices using broadband within single households, raised its minimum fixed broadband benchmark speed from 4 Mbps (download)/1 Mbps (upload) to 25 Mbps/3 Mbps. The designation of minimum benchmark speeds for fixed broadband, and how mobile broadband speeds should be benchmarked and factored into an overall determination of broadband deployment, has proven controversial. On February 2, 2018, the FCC adopted and released its latest 706 report, the 2018 Broadband Deployment Report. The FCC concluded that advanced telecommunications capability is being deployed to all Americans in a reasonable and timely fashion. This determination was based on evaluating progress—comparing deployment in the present year to deployment in previous years. According to the Report : We find that analyzing progress to determine whether deployment is occurring in a reasonable and timely fashion is the approach that is most consistent with the language of section 706, as the analysis of such progress enables the Commission to determine whether advanced telecommunications capability "is being deployed" in the manner that section 706 requires. The use of the present progressive tense—"is being deployed"—as well as the language requiring an evaluation of whether that deployment is "reasonable and timely" indicates that Congress intended that the Commission evaluate the current state of deployment to all Americans, not a rigid requirement that each and every American be served at this moment . The FCC's latest 706 determination that broadband is being deployed in a reasonable and timely fashion is a departure from the FCC's previous five determinations that broadband is not being deployed in a reasonable and timely fashion. The latest 706 determination was approved by the three Republican FCC commissioners, with the remaining two Democratic commissioners dissenting. According to FCC Commissioner Rosenworcel's dissent: This report concludes that in the United States the deployment of broadband to all Americans is reasonable and timely. This is ridiculous—and irresponsible. Today there are 24 million Americans without access to broadband. There are 19 million Americans in rural areas who lack the ability to access high-speed services at home. There are 12 million school-aged children who are falling into the Homework Gap because they do not have the broadband at home they need for nightly schoolwork. Ask any one of them if they think the deployment of the most essential digital age infrastructure is reasonable and timely and you will get a resounding "No." To call these numbers a testament to our national success is insulting and not credible. In gathering data, information, and viewpoints for the Report , the August 8, 2017, N otice o f I nquiry proposed to maintain the 25 Mbps/3 Mbps benchmark for fixed broadband, while at the same time soliciting comments on whether to establish a lower benchmark speed specifically for mobile broadband. One proposal under consideration was whether the presence of fixed or mobile broadband should indicate that an area has adequate broadband service. Ultimately, the Report concluded that adoption of a single mobile benchmark is currently unworkable, given available data and the inherent variability of actual mobile speeds, and that mobile broadband service is not a full substitute for fixed service at this time. On August 8, 2018, the FCC adopted the Fourteenth Broadband Deployment Report Notice of Inquiry , which is collecting comments in preparation for the next Section 706 report in 2019. The FCC proposes to maintain the 25 Mbps/3 Mbps benchmark and is seeking comments on "whether since the 2018 Report there have been developments that would support a different conclusion about substitutability" between mobile and fixed broadband service, and "to the extent that mobile services are able to offer equivalent functionality as fixed services either now or in the future ... whether or not and in what circumstances, if any, mobile and fixed services should be considered substitutes." Obtaining an accurate snapshot of broadband deployment is problematic. Rapidly evolving technologies, the constant flux of the telecommunications industry, the uncertainty of consumer wants and needs, and the sheer diversity and size of the nation's economy and geography make the status of broadband deployment difficult to characterize. Improving the quality of broadband deployment data has become an issue of congressional interest, as policymakers recognize that more accurate broadband availability maps could help ensure that federal broadband programs target unserved areas of the country that are most in need of assistance. Since the initial deployment of broadband in the late 1990s, two federal agencies have implemented broadband availability data collection and mapping initiatives: the NTIA's State Broadband Initiative, which was funded by the American Recovery and Reinvestment Act of 2009 (ARRA) and used to develop the previous National Broadband Map; and the FCC's Form 477 Data Program, which is used to populate and update the current National Broadband Map. One of the major criticisms of the FCC's Form 477 National Broadband Map is that broadband availability can be overstated because fixed broadband deployment data are collected at the census block level. A census block is considered served if there is broadband service (or the strong potential of broadband service) to one or more locations. This is especially problematic in rural areas, which have large census blocks and may be considered served if, for example, a single neighborhood in that large census block has broadband service. On August 3, 2017, the FCC adopted a Further Notice of Proposed Rulemaking to explore ways "to improve the quality, accuracy, and usefulness of the data it collects on fixed and mobile voice and broadband service," while at the same time examining how it can "reduce burdens on industry by eliminating unnecessary or onerous data filing requirements." The Administration requested $50 million for broadband mapping in FY2018. The Consolidated Appropriations Act, 2018 ( P.L. 115-141 ) appropriated $7.5 million to NTIA to update the national broadband availability map in coordination with the FCC and using partnerships previously developed with the states. For FY2019, the House and Senate appropriations committees would provide an additional $7.5 million to NTIA for broadband mapping. On May 30, 2018, NTIA issued a Request for Comments on actions it should take to improve the quality and accuracy of broadband availability data. NTIA received comments on the following issues: identifying additional broadband availability data; technology type, service areas, and bandwidth associated with such data; new approaches, tools, technologies, or methodologies to capture broadband availability data; validating broadband availability data; and identifying gaps in broadband availability. On October 25, 2018, NTIA issued a notice for public comment regarding its intention to collect broadband availability data at a more granular level than what the FCC currently collects. As mandated by the American Recovery and Reinvestment Act of 2009 (ARRA), on March 16, 2010, the FCC released its report, Connecting America: The National Broadband Plan . The National Broadband Plan (NBP) sought to "create a high-performance America," which the FCC defined as "a more productive, creative, efficient America in which affordable broadband is available everywhere and everyone has the means and skills to use valuable broadband applications." In order to achieve this mission, the NBP recommended that the country set six goals for 2020 Goal No. 1: At least 100 million U.S. homes should have affordable access to actual download speeds of at least 100 megabits per second and actual upload speeds of at least 50 megabits per second. Goal No. 2: The United States should lead the world in mobile innovation, with the fastest and most extensive wireless networks of any nation. Goal No. 3: Every American should have affordable access to robust broadband service, and the means and skills to subscribe if they so choose. Goal No. 4: Every American community should have affordable access to at least 1 gigabit per second broadband service to anchor institutions such as schools, hospitals, and government buildings. Goal No. 5: To ensure the safety of the American people, every first responder should have access to a nationwide, wireless, interoperable broadband public safety network. Goal No. 6: To ensure that America leads in the clean energy economy, every American should be able to use broadband to track and manage their real-time energy consumption. The National Broadband Plan was categorized into three parts Part I (Innovation and Investment) , which "discusses recommendations to maximize innovation, investment and consumer welfare, primarily through competition. It then recommends more efficient allocation and management of assets government controls or influences." The recommendations address a number of issues, including spectrum policy, improved broadband data collection, broadband performance standards and disclosure, special access rates, interconnection, privacy and cybersecurity, child online safety, poles and rights-of-way, research and experimentation (R&E) tax credits, and R&D funding. Part II (Inclusion) , which "makes recommendations to promote inclusion—to ensure that all Americans have access to the opportunities broadband can provide." Issues include reforming the Universal Service Fund, intercarrier compensation, federal assistance for broadband in tribal lands, expanding existing broadband grant and loan programs at the Rural Utilities Service, enabling greater broadband connectivity in anchor institutions, and improved broadband adoption and utilization especially among disadvantaged and vulnerable populations. Part III (National Purposes) , which "makes recommendations to maximize the use of broadband to address national priorities. This includes reforming laws, policies and incentives to maximize the benefits of broadband in areas where government plays a significant role." National purposes include health care, education, energy and the environment, government performance, civic engagement, and public safety. Issues include telehealth and health IT, online learning and modernizing educational broadband infrastructure, digital literacy and job training, smart grid and smart buildings, federal support for broadband in small businesses, telework within the federal government, cybersecurity and protection of critical broadband infrastructure, copyright of public digital media, interoperable public safety communications, next generation 911 networks, and emergency alert systems. With the conclusion of grant and loan awards established by the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ), there remain two ongoing major federal vehicles which direct federal money to fund broadband: the Universal Service Fund (USF) programs under the Federal Communications Commission (FCC), and the broadband and telecommunications programs at the Rural Utilities Service (RUS) of the U.S. Department of Agriculture. In June 2017, the National Telecommunications and Information Administration (NTIA) released an updated comprehensive Guide to Federal Funding of Broadband Projects . The guide provides summary and contact information for a variety of federal programs that may fund projects involving broadband infrastructure, adoption, access, planning, or research. Since its creation in 1934 the Federal Communications Commission (FCC) has been tasked with "mak[ing] available, so far as possible, to all the people of the United States ... a rapid, efficient, Nation-wide, and world-wide wire and radio communications service with adequate facilities at reasonable charges." This mandate led to the development of what has come to be known as the universal service concept. The universal service concept, as originally designed, called for the establishment of policies to ensure that telecommunications services are available to all Americans, including those in rural, insular, and high cost areas, by ensuring that rates remain affordable. Over the years this concept has evolved and expanded, fostering the development of various FCC policies and programs that target both providers of and subscribers to telecommunications and, more recently, broadband services. Passage of the Telecommunications Act of 1996 ( P.L. 104-104 ) codified the long-standing commitment by U.S. policymakers to ensure universal service in the provision of telecommunications services, and the FCC established, in 1997, a federal Universal Service Fund (USF) to meet the expanded objectives and principles contained in the act. The USF is administered by the Universal Service Administrative Company (USAC), an independent not-for-profit organization, under the direction of the FCC. The USF is being transformed in stages, over a multiyear period, from a mechanism to support voice telecommunications services to one that supports the deployment, adoption, and utilization of both fixed and mobile broadband. The USF currently administers four programs: the High Cost/Connect America Fund Program, the Schools and Libraries Program, the Rural Health Care Program, and the Low Income Program. The USF disbursed $8.8 billion in 2017 with all 50 states, the District of Columbia, and all territories receiving some benefit. One of the major policy debates surrounding universal service in the last decade was whether access to advanced telecommunications services (i.e., broadband) should be incorporated into universal service objectives. The 1996 Telecommunications Act tasked the federal-state Joint Board with defining the services which should be included in the definition of services to be eligible for universal service support. The Joint Board's recommendation, which was adopted by the FCC in May 1997, largely limited the definition to voice telecommunications services. Some policymakers expressed concern that the FCC-adopted definition was too limited and did not take into account the importance and growing acceptance of advanced services such as broadband and internet access. They pointed to a number of provisions contained in the universal service principles of the 1996 act to support their claim. Universal service principles contained in Section 254(b)(2) state that "Access to advanced telecommunications services should be provided to all regions of the Nation." The subsequent principle (b)(3) calls for consumers in all regions of the nation, including "low-income" and those in "rural, insular, and high cost areas," to have access to telecommunications and information services including "advanced services" at a comparable level and a comparable rate charged for similar services in urban areas. Such provisions, they state, dictate that the FCC expand its universal service definition. The 1996 act does take into consideration the changing nature of the telecommunications sector and allows, if future conditions warrant, for the modification of the universal service definition. Section 254(c) of the act states that "universal service is an evolving level of telecommunications services" and that the FCC is tasked with "periodically" reevaluating this definition "taking into account advances in telecommunications and information technologies and services." Furthermore, the Joint Board is given specific authority to recommend "from time to time" to the FCC modification in the definition of the services to be included for federal universal service support. The Joint Board, on November 19, 2007, concluded such an inquiry and recommended that the FCC change the mix of services eligible for universal support. The Joint Board recommended, among other things, that "the universal availability of broadband Internet services" be included in the nation's communications goals and hence be supported by federal universal service funds. This debate was put to rest when provisions contained in the American Recovery and Reinvestment Act of 2009 (ARRA) called for the FCC to develop, and submit to Congress, a national broadband plan to ensure that every American has "access to broadband capability." The FCC in its national broadband plan , Connecting America: the National Broadband Plan , recommended that access to and adoption of broadband be a national goal. Furthermore the national broadband plan proposed that the Universal Service Fund be restructured to become a vehicle to help reach this goal. The FCC, in an October 2011 decision, adopted an Order that calls for the USF to be transformed, in stages, over a multiyear period, from a mechanism to support voice telephone service to one that supports the deployment, adoption, and utilization of both fixed and mobile broadband. This transformation includes the phaseout of the USF's legacy High Cost Program and the creation of a new fund, the Connect America Fund, to replace it as well as an expansion and modification of the Schools and Libraries, Rural Health Care, and Low Income programs. Historically the High Cost Program provided support for eligible telecommunications carriers to help offset the higher-than-average costs of providing voice telephone service in rural, insular, or other high cost areas. This mechanism has been the largest USF program based on disbursements and has been particularly important to rural areas due to the lack of subscriber density often combined with higher costs. The High Cost Program is undergoing a transition from one that primarily supports voice communications to one that supports a broadband platform that enables multiple applications, including voice. The High Cost program is being phased out in stages and is being replaced by the Connect America Fund (CAF), which will support the provision of affordable voice and broadband services, both fixed and mobile, in high cost areas. The CAF will eventually replace all of the existing support mechanisms in the High Cost Program and contains a Mobility Fund and a Remote Areas Fund to meet these needs. According to data released by program administrators, approximately $4.67 billion in funding was disbursed in 2017. Congress, through the 1996 act, not only codified, but also expanded the concept of universal service to include, among other principles, that elementary and secondary schools and classrooms, libraries, and rural health care providers have access to telecommunications services for specific purposes at discounted rates. (See §§254(b)(6) and 254(h) of the 1996 Telecommunications Act, 47 U.S.C. 254.) 1. The Schools and Libraries (E-Rate) Program. Under universal service provisions contained in the 1996 act, elementary and secondary schools and classrooms and libraries are designated as beneficiaries of universal service discounts. Universal service principles detailed in Section 254(b)(6) state that "Elementary and secondary schools and classrooms ... and libraries should have access to advanced telecommunications services." The act further requires in Section 254(h)(1)(B) that services within the definition of universal service be provided to elementary and secondary schools and libraries for education purposes at discounts, that is at "rates less than the amounts charged for similar services to other parties." The FCC established the Schools and Libraries Division within USAC to administer the schools and libraries or "E (education)-rate" program to comply with these provisions. Under this program, eligible schools and libraries receive discounts ranging from 20% to 90% for telecommunications services depending on the poverty level of the school's (or school district's) population and its location in a high cost (i.e., rural) telecommunications area. Two categories of services are eligible for discounts: category one services (telecommunications, telecommunications services, and internet access), and category two services that deliver internet access within schools and libraries (internal connections, basic maintenance of internal connections, and managed internal broadband services). The funding cap for funding year 2018 (July 1, 2018, to June 30, 2019) is $4.1 billion. According to data released by program administrators, approximately $2.62 billion in funding was disbursed in 2017. 2. The Rural Health Care Program. Section 254(h) of the 1996 act requires that public and nonprofit rural health care providers have access to telecommunications services necessary for the provision of health care services at rates comparable to those paid for similar services in urban areas. Subsection 254(h)(1) further specifies that "to the extent technically feasible and economically reasonable" health care providers should have access to advanced telecommunications and information services. The FCC established the Rural Health Care Division (RHCD) within USAC to administer the universal support program to comply with these provisions. The Rural Health Care Program provides funding through three programs: the Telecommunications Program, the Healthcare Connect Fund, and the rural Health Care Pilot Program. The goal of these programs is to improve the quality of health care for those living in rural areas by ensuring access to broadband and telecommunications services. Under FCC established rules only public or nonprofit health care providers are eligible to receive funding. The Telecommunications Program, established in 1997, provides discounts for telecommunications services to ensure that eligible rural health care providers pay no more than urban providers for telecommunications services. The primary use of the funding is to provide reduced rates for telecommunications and information services necessary for the provision of health care. The Rural Health Care Pilot Program was established in 2006 to help public and nonprofit health care providers build state- and region-wide broadband networks dedicated to the provision of health care services. The program provides funding up to 85% of eligible costs. No new funding is available under this program and current participants that need additional support will transfer to the most recently created program, the Healthcare Connect Fund. The FCC in December 2012 created the Healthcare Connect Fund, a program to expand health care provider access to broadband, particularly in rural areas, and replace the Rural Health Care Pilot Program with a permanent program. The Healthcare Connect Fund program supports high-capacity broadband connectivity and encourages the development of state and regional networks. This program provides a 65% discount on eligible expenses related to broadband connectivity and is available to individual rural health care providers and consortia. Consortia can include nonrural providers but at least 50% of providers must be located in a rural area. The total annual funding cap for all of the above mentioned USF rural health care programs is $400 million. According to data released by program administrators, approximately $261.5 million was disbursed in 2017. As initially designed the Low Income Program provided a discount for voice telephony service for eligible low-income consumers. The major program has two subprograms, Lifeline and Link Up, with the Lifeline Program providing the vast majority of support. In March 2016 the FCC adopted an Order to expand the Lifeline Program to support mobile and fixed broadband internet access services on a stand-alone basis, or with a bundled voice service. Households must meet a needs-based criteria for eligibility. The Lifeline Program provides assistance to only one line per eligible household either wired or wireless, in the form of a monthly subsidy of, in most cases, $9.25. Support is not given directly to the subscriber but to the designated service provider. According to data released by program administrators, approximately $1.27 billion was disbursed in 2017. RUS implements four programs specifically targeted at providing assistance for broadband connectivity infrastructure deployment in rural areas: the Rural Broadband Access Loan and Loan Guarantee Program (also referred to as the Farm Bill Broadband Loans), the Telecommunications Infrastructure Loans and Loan Guarantees (previously the rural telephone loan program dating back to 1949), the ReConnect Program (pilot broadband loan and grant program), and the Community Connect Grant Program. Additionally, RUS houses the Distance Learning and Telemedicine Grant Program, which supports broadband-based distance learning and telemedicine applications. The 115 th Congress reauthorized and modified RUS broadband programs as part of the 2018 farm bill ( P.L. 115-334 , Agriculture Improvement Act of 2018). For more information on how the 2018 farm bill addressed RUS broadband programs, see CRS Report RL33816, Broadband Loan and Grant Programs in the USDA's Rural Utilities Service , by Lennard G. Kruger. On February 17, 2009, President Obama signed P.L. 111-5 , the American Recovery and Reinvestment Act (ARRA). Broadband provisions of the ARRA provided a total of $7.2 billion, for broadband grants, loans, and loan/grant combinations. The total consisted of $4.7 billion to NTIA/DOC for a newly established Broadband Technology Opportunities Program (grants) and $2.5 billion to the RUS/USDA Broadband Initiatives Program (grants, loans, and grant/loan combinations). Regarding the $2.5 billion to RUS/USDA broadband programs, the ARRA specified that at least 75% of the area to be served by a project receiving funds shall be in a rural area without sufficient access to high-speed broadband service to facilitate economic development, as determined by the Secretary of Agriculture. Priority was given to projects that provide service to the most rural residents that do not have access to broadband services. Priority was also given to borrowers and former borrowers of rural telephone loans. Of the $4.7 billion appropriated to NTIA $4.35 billion was directed to a competitive broadband grant program, of which not less than $200 million shall be available for competitive grants for expanding public computer center capacity (including at community colleges and public libraries); not less than $250 million to encourage sustainable adoption of broadband service; and $10 million transferred to the Department of Commerce Office of Inspector General for audits and oversight; and $350 million was directed for funding the Broadband Data Improvement Act ( P.L. 110-385 ) and for the purpose of developing and maintaining a broadband inventory map, which shall be made accessible to the public no later than two years after enactment. Funds deemed necessary and appropriate by the Secretary of Commerce may be transferred to the FCC for the purposes of developing a national broadband plan, which shall be completed one year after enactment. Final BTOP and BIP program awards were announced by September 30, 2010. With a few exceptions, all ARRA broadband projects were concluded as of September 30, 2015. On February 12, 2018, the Trump Administration released its Legislative Outline for Rebuilding Infrastructure in America . The plan does not dedicate any funding exclusively for broadband, but does include rural broadband among the types of infrastructure projects that would be eligible for funding. Proposed funding streams include the following: $50 billion for a Rural Infrastructure Program. Funding would be block-granted to the states under a formula distribution for infrastructure projects including transportation, water and waste, power and electric, water resources, and broadband (including other high-speed data and communication conduits). Governors "would have the discretion to choose investments to respond to the unique rural needs of their states." Eligible infrastructure projects would serve rural areas with populations of less than 50,000. An unspecified portion of the Rural Infrastructure Program funds would be set aside for tribal infrastructure and territorial infrastructure. $20 billion for a Transformative Projects Program, which would "provide Federal funding and technical assistance for bold, innovative, and transformative infrastructure projects that could dramatically improve infrastructure." Funding would be awarded on a competitive basis to projects "that are likely to be commercially viable, but that possess unique technical and risk characteristics that otherwise deter private sector investment." The program would be led by the Department of Commerce, which would chair an interagency project selection and evaluation committee. Federal funding would be available for up to 30% of eligible costs for project demonstration, up to 50% of eligible costs for project planning, and up to 80% of eligible costs for capital construction. $14 billion for expanding existing federal credit programs that address infrastructure. This would include additional budget authority to the USDA's Rural Utilities Service for RUS loan programs (which include telecommunications and broadband loans and loan guarantees). $6 billion for expanding the scope of Public Activity Bonds (PABs). The proposal would expand and modify eligible exempt facilities for PABs to include a number of new categories, including rural broadband service facilities. It will be up to Congress to determine the extent to which the Administration infrastructure proposal will be implemented, and how an infrastructure initiative will be legislated. Whether dedicated rural broadband funding should or should not be part of the legislative response will likely be debated. Meanwhile, rural broadband was included in the $20 billion carved out for infrastructure in the two-year budget agreement ($10 billion per year for two years) reached between the House and Senate in February 2018 ( P.L. 115-123 ). However, the amount of targeted funding specifically for broadband was not specified. The Trump Administration's Legislative Outline also contains many recommendations for reducing the costs and improving the time-effectiveness of infrastructure deployment by streamlining permitting regulations and procedures. In the 115 th Congress, the House and Senate have considered legislation that would streamline permitting for broadband deployment. The FCC has also begun a process to develop recommendations for lowering or removing regulatory barriers to broadband deployment (see section below, " FCC's Broadband Deployment Advisory Committee "). Aside from funding, another way the federal government can facilitate broadband deployment is by taking steps to lower or remove regulatory barriers to broadband deployment facing private sector providers. On January 31, 2017, FCC Chairman Ajit Pai announced the formation of a new federal advisory committee, the Broadband Deployment Advisory Committee (BDAC), which will provide advice and recommendations for the FCC on how to accelerate the deployment of broadband by reducing and/or removing regulatory barriers to infrastructure investment. The BDAC is composed of stakeholders, appointed by the FCC chairman, representing industry, states, localities, tribes, academia, and others. Five working groups have been formed; these are Model Code for Municipalities, Model Code for States, Competitive Access to Broadband Infrastructure, Removing State and Local Regulatory Barriers, and Streamlining Federal Siting. The FCC has also initiated proceedings and adopted orders addressing the issue of reducing regulatory barriers for the deployment of wireless and wireline broadband. BroadbandUSA is housed at the Department of Commerce's National Telecommunications and Information Administration (NTIA). Using the expertise gained during administration of the ARRA Broadband Technology Opportunities Program (BTOP), the BroadbandUSA program offers one-to-one technical assistance to communities seeking to plan and implement broadband initiatives. BroadbandUSA will leverage knowledge of federal funding and its network of contacts to help communities identify and leverage funding opportunities; provide support to communities seeking public-private partnerships; review, analyze, and provide recommendations and guidance associated with community-level reports, studies, and procurements; and provide background information and training to organizations that need assistance navigating the broadband landscape. BroadbandUSA also organizes regional events and workshops bringing together broadband stakeholders and publishes guides and tools that can serve as resources for communities seeking to launch broadband initiatives. Additionally, NTIA serves as cochair of the Broadband Interagency Working Group (BIWG) alongside the Department of Agriculture's Rural Utilities Service (RUS). Through the BIWG, NTIA works with other federal agencies to improve coordination across programs, reduce regulatory barriers to broadband deployment, promote awareness of the importance of federal support for broadband investment and digital inclusion programs, and collect and share information with communities about available federal resources for broadband deployment and digital inclusion efforts. The BIWG was formed in January 2017, in response to the Broadband Opportunity Council Agency's Progress Report . BroadbandUSA also coordinates the State Broadband Leaders Network (SBLN), which includes state level office representatives involved in broadband efforts. The SBLN shares priorities and best practices; discusses emerging telecommunications policy issues; links states and local jurisdictions to federal agencies and funding sources; and addresses barriers to collaboration across states and agencies. Section 1436 of the Fixing America's Surface Transportation Act (FAST Act, P.L. 114-94 ) authorized a high-speed broadband deployment initiative for the 13-state Appalachian region consisting of $10 million in available broadband grants annually through FY2020. In August 2016, ARC published a Broadband Planning Primer and Toolkit . Broadband projects are eligible for funding under the Economic Development Assistance programs of the Economic Development Administration (EDA) in the Department of Commerce. The Explanatory Statement that accompanied the FY2018 Consolidated Appropriations Act ( P.L. 115-141 ) stated that funding provided under EDA's Public Works, Economic Adjustment Assistance, and other programs may be used to support broadband infrastructure projects, and that EDA is encouraged to prioritize unserved areas. The Explanatory Statement directed that "EDA shall submit a report to the Committees within 30 days of the end of fiscal year 2018 describing the number and value of broadband projects supported with fiscal year 2018 funds." The Consolidated Appropriations Act, 2018 ( P.L. 115-141 ) contained many broadband-related provisions Title VII, Section 779 of Division A (Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 2018) appropriates $600 million to RUS to "conduct a new broadband loan and grant pilot program." The law states that the funding is to "remain available until expended," and that at least 90% of the households to be served by a project receiving a loan or grant under the pilot program shall be in a rural area without sufficient access to broadband, defined for this pilot program as 10 Mbps downstream, and 1 Mbps upstream, which shall be reevaluated and redetermined, as necessary, on an annual basis by the Secretary of Agriculture. The pilot broadband loan and grant program is being implemented as the ReConnect Program, which is offering loans, grants, and loan/grant combinations. More information on the ReConnect Program is available at https://reconnect.usda.gov . Title I of Division B (Commerce, Justice, Science, and Related Agencies Appropriations Act, 2018) appropriates $7.5 million to update the national broadband availability map in coordination with the FCC and using partnerships previously developed with the states. Title V of Division P (Ray Baum's Act of 2018). Section 101 amends the Communications Act of 1934 to provide for the deposits of bidders in auctions of spectrum frequencies to be deposited in the Treasury. Section 504 directs the FCC to submit a report to Congress on promoting broadband for veterans, in particular low-income veterans and veterans residing in rural areas. Section 505 directs the FCC to promulgate regulations to establish a methodology that shall apply to the collection of mobile service coverage data for the purposes of the Universal Service program. Section 508 requires the FCC to submit a report to Congress evaluating broadband coverage in Indian country and on land held by a Native Corporation pursuant to the Alaska Native Claims Settlement Act, with the FCC required to complete a proceeding to address the unserved areas identified in the report. Title VI (MOBILE NOW) of Division P seeks to make more spectrum available for wireless broadband, facilitate broadband infrastructure deployment on federal lands, include communications facility installation data in the federal real property database, and require consultation between telecommunications providers and state highway authorities receiving federal highway money. Additionally, Section 615 directs GAO to conduct a study to evaluate the availability of broadband access using unlicensed spectrum and wireless networks in low-income neighborhoods. To the extent that Congress may consider various options for encouraging broadband deployment and adoption, a key issue is how to strike a balance between providing federal assistance for unserved and underserved areas where the private sector may not be providing acceptable levels of broadband service, while at the same time minimizing any deleterious effects that government intervention in the marketplace may have on competition and private sector investment. The 116 th Congress may address the digital divide issue by considering various approaches to providing support for infrastructure deployment, including support for rural broadband. In addition to loans, loan guarantees, and grants for broadband infrastructure deployment, a wide array of policy instruments are available to policymakers, including universal service reform, tax incentives to encourage private sector deployment, broadband bonds, demand-side incentives (such as assistance to low-income families for purchasing computers), reducing regulatory barriers to broadband deployment, and spectrum policy to spur rollout of wireless broadband services. In assessing federal incentives for broadband deployment, Congress may consider the appropriate mix of broadband deployment incentives to create jobs in the short and long term, the extent to which incentives should target next-generation broadband technologies, and the extent to which unserved and underserved areas with existing broadband providers should receive federal assistance. Aside from the 2018 farm bill ( P.L. 115-334 ) and annual appropriations legislation, the following broadband-related bills were introduced into the 115th Congress: Funding and Federal Assistance H.R. 547 (DeLauro), introduced on January 13, 2017, would have facilitated efficient investments and financing of infrastructure projects (including broadband projects) through the establishment of a National Infrastructure Development Bank. Referred to multiple committees. H.R. 800 (Huffman), introduced on February 1, 2017, as the New Deal Rural Broadband Act of 2017, would have established an Office of Rural Broadband within USDA; authorize a "Breaking Ground on Rural Broadband Program" to make grants, loans, or loan guarantees to eligible entities for serving rural and underserved areas ($20 billion to remain available until September 30, 2022); establish a Tribal Broadband Assistance Program ($25 million for each of fiscal years 2017 through 2022); establish a broadband grant program to accompany the Rural Broadband Loan program; and modify the Telecommunications Infrastructure Loan program by raising the threshold for an eligible rural area from 5,000 to 20,000 population and by permitting RUS to give preference to loan applications that support regional telecommunications development. Referred to the Committee on Agriculture, and in addition to the Committees on Natural Resources and Energy and Commerce. H.R. 1139 (Cramer), introduced February 16, 2017, as the Preserving State Commission Oversight Act of 2017, would have amended the Communications Act of 1934 to protect low-income Lifeline subscribers by mandating a continued role for states in designating eligible telecommunications carriers for participation in the Universal Service Program, and for other purposes. Referred to the House Committee on Energy and Commerce. H.R. 1581 (Ruiz), introduced on March 16, 2017, as the Tribal Digital Access Act of 2017, would have amended the Communications Act of 1934 to add access to telecommunications and information services in Indian country and areas with high populations of Indian people to the universal service principle relating to access to such services in rural, insular, and high cost areas. Referred to the Committee on Energy and Commerce. H.R. 1591 (Welch), introduced on March 16, 2017, would have directed the FCC to adopt rules and conduct outreach to offer recipients of assistance under the Lifeline Assistance Program mobile devices that are capable of receiving a WiFi signal and are capable of tethering with other WiFi compatible hardware or devices. Referred to the Committee on Energy and Commerce. H.R. 2479 (Pallone), introduced on May 17, 2017, as the LIFT America Act, would have provided $40 billion over five years to deploy secure and resilient broadband to expand access for communities nationwide while promoting security by design. Three-quarters of this funding will be used to deploy broadband in unserved areas of the country through a national reverse auction. The remaining funds will be given to states to distribute through separate statewide reverse auctions. If there are no unserved areas in a state, the state may use the funding to deploy broadband in underserved areas, to deploy broadband or connective technology to schools and libraries, or to fund the deployment of Next Generation 9-1-1. Requires that grant recipients offer a service tier of 25 Mbps (download)/3Mbps (upload) at $60 per month. Referred to multiple committees. H.R. 3314 (Polis), introduced on July 19, 2017, as the 100 by '50 Act, would have included broadband grants and loans under a community need-based economic transition assistance program. Referred to multiple committees. H.R. 3546 (Austin Scott of Georgia), introduced on July 28, 2017, as the End Taxpayer Funded Cell Phones Act of 2017, would have prohibited universal service support of commercial mobile service and commercial mobile data service through the Lifeline program. Referred to the Committee on Energy and Commerce. H.R. 3621 (Russell), introduced on July 28, 2017, as the Rechecking Eligibility of Applicants to the Lifeline Program to Prevent Losses Yearly Act of 2017 (REAPPLY Act), would have required Lifeline subscribers to reapply for such services on an annual basis. Referred to Committee on Energy and Commerce. H.R. 3912 (Walorski), introduced on October 2, 2017, as the Move America Act of 2017, would have included rural broadband service infrastructure as eligible for funding under Move America bonds. Referred to the Committee on Ways and Means. H.R. 3994 (Tonko), introduced on October 6, 2017, as the ACCESS Broadband Act, would have established the Office of Internet Connectivity and Growth within NTIA at the Department of Commerce. Reported by the Committee on Energy and Commerce on July 18, 2018 ( H.Rept. 115-841 ). Passed by House on July 23, 2018. H.R. 4209 (Larson), introduced on November 1, 2017, as the American Wins Act, would have established a Build America Trust Fund in the Department of the Treasury, which would provide $3 billion to the Department of Commerce to carry out a program to expand access to broadband to communities throughout the United States, with an emphasis on communities unserved by broadband. Referred to multiple committees. H.R. 4232 (Pocan), introduced on November 2, 2017, as the Broadband Connections for Rural Opportunities Program (BCROP) Act, would have amended Section 601 of the Rural Electrification Act of 1936 (7 U.S.C. 950bb) to establish a broadband grant program to accompany the Rural Broadband Loan program. Also would have raised the broadband loan program authorization from $25 million to $50 million. Referred to the Committees on Energy and Commerce and on Agriculture. H.R. 4287 (Ben Ray Lujan), introduced on November 7, 2017, as the Broadband Infrastructure Finance and Innovation Act of 2017, would have established in the Department of Commerce a broadband infrastructure finance and innovation program to make available loans, loan guarantees, and lines of credit for the construction and deployment of broadband infrastructure. Referred to the Committee on Energy and Commerce. H.R. 4291 (Stefanik), introduced on November 7, 2017, as the Precision Farming Act, would have utilized Rural Utilities Service loans and loan guarantees under the rural broadband access program to provide broadband service for agricultural producers, and would have provided universal service support for installation charges for broadband service for agricultural producers in order to improve precision farming and ranching. Referred to the Committees on Energy and Commerce and on Agriculture. H.R. 4308 (Lujan Grisham), introduced on November 8, 2017, as the Rural Broadband Expansion Act, would have authorized the Rural Utility Service's Community Connect broadband grant program at $100 million for each of fiscal years 2019 through 2023. Referred to the Committees on Agriculture and on Energy and Commerce. H.R. 4677 (Moulton), introduced on December 18, 2017, as the Small Business Broadband and Emerging Information Technology Enhancement Act of 2017, would have improved certain programs of the Small Business Administration to better assist small business customers in accessing broadband technology. Referred to the Committee on Small Business. H.R. 4817 (Long), introduced on January 17, 2018, as the Promoting Exchanges for Enhanced Routing of Information so Networks are Great Act of 2018 (PEERING Act of 2018), would have directed NTIA to make grants for the establishment or expansion of internet exchange facilities. Referred to the Committee on Energy and Commerce. H.R. 4832 (Cramer), introduced on January 18, 2018, as the Restoring Economic Strength and Telecommunications Operations by Releasing Expected Dollars Act of 2018 (RESTORED Act of 2018), would have amended the Communications Act of 1934 to clarify that an eligible telecommunications carrier may use high cost universal service support to aid in the restoration of telecommunications capabilities in an area in which the President has declared a major disaster or emergency and may elect to receive an advance payment of such support. Referred to the Committee on Energy and Commerce. H.R. 4986 (Blackburn), introduced on February 8, 2018, as the Repack Airwaves Yielding Better Access for Users of Modern Services Act of 2018 (RAY BAUM's Act). Reauthorizes FCC. Section 505 would have directed the FCC to promulgate regulations to establish a methodology that shall apply to the collection of mobile service coverage data for the purposes of the Universal Service program. Referred to Committee on Energy and Commerce, and in addition to the Committees on Transportation and Infrastructure, and Oversight and Government Reform. Reported (amended) by Committee on Energy and Commerce on March 6, 2018 ( H.Rept. 115-587 ). Passed House on March 6, 2018. H.R. 5016 (Abraham), introduced on February 14, 2018, as the Revitalize Rural America Act, would have directed the Secretary of Transportation to establish a $2.1 billion Revitalize Rural America Grant Program that would fund infrastructure projects, including rural broadband. Referred to Committee on Transportation and Infrastructure, and in addition to the Committee on Energy and Commerce. H.R. 5172 (O'Halleran), introduced on March 6, 2018, would have assisted Indian tribes in maintaining, expanding, and deploying broadband systems. Referred to the Committee on Agriculture, and in addition to the Committee on Energy and Commerce. H.R. 5213 (Hartzler), introduced on March 8, 2018, as the Expanding Rural Access to Broadband Act, would have prohibited the Rural Utilities Service from providing assistance for the provision of broadband service with a download speed of less than 25 megabits per second or an upload speed of less than 3 megabits per second, and clarify the broadband loan and loan guarantee authority provided in Section 601 of the Rural Electrification Act of 1936. Referred to the Committee on Agriculture, and in addition to the Committee on Energy and Commerce. H.R. 5294 (Barletta), introduced on March 15, 2018, as the Treating Barriers to Prosperity Act of 2018, would have authorized the Appalachian Regional Commission to make grants and provide technical assistance to develop relevant infrastructure, including broadband infrastructure that supports the use of telemedicine. Reported by the Committee on Transportation and Infrastructure on June 12, 2018 ( H.Rept. 115-749 ); passed House on June 13, 2018. H.R. 5318 (Huffman), introduced on March 15, 2018, as the Investing for Tomorrow's Schools Act, would have authorized the Secretary of the Treasury, in consultation with the Secretary of Education, to enter into cooperative agreements with states for the establishment of state infrastructure banks and multistate infrastructure banks for making loans to community learning centers to connect and improve broadband services. Referred to Committee on Education and the Workforce. H.R. 5497 (Peterson), introduced on April 12, 2018, as the Office of Rural Telecommunications Act, which would have directed the FCC to establish the Office of Rural Telecommunications which would coordinate with RUS, NTIA, and other federal broadband programs. Referred to the Committee on Energy and Commerce. H.R. 6073 (Cramer), introduced on June 12, 2018, as the RURAL Broadband Act of 2018, would have prohibit ed USDA from providing broadband loans or grants for projects that overbuild or otherwise duplicate broadband networks operated by another provider that have received universal service support from the FCC or previous broadband assistance from RUS. Referred to the Committee on Agriculture, and in addition to the Committee on Energy and Commerce. H.R. 6442 (Kilmer), introduced on July 19, 2018, as the Broadband for All Act of 2018, would have amended the Internal Revenue Code of 1986 to provide a tax credit to consumers to reimburse a portion of the cost of broadband infrastructure serving limited broadband districts. Referred to Committee on Ways and Means. H.R. 6781 (Marino), introduced September 25, 2018, as the Rural Broadband Connectivity Act of 2018, would have provided tax credits for broadband providers. Referred to the Committee on Ways and Means. S. 277 (Manchin), introduced on February 2, 2017 , as the Rural Telecommunications and Broadband Service Act of 2017 , would have establish ed a Rural Telecommunications and Broadband Advisory Committee within the Federal Communications Commission. Referred to the Committee on Commerce, Science, and Transportation. S. 421 (Fischer), introduced February 16, 2017, as the Preserving State Commission Oversight Act of 2017, would have amended the Communications Act of 1934 to protect low-income Lifeline subscribers by mandating a continued role for states in designating eligible telecommunications carriers for participation in the Universal service program, and for other purposes. Referred to the Committee on Commerce, Science, and Transportation. S. 987 (Merkley), introduced on April 27, 2017, as the 100 by ' 50 Act, would have include d broa dband grants and loans under a community need-b ased economic transition assistance program. Referred to the Committee on Finance. S. 1229 (Hoeven), introduced on May 25, 2017, as the Move America Act of 2017, would have included rural broadband service infrastructure as eligible for funding under Move America bonds. Referred to the Committee on Finance. S. 1377 (Wicker), introduced on June 19, 2017, as the Reaching Underserved Rural Areas to Lead Telehealth Act, would have removed the limitation on certain amounts for which large nonrural hospitals may be reimbursed under the Healthcare Connect Fund of the Federal Communications Commission, and for other purposes. Referred to the Committee on Commerce, Science, and Transportation. S. 1676 (Gillibrand), introduced on July 31, 2017, as the Broadband Connections for Rural Opportunities Program (BCROP) Act, would have amended Section 601 of the Rural Electrification Act of 1936 (7 U.S.C. 950bb) to establish a broadband grant program to accompany the Rural Broadband Loan program. Also would have raised the broadband loan program authorization from $25 million to $50 million. Referred to the Committee on Agriculture, Nutrition, and Forestry. S. 2165 (Sanders), introduced on November 28, 2017, as the Puerto Rico and Virgin Islands Equitable Rebuild Act of 2017, would have provided $300 million in FY2018 to Department of Agriculture and Department of Commerce broadband programs to expand access to, and the quality of, broadband service across Puerto Rico and the Virgin Islands. Referred to the Committee on Finance. S. 2205 (Heinrich), introduced on December 7, 2017, as the Tribal Connect Act of 2017, would have improved access by Indian tribes to support from the Schools and Libraries Universal Service Support program (E-rate) of the Federal Communications Commission. Referred to the Committee on Indian Affairs. S. 2654 (Smith), introduced on April 12, 2018, as the Community Connect Grant Program Act of 2018, would have amended the Rural Electrification Act of 1936 to authorize the Community Connect Grant Program at an annual level of $50 million per year. Defines "eligible broadband service" as operating at or above the applicable minimum download and upload speeds established by the FCC in defining the term "advanced telecommunications capability." Referred to Committee on Agriculture, Nutrition, and Forestry. S. 2955 (Wicker), introduced on May 24, 2018, as the Mobile Accuracy and Precision (MAP) Broadband Act of 2018, would have reformed the Mobility Fund Phase II challenge process conducted by the FCC. Referred to the Committee on Commerce, Science, and Transportation. S. 2958 (Udall), introduced on May 24, 2018, would have required the FCC to make the provision of Wi-Fi access on school buses eligible for E-rate support. Referred to the Committee on Commerce, Science, and Transportation. S. 2959 (Hoeven), introduced on May 24, 2018, as the Office of Rural Broadband Act, would have directed the FCC to establish the Office of Rural Broadband which would coordinate broadband efforts between the FCC, RUS, NTIA, and other agencies. Referred to the Committee on Commerce, Science, and Transportation. S. 2970 (Daines), introduced on May 24, 2018, as the RURAL Broadband Act of 2018, would have prohibit ed USDA from providing broadband loans or grants for projects that overbuild or otherwise duplicate broadband networks operated by another provider that have received universal service support from the FCC or previous broadband assistance from RUS. Referred to the Committee on Agriculture, Nutrition, and Forestry. S. 3080 (Murkowski), introduced on June 18, 2018, as the Food Security, Housing, and Sanitation Improvements in Rural, Remote, and Frontier Areas Act of 2018, would have amend ed the Rural Electrification Act of 1936 to include a satellite project or technology within the definition of broadband service. Referred to the Committee on Agriculture, Nutrition, and Forestry. S. 3255 (Cruz), introduced on July 23, 2018, as the E-FRONTIER Act, would have prohibit ed the President or a federal agency from constructing, operating, or offering wholesale or retail services on broadband networks without authorization from Congress. Referred to the Committee on Commerce, Science, and Transportation. S. 3346 (Cortez Masto), introduced on August 1, 2018 , as the ACCESS Broadband Act, would have established the Office of Internet Connectivity and Growth within NTIA at the Department of Commerce. Referred to the Committee on Commerce, Science, and Transportation. S. 3360 (Wyden), introduced August 21, 2018, as the Broadband Internet for Small Ports Act, would have establish ed priority for small harbors to receive RUS broadband funding. Referred to the Committee on Agriculture, Nutrition, and Forestry. Broadband Data, Studies, Reports H.R. 1084 (Kelly of Illinois), introduced on February 15, 2017, as the Today's American Dream Act, would have directed GAO to submit to Congress a report on the efficiency and effectiveness of efforts by federal agencies to expand access to broadband service. Referred to multiple committees. H.R. 1546 (Loebsack), introduced on March 15, 2017, as the Rural Wireless Access Act of 2017, would have directed the FCC to establish a methodology for the collection by the commission of mobile service coverage data. Referred to the Committee on Energy and Commerce. H.R. 2903 (McKinley), introduced on June 15, 2017, as the Rural Reasonable and Comparable Wireless Access Act of 2017, would have directed the FCC to promulgate regulations that establish a national standard for determining whether mobile and broadband services available in rural areas are reasonably comparable to those services provided in urban areas. Referred to the Committee on Energy and Commerce. H.R. 3523 (Young of Alaska), introduced on July 27, 2017, would have required the Comptroller General of the United States to conduct a study and submit a report on filing requirements under the Universal Service Fund programs. Referred to the Committee on Energy and Commerce. H.R. 3839 (Kelly of Illinois), introduced on September 26, 2017, as the Today's American Dream Act, would have directed GAO to submit to Congress a report on the efficiency and effectiveness of efforts by federal agencies to expand access to broadband service. Referred to multiple committees. H.R. 3995 (McNerney), introduced on October 10, 2017, as the Improving Broadband Access for Veterans Act of 2017, would have required the FCC to submit to Congress a report on promoting broadband internet access service for veterans. Referred to the Committee on Energy and Commerce. H.R. 4506 (Torres), introduced on November 30, 2017, as the Jobs for Tribes Act, would have directed GAO to conduct a study assessing a range of federal programs (including broadband and telecommunications programs) available to assist Indian communities with business and economic development. Referred to the Committees on Natural Resources; Foreign Affairs; and Education and the Workforce. H.R. 4810 (Johnson of Ohio), introduced on January 17, 2018, as the Making Available Plans to Promote Investment in Next Generation Networks without Overbuilding and Waste Act of 2018 (MAPPING NOW Act of 2018), would have directed the Department of Commerce to carry out activities relating to the development and maintenance of a broadband inventory map through NTIA and not through an agreement with any other agency. Referred to the Committee on Energy and Commerce. H.R. 4876 (Rush), introduced on January 22, 2018, as the Connecting Broadband Deserts Act of 2018, would have amended the Communications Act of 1934 to direct the FCC to conduct an annual inquiry on the availability of advanced telecommunications capability in broadband deserts. Referred to the Committee on Energy and Commerce. H.R. 4881 (Latta), introduced on January 25, 2018, as the Precision Agriculture Connectivity Act of 2018, would have required the FCC to establish a task force for meeting the connectivity and technology needs of precision agriculture in the United States. Reported by the Committee on Energy and Commerce on July 18, 2018 ( H.Rept. 115-837 ). Passed by House on June 23, 2018. H.R. 4986 (Blackburn), introduced on February 8, 2018, as the Repack Airwaves Yielding Better Access for Users of Modern Services Act of 2018 (RAY BAUM's Act). Reauthorizes FCC. Section 504 would have directed the FCC to submit a report to Congress on promoting broadband for veterans, in particular low-income veterans and veterans residing in rural areas. Section 508 would have required the FCC to submit a report to Congress evaluating broadband coverage in Indian country and on land held by a Native Corporation pursuant to the Alaska Native Claims Settlement Act; the FCC shall complete a proceeding to address the unserved areas identified in the report. Section 711 would have directed GAO to conduct a study to evaluate the availability of broadband access using unlicensed spectrum and wireless networks in low-income neighborhoods. Referred to Committee on Energy and Commerce, and in addition to the Committees on Transportation and Infrastructure, and Oversight and Government Reform. Reported (amended) by Committee on Energy and Commerce on March 6, 2018 ( H.Rept. 115-587 ). Passed House on March 6, 2018. H.R. 5007 (Ruiz), introduced on February 13, 2018, would have directed the FCC to submit to Congress a report evaluating broadband coverage in Indian country and on land held by a Native Corporation and to complete a proceeding to address the unserved areas identified in the report. Referred to the Committee on Energy and Commerce. H.R. 5213 (Hartzler), introduced on March 8, 2018, as the Expanding Rural Access to Broadband Act, would have required RUS to submit a report to Congress identifying administrative and legislative options for incentivizing private investment by utilizing RUS loan guarantee programs for the purpose of expanding broadband to rural areas; referred to the Committee on Agriculture, and in addition to the Committee on Energy and Commerce. S. 645 (Klobuchar), introduced on March 15, 2017, as the Measuring the Economic Impact of Broadband Act of 2018, would have required the Secretary of Commerce to conduct an assessment and analysis of the effects of the digital economy on the economy of the United States. Referred to the Committee on Commerce, Science, and Transportation ; reported by the Committee on October 2, 2018 ( S.Rept. 115-341 ) . P assed Senate with an amendment by Unanimous Consent on December 13, 2018. S. 875 (Sullivan), introduced on April 6, 2017, would have require d the Comptroller General of the United States to conduct a study and submit a report on filing requirements under the Universal Service Fund programs. Referred to the Committee on Commerce, Science, and Transportation and ordered to be reported with an amendment in the nature of a substitute favorably ( S.Rept. 115-192 ). S. 1104 (Manchin), introduced on May 11, 2017, as the Rural Wireless Access Act of 2017, would have required the FCC to establish a methodology for the collection by the commission of information about commercial mobile service and commercial mobile data service. Referred to the Committee on Commerce, Science, and Transportation. S. 1116 (Hoeven), introduced on May 11, 2017, as the Indian Community Economic Enhancement Act of 2017, would have directed GAO to conduct a study assessing a range of federal programs (including broadband and telecommunications programs) available to assist Indian communities with business and economic development. Referred to the Committee on Senate Indian Affairs; reported by Committee on October 17, 2017 ( S.Rept. 115-174 ). S. 1621 (Wicker), introduced on July 24, 2017, as the Rural Wireless Access Act of 2017, would have required the FCC to establish a methodology for the collection by the commission of information about commercial mobile service and commercial mobile data service. Referred to the Committee on Commerce, Science, and Transportation. Reported by the Committee on February 7, 2018 ( S.Rept. 115-206 ). S. 1950 (Blumenthal), introduced on October 5, 2017, as the Improving Broadband Access for Veterans Act of 2017, would have required the FCC to submit to Congress a report on promoting broadband internet access service for veterans. Referred to the Committee on Commerce, Science, and Transportation. S. 2343 (Wicker), introduced on January 25, 2018, as the Precision Agriculture Connectivity Act of 2018, would have required the FCC to establish a task force for meeting the connectivity and technology needs of precision agriculture in the United States. Referred to the committee on Commerce, Science, and Transportation; reported by Committee on October 2, 2018 ( S.Rept. 115-342 ). Passed in Senate with an amendment by Unanimous Consent on December 6, 2018. S. 2418 (Hassan), introduced on February 13, 2018, as the Rural Reasonable and Comparable Wireless Access Act of 2017, would have directed the FCC to promulgate regulations that establish a national standard for determining whether mobile and broadband services available in rural areas are reasonably comparable to those services provided in urban areas. Referred to the Committee on Commerce, Science, and Transportation; ordered to be reported with an amendment on May 22, 2018. Spectrum for Wireless Broadband H.R. 686 (Paulsen), introduced on January 24, 2017, as the DIGIT Act, would have ensured appropriate spectrum planning and interagency coordination to support the Internet of Things. Referred to the Committee on Energy and Commerce. H.R. 1814 (Kinzinger), introduced on March 30, 2017, would have encouraged spectrum licensees to make unused spectrum available for use by rural and smaller carriers in order to expand wireless coverage. Referred to the Committee on Energy and Commerce. H.R. 1888 (Guthrie), introduced on April 4, 2017, as the Federal Spectrum Incentive Act of 2017, would have amended the National Telecommunications and Information Administration Organization Act to provide incentives for the reallocation of federal government spectrum for commercial use. Referred to the Committee on Energy and Commerce, and in addition to the Committee on Armed Services. H.R. 4109 (Guthrie), introduced on October 24, 2017, as the Spectrum Auction Deposits Act of 2017, would have amended the Communications Act of 1934 to provide for the deposits of bidders in auctions of spectrum frequencies to be deposited in the Treasury. Referred to the Committee on Energy and Commerce. H.R. 4813 (Costello of Pennsylvania), introduced on January 17, 2018, as the Wireless Internet Focus on Innovation in Spectrum Technology for Unlicensed Deployment Act (WIFI STUDy Act), would have directed GAO to conduct a study to evaluate the role of unlicensed spectrum in offloading broadband traffic. Referred to the Committee on Energy and Commerce. H.R. 4986 (Blackburn), introduced on February 8, 2018, as the Repack Airwaves Yielding Better Access for Users of Modern Services Act of 2018 (RAY BAUM's Act). Reauthorizes FCC. Section 101 would have amended the Communications Act of 1934 to provide for the deposits of bidders in auctions of spectrum frequencies to be deposited in the Treasury. Title VII (MOBILE Now) would make more spectrum available for wireless broadband. Referred to Committee on Energy and Commerce, and in addition to the Committees on Transportation and Infrastructure, and Oversight and Government Reform. Reported (amended) by Committee on Energy and Commerce on March 6, 2018 ( H.Rept. 115-587 ). Passed House on March 6, 2018. H.R. 4953 (Lance), introduced on February 6, 2018, as the AIRWAVES Act, would have facilitated a national pipeline of spectrum for commercial use. Referred to the Committee on Energy and Commerce. H.R. 6017 (Guthrie), introduced on June 6, 2018, as the SPECTRUM NOW Act, would have amended the National Telecommunications and Information Administration Organization Act to provide for necessary payments from the Spectrum Relocation Fund for costs of spectrum research and development and planning activities. Referred to the Committee on Energy and Commerce. S. 19 (Thune), introduced on June 3, 2017, as the MOBILE Now Act, would have made more spectrum available for wireless broadband, facilitate broadband infrastructure deployment on federal lands, establish a national broadband facilities asset database, and encourage consultation between telecommunications providers and state highway authorities receiving federal highway money. Reported ( S.Rept. 115-4 ) by the Committee on March 21, 2017. Passed Senate on August 3, 2017. S. 88 (Fischer), introduced on January 10, 2017, as the DIGIT Act, would have ensured appropriate spectrum planning and interagency coordination to support the Internet of Things. Referred to the Committee on Commerce, Science, and Transportation. Reported ( S.Rept. 115-90 ) by the Committee on June 5, 2017. Passed Senate on August 3, 2017. S. 1682 (Gardner), introduced on August 1, 2017, as the AIRWAVES Act, would have facilitated a national pipeline of spectrum for commercial use, including wireless broadband internet access. Referred to the Committee on Commerce, Science, and Transportation. S. 3010 (Wicker), introduced on June 6, 2018, as the SPECTRUM NOW Act, would have amended the National Telecommunications and Information Administration Organization Act to provide for necessary payments from the Spectrum Relocation Fund for costs of spectrum research and development and planning activities. Referred to the Committee on Commerce, Science, and Transportation. S. 3347 (Markey), introduced on August 1, 2018, a bill to repeal the section of the Middle Class Tax Relief and Job Creation Act of 2012 that requires the Federal Communications Commission to reallocate and auction the T-Band spectrum. Referred to the Committee on Commerce, Science, and Transportation. Addressing Barriers to Broadband Deployment H.R. 800 (Huffman), introduced on February 1, 2017, as the New Deal Rural Broadband Act of 2017, includes language that would have directed USDA to establish and maintain an inventory of any real property that is owned, leased, or otherwise managed by the federal government on which a broadband facility could be constructed, as determined by the Under Secretary for Rural Broadband Initiatives. Referred to the Committee on Agriculture, and in addition to the Committees on Natural Resources and Energy and Commerce. H.R. 2425 (Huffman), introduced on May 17, 2017, as the Public Lands Telecommunications Act, would have supported the establishment and improvement of communications sites on or adjacent to federal lands under the jurisdiction of the Secretary of the Interior or the Secretary of Agriculture through the retention and use of rental fees associated with such sites. Referred to the Committee on Natural Resources and in addition to the Committee on Agriculture. Ordered to be reported (amended) by the Committee on Natural Resources on June 27, 2017. H.R. 2870 (Collins), introduced on June 12, 2017, as the Gigabit Opportunity Act, would have provided tax incentives for low-income communities in states that adopt Uniform Model Broadband Deployment laws developed by FCC and that have been designated by state as gigabit opportunity zones. Referred to the Committees on Energy and Commerce and Ways and Means. H.R. 4682 (Blackburn), introduced on December 19, 2017, as the Open Internet Preservation Act, would have amended the Communications Act of 1934 to ensure internet openness, to prohibit blocking of lawful content, applications, services, and nonharmful devices, to prohibit impairment or degradation of lawful internet traffic, to limit the authority of the FCC and to preempt state law with respect to internet openness obligations, to provide that broadband internet access service shall be considered to be an information service. Referred to the Committee on Energy and Commerce. Reported (amended) by Committee on Energy and Commerce on March 6, 2018 ( H.Rept. 115-587 ). Passed House on March 6, 2018. H.R. 4795 (Walters of California), introduced on January 16, 2018, as the Communications Facilities Deployment on Federal Property Act of 2018, would have streamlined communications facilities deployment on federal property. Referred to the Committee on Transportation and Infrastructure, and in addition to the Committee on Energy and Commerce. H.R. 4800 (Eshoo), introduced on January 17, 2018, as the Broadband Conduit Deployment Act of 2018, would have provided for the inclusion of broadband conduit installation in certain highway construction projects. Referred to the Committee on Transportation and Infrastructure. H.R. 4802 (Kinzinger), introduced on January 16, 2018, as the Streamlining and Expediting Approval for Communications Technologies Act, would have tracked applications to locate or modify communications facilities on federal real property. Referred to the Committee on Transportation and Infrastructure, and in addition to the Committees on Oversight and Government Reform, and Energy and Commerce. H.R. 4814 (Eshoo), introduced on January 17, 2018, as the Community Broadband Act of 2018, would have amended the Telecommunications Act of 1996 to preserve and protect the ability of local governments to provide broadband capability and services. Referred to the Committee on Energy and Commerce. H.R. 4824 (Curtis), introduced on January 18, 2018, as the Rural Broadband Permitting Efficiency Act of 2018, would have allowed certain state permitting authority to encourage expansion of broadband service to rural communities. Referred to the Committee on Natural Resources, and in addition to the Committee on Agriculture; reported by Committee on Natural Resources on August 3, 2018 ( H.Rept. 115-881 ). Passed by House September 12, 2018. H.R. 4839 (Ben Ray Lujan of New Mexico), introduced on January 18, 2018, as the Broadband Inventory Infrastructure Act of 2018, would have provided for the establishment of an inventory of federal assets to provide information to entities that construct or operate communications facilities or provide communications service. Referred to the Committee on Transportation and Infrastructure, and in addition to the Committee on Energy and Commerce. H.R. 4842 (Shimkus), introduced on January 18, 2018, as the Streamlining Permitting to Enable Efficient Deployment of Broadband Infrastructure Act of 2018, would have amended the Communications Act of 1934 to provide that the FCC is not required to perform any review under the National Environmental Policy Act of 1969 or division A of subtitle III of Title 54, United States Code, as a condition of permitting the placement and installation of a communications facility. Referred to the Committee on Energy and Commerce, and in addition to the Committee on Natural Resources. H.R. 4845 (Olson), introduced on January 19, 2018, as the Connecting Communities Post Disasters Act of 2018, would have provided that the FCC and communications service providers regulated by the FCC shall not be subject to certain provisions of the National Environmental Policy Act of 1969 and the National Historic Preservation Act with respect to the construction, rebuilding, or hardening of communications facilities following a major disaster or an emergency declared by the President. Referred to the Committee on Energy and Commerce, and in addition to the Committee on Natural Resources. H.R. 4847 (Brooks of Indiana), introduced on January 19, 2018, as the Broadband Deployment Streamlining Act, would have streamlined the process for consideration of applications for the placement of communications facilities on certain federal lands. Referred to the Committee on Transportation and Infrastructure, and in addition to the Committees on Agriculture, Natural Resources, and Energy and Commerce. H.R. 4858 (Eshoo), introduced on January 19, 2018, as the Clearing Local Impediments Makes Broadband Open to New Competition and Enhancements (CLIMB ONCE Act), would have clarified Section 224 of the Communications Act of 1934 as not limiting the ability of a state to adopt a one touch make ready policy for pole attachments. Referred to the Committee on Energy and Commerce. H.J.Res. 131 (Doyle), introduced on March 28, 2018, would have provided for congressional disapproval under Chapter 8 of Title 5, United States Code, of the rule submitted by the FCC relating to "Restoring Internet Freedom." Referred to the Committee on Energy and Commerce. H.R. 5969 (Pocan), introduced on May 24, 2018, as the Speed Up Broadband Access Act of 2018, would have prohibited the use of federal funds for the provision of broadband service in any State that has in effect a law, regulation, or other requirement that prohibits, limits, places conditions on, or regulates the provision of broadband service by public, cooperative, or nonprofit broadband providers. Referred to the Committee on Energy and Commerce. H.R. 6393 (Coffman), introduced on July 17, 2018, as the 21 st Century Internet Act, would have amended the Communications Act of 1934 to provide for internet openness requirements for broadband internet access service providers. Referred to the Committee on Energy and Commerce. S. 19 (Thune), introduced on June 3, 2017, as the MOBILE Now Act, would have made more spectrum available for wireless broadband, facilitate broadband infrastructure deployment on federal lands, establish a national broadband facilities asset database, and encourage consultation between telecommunications providers and state highway authorities receiving federal highway money. Reported ( S.Rept. 115-4 ) by the Committee on Commerce, Science, and Transportation on March 21, 2017. S. 604 (Hatch), introduced on March 9, 2017 , as the Highway Rights-of-Way Permitting Efficiency Act of 2017, would have allow ed certain state permitting authority to encourage expansion of broadband service to rural communities. Referred to the Committee on Environment and Public Works. S. 742 (Booker), introduced on March 28, 2017, as the Community Broadband Act of 2017, would have removed state barriers for constructing municipal broadband networks and encourage public-private partnerships. Referred to the Committee on Commerce, Science, and Transportation. S. 1013 (Moore), introduced on May 3, 2017, as the Gigabit Opportunity Act, would have provided tax incentives for low income communities in states that adopt Uniform Model Broadband Deployment laws developed by FCC and that have been designated by state as gigabit opportunity zones. Referred to the Committee on Finance. S. 1363 (Heller), introduced on June 15, 2017, as the Rural Broadband Deployment Streamlining Act, would have streamlined the process for broadband facility location applications on Department of Interior and Forest Service land. Referred to the Committee on Energy and Natural Resources. S. 1988 (Wicker), introduced on October 19, 2017, as the Streamlining Permitting to Enable Efficient Deployment of Broadband Infrastructure Act of 2017 (the SPEED Act), would have streamlined broadband infrastructure permitting on established public rights-of-way. Referred to the Committee on Environment and Public Works. S. 2381 (Klobuchar), introduced on February 6, 2018, as the Streamlining and Investing in Broadband Infrastructure Act, would have directed the Secretary of Transportation to require that broadband conduits be installed as a part of certain highway construction projects. Referred to the Committee on Environment and Public Works. S.J.Res. 52 (Markey), introduced on February 27, 2018, would have provided for congressional disapproval under Chapter 8 of Title 5, United States Code, of the rule submitted by the FCC relating to "Restoring Internet Freedom." Passed by Senate on May 16, 2018. S. 2853 (Thune), introduced on May 16, 2018, to amend the Communications Act of 1934 to ensure internet openness, to prohibit blocking lawful content and nonharmful devices, to prohibit throttling data, to prohibit paid prioritization, to require transparency of network management practices, to provide that broadband shall be considered to be an information service, and to prohibit the commission or a State commission from relying on Section 706 of the Telecommunications Act of 1996 as a grant of authority. Referred to the Committee on Commerce, Science, and Transportation. S. 3157 (Thune), introduced on June 28, 2018, as the STREAMLINE Small Cell Deployment Act, would have streamlined siting processes for small cell deployment. Referred to the Committee on Commerce, Science, and Transportation. | The "digital divide" is a term that has been used to characterize a gap between "information haves and have-nots," or in other words, between those Americans who use or have access to telecommunications and information technologies and those who do not. One important subset of the digital divide debate concerns high-speed internet access and advanced telecommunications services, also known as broadband. Broadband is provided by a series of technologies (e.g., cable, telephone wire, fiber, satellite, mobile and fixed wireless) that give users the ability to send and receive data at volumes and speeds necessary to support a number of applications including voice communications, entertainment, telemedicine, distance education, telework, ecommerce, civic engagement, public safety, and energy conservation. Broadband technologies are currently being deployed primarily by the private sector throughout the United States. While the numbers of new broadband subscribers continue to grow, studies and data suggest that the rate of broadband deployment in urban/suburban and high-income areas is outpacing deployment in rural and low-income areas. Some policymakers, believing that disparities in broadband access across American society could have adverse economic and social consequences on those left behind, assert that the federal government should play a more active role to address the "digital divide" in broadband access. With the conclusion of the grant and loan awards established by the American Recovery and Reinvestment Act of 2009 (P.L. 111-5), there remain two primary ongoing federal vehicles which direct federal money to fund broadband infrastructure: the broadband and telecommunications programs at the Rural Utilities Service (RUS) of the U.S. Department of Agriculture and the Universal Service Fund (USF) programs under the Federal Communications Commission (FCC). RUS broadband programs were reauthorized and modified by the 2018 farm bill. The USF High Cost Fund is undergoing a major transition to the Connect America Fund, which is targeted to the deployment, adoption, and utilization of both fixed and mobile broadband. Meanwhile, the Consolidated Appropriations Act, 2018 (P.L. 115-141) appropriated $600 million to RUS to conduct a new broadband loan and grant pilot program (called the ReConnect Program), and appropriated $7.5 million to the National Telecommunications and Information Administration to update the national broadband availability map in coordination with the FCC. Additionally, P.L. 115-141 contained provisions seeking to facilitate deployment of broadband infrastructure on federal property, as well as making more spectrum available for wireless broadband. To the extent that the 116th Congress may consider various options for further encouraging broadband deployment and adoption, a key issue is how to strike a balance between providing federal assistance for unserved and underserved areas where the private sector may not be providing acceptable levels of broadband service, while at the same time minimizing any deleterious effects that government intervention in the marketplace may have on competition and private sector investment. |
The term "procurement" describes the process whereby government agencies acquire supplies or services for their own "direct benefit or use." Competition in government procurement means that the government determines from whom to buy supplies or services—and thus with whom to contract—by "solicit[ing] or entertain[ing] offers from two or more competitors, compar[ing] them, and accept[ing] one based on its relative value." Competition in federal procurement contracting has long been of interest to Congress and the executive branch, in part because of the belief that increased competition among potential vendors results in lower prices for the government. President Obama issued a memorandum calling for increased competition in federal contracting on March 4, 2009, shortly after taking office, and his Administration has sought to reduce the number of "noncompetitive" contracts by various means, including by issuing guidance on "Increasing Competition and Structuring Contracts for Best Results" in October 2009. Subsequently, in 2012, the Department of Defense (DOD), which accounts for 60% to 70% of federal procurement spending per year, amended its regulations to require that contracting officers re-solicit agency requirements if a solicitation allowed fewer than 30 days for the receipt of proposals and resulted in only one bid or offer. Most recently, in 2014, DOD issued guidance that calls for contracting officers to take additional steps, including issuing requests for information (RFIs) prior to soliciting sole-source acquisitions. Recent Congresses have also sought to promote competition in federal contracting by enacting legislation that limits the use of appropriated funds to procure certain items until the procuring agency certifies to Congress that its acquisition strategy meets certain requirements pertaining to competition; requires agencies to establish goals for competition for certain contracts, plans for competing certain acquisitions, processes for measuring competition for certain contracts, and/or annual reviews of certain contracts; precludes defense agencies from awarding noncompetitive contracts based on unsolicited research proposals; requires DOD to take further steps to foster competition in the procurement of "major defense acquisition programs"; and requires that certain recipients of federal grants or financial assistance obtain competition when awarding contracts. This report describes the competition requirements currently governing the procurement activities of federal agencies. Specifically, it addresses (1) what contracts are subject to competition requirements; (2) what constitutes full and open competition for government contracts; (3) what is meant by "full and open competition after exclusion of sources"; (4) the circumstances permitting agencies to award contracts on the basis of other than full and open competition; (5) the "special simplified procedures for small purchases"; and (6) the competition requirements for task order and delivery order (TO/DO) contracts. The report does not address so-called "public-private competitions" or "competitive sourcing targets" under the Federal Activities Inventory Reform (FAIR) Act or Office of Management and Budget (OMB) Circular A-76. Public-private competitions are conducted to determine whether government employees or private contractors will perform functions formerly performed by the government that have been identified as commercial and suitable for contracting out. The federal government has promoted competition between offerors seeking to meet its needs since at least 1781, when the Superintendent of Finance advertised in a local newspaper for proposals from potential suppliers of food for federal employees in Philadelphia. Then, as now, the government encouraged competition because of its reported benefits to the government and the general public. Among other things, an argument can be made that, when multiple offerors compete for the government's business, the government can acquire higher quality goods and services at lower prices than it would acquire if it awarded contracts without competition. An argument can also be made that competition helps to curb fraud because it allows for periodic changes in the vendors from which the government acquires goods and services, thereby limiting opportunities for government employees to enter into collusive agreements with their regular suppliers. Competition can similarly be said to promote accountability by ensuring that contracts are entered into on their merits and not upon any other basis (e.g., familial or other relationships between contracting officers and contractors). Further, because the government is said to acquire the highest quality goods and services at the lowest prices, competition can be said to help government officials reassure citizens that their tax dollars are not spent wastefully. Finally, an argument can be made that citizens are less likely to perceive contracts as being awarded because of favoritism when there is competition. Competition is not considered an unmitigated good by all, however, as is noted by those who suggest that not all procurements need to be competed to the maximum extent possible. An argument can be made that agency operations can be delayed by the time it takes to solicit and evaluate offers from eligible suppliers. These delays are reportedly especially harmful when agencies are contracting for goods or services for disaster responses or military operations. Moreover, because there are costs involved in agencies' soliciting and evaluating offers, an argument can also be made that there comes a point when the government's costs in competing contracts are greater than the savings it realizes from the lower price, higher quality goods it may obtain through competition. It was, in part, for this reason that the drafters of the Competition in Contracting Act (CICA) of 1984 opted to require full and open competition rather than maximum competition. They reportedly considered language calling for "maximum competition," but rejected it, in part, because "there is a point of diminishing return" with competition. Competition could also be said to increase the risk that government contractors will be unable to perform by allowing new contractors—who may not have experience meeting agencies' needs or complying with the accounting and paperwork requirements imposed on federal contractors—to win government contracts. Agencies reportedly would prefer to deal with their incumbent contractors, assuming these contractors are competent, because they represent "known quantities" for the agencies. As the accompanying chronology illustrates, the federal government's requirements for competition in contracting have periodically shifted as the government has variously sought to realize the benefits of competition or further other goals—such as the protection of national security in times of war or efficiency in agency operations—in its procurement activities. Armed conflicts, in particular, typically lead to relaxation of competition requirements, but often result in alleged abuses (e.g., "war profiteering" by contractors and waste of money on overpriced goods and services). These abuses, in turn, can lead to the enactment of competition requirements. The current interest in competition in contracting is perhaps to be expected given developments in the 25 years since the enactment of CICA. CICA itself requires that agencies "obtain full and open competition through the use of competitive procedures" in all procurements not involving the use of procedures expressly authorized by a particular statute. CICA remains the foundation for the current competition requirements, but has been amended or supplemented by later laws that place efficiency in agency operations or other public benefits on par with competition, or expand agencies' ability to use "special simplified methods" for contracting for commercial items. The Federal Acquisition Streamlining Act (FASA) of 1994, for example, establishes a "preference" for the procurement of commercial items, which generally may be acquired using simplified methods, as opposed to full and open competition. FASA was followed by the Federal Acquisition Reform Act (FARA) of 1996, which placed increasing emphasis on efficiency in agency operations by requiring that the Federal Acquisition Regulation (FAR) be amended to "ensure that the requirement to obtain full and open competition is implemented in a manner that is consistent with the need to efficiently fulfill the Government's requirements." FARA and the Services Acquisition Reform Act (SARA) of 2003 also relaxed the rules governing agencies' acquisition of commercial items. More recently, the Emergency Economic Stabilization Act (EESA) of 2008 authorized the Secretary of the Treasury to use other than full and open competition upon determining "that urgent and compelling circumstances make compliance with [the competition] provisions contrary to the public interest." This provision was designed to ensure that competition requirements, among other things, did not slow the Treasury Department's contracting for services that would help stabilize U.S. financial markets and the banking system. Not all contracts—or even all procurement contracts—that agencies lawfully enter into are the result of full and open competition under CICA or an "exception" to it. Non-procurement contracts, such as those resulting from agencies' use of other transaction authority (OTA) or similar authorities, are not subject to CICA because they are not procurement contracts, and CICA only applies to "procurement procedures." OTA refers to agencies' authority to enter into an "other transaction," or "a form of contract ... that is not a procurement contract, grant, or cooperative agreement." Only certain agencies, most notably the Departments of Defense, Transportation, Homeland Security, Health and Human Services, and Energy have, at various times, been granted OTA so that they can contract for research and development (R&D) or prototypes of promising new technologies without being subject to the requirements as to full and open competition. Contracting for R&D or prototypes can be difficult because the uncertainties inherent in the development of new technologies make it hard to establish contract prices. Additionally, the companies best able to perform such contracts are often not regular government vendors and may be unwilling or unable to comply with the government's procurement regulations. OTA helps to avoid these difficulties. Also not subject to the requirement for full and open competition under CICA are those procurement contracts entered into through the "use of procurement procedures ... expressly authorized by statute." There are numerous statutory provisions that allow agencies to use specific procurement procedures in certain circumstances, or otherwise allow them to limit competition for procurement contracts. One provision of the Consolidated Appropriations Act for FY2005, for example, allowed the U.S. Agency for International Development (USAID) to place task orders with small businesses or small disadvantaged businesses (SDBs) in lieu of providing a "fair opportunity" for all eligible firms to compete. Other provisions of this law allowed agencies to limit competition to certain groups or entities, notwithstanding CICA, or to enter into contracts without competition. For example, the Bureau of Land Management is expressly authorized to limit competition for contracts for hazardous fuel reduction activities to specified groups or entities, while the National Gallery of Art may contract for restoration and repair without competition. Any procurement contract not entered into through the use of procedures expressly authorized by a particular statute, such as those described above, is subject to CICA. CICA requires that these contracts be entered into after "full and open competition through the use of competitive procedures" unless certain circumstances exist that would permit agencies to use noncompetitive procedures. Under CICA, "full and open competition" results when "all responsible sources are permitted to submit sealed bids or competitive proposals." A "responsible source" is a prospective contractor who (1) has adequate financial resources to perform the contract, or the ability to acquire such resources; (2) is able to comply with the required or proposed delivery or performance schedule; (3) has a satisfactory performance record; (4) has a satisfactory record of integrity and business ethics; (5) has the necessary organization, experience, technical skills, and accounting and operational controls, or the ability to obtain them; (6) has the necessary production, construction, and technical equipment and facilities, or the ability to obtain them; and (7) is otherwise qualified and eligible to receive an award under applicable laws and regulations. Agencies meet CICA's requirement for full and open competition by using one of the "competitive procedures" recognized under the act. CICA recognizes the following procedures as competitive: 1. Sealed bids . Sealed bids are offers submitted in response to invitations for bids (IFBs); opened publicly at a specified time and place; and evaluated without discussions with the bidders, with the contract being awarded to the lowest-priced responsible bidder. CICA requires that agencies solicit sealed bids if (1) time permits their solicitation, submission, and evaluation; (2) the award will be made on the basis of price and other price-related factors; (3) it is not necessary to conduct discussions with bidders about their bids; and (4) there is a reasonable expectation of receiving more than one sealed bid. 2. Competitive Proposals . Agencies are to use competitive proposals whenever "sealed bids are not appropriate" in light of the previous four factors. Competitive proposals are offers received in response to requests for proposals (RFPs). RFPs generally provide for discussion or negotiation between the government and at least those offerors within the "competitive range," with the contract being awarded to the responsible offeror whose proposal represents the "best value" for the government. 3. Combinations of competitive procedures . These include procedures like two-step sealed bidding. With two-step sealed bidding, the first step consists of the submission, evaluation and, potentially, discussion of technical proposals from each bidder with no pricing involved. In the second step, sealed bids are submitted only by those who submitted technically acceptable proposals during the first step. 4. Procurement of architectural or engineering services conducted in accordance with the requirements of the Brooks Act (40 U.S.C. §§541-559). The Brooks Act allows the selection of architects and engineers based upon their qualifications without consideration of the proposed price for the work. Awards must be made to the highest-ranked offeror unless a reasonable price cannot be agreed upon. 5. Competitive selection of basic research proposals resulting from a general solicitation and peer or scientific review of proposals, or from a solicitation conducted pursuant to 15 U.S.C. Section 638 (research and development contracts for small businesses). 6. Procedures established by the General Services Administration (GSA) for its multiple awards schedule program . Such procedures are recognized as competitive so long as participation in the GSA program is open to all responsible sources, and orders and contracts under GSA's procedures result in the lowest overall cost alternative to meet the government's needs. 7. Procurements conducted pursuant to 15 U.S.C. Section 644 . Section 644 addresses set-asides for small businesses, among other things. Such set-asides are competitive so long as all responsible businesses entitled to submit offers under Section 644 are permitted to compete. The sixth of these provisions is particularly significant because it allows agencies to use the so-called "Federal Supply Schedules" (FSS) or "GSA schedules." These schedules enable agencies to take advantage of a "simplified process" for obtaining commercial supplies and services by issuing task or delivery orders directly to contractors listed on the schedules without issuing IFBs or RFPs. The seventh provision is also significant because it authorizes "set-asides" for small businesses, which constitute "full and open competition after exclusion of sources" and are discussed below. Some competitions in which only certain contractors can compete nonetheless meet CICA's requirement for full and open competition because CICA provides for "full and open competition after exclusion of sources." "Full and open competition after exclusion of sources" occurs in two contexts: agencies' "dual sourcing" initiatives and set-asides for small businesses. The defense agencies, in particular, have a lengthy history of dual sourcing, or distributing their contracts for particular goods or services among multiple manufacturers or suppliers in order to ensure that their operations are not vulnerable to the fortunes of individual companies. CICA recognizes this history, and the agency concerns underlying it, by stating that agencies: may provide for the procurement of property or services covered by this section using competitive procedures but excluding a particular source in order to establish or maintain any alternative source or sources of supply for that property or service if the agency head determines that to do so— (A) would increase or maintain competition and would likely result in reduced overall costs for such procurement, or for any anticipated procurement, of such property and services; (B) would be in the interest of national defense in having a facility (or a producer, manufacturer, or other supplier) available for furnishing the property or service in the case of a national emergency or industrial mobilization; (C) would be in the interest of national defense in establishing or maintaining an essential engineering, research, or development capability to be provided by an educational or other nonprofit institution or a federally funded research and development center; (D) would ensure the continuous availability of a reliable source of supply of such property or service; (E) would satisfy projected needs for such property or service determined on the basis of a history of high demand for the property or service; or (F) in the case of medical supplies, safety supplies, or emergency supplies, would satisfy a critical need for such supplies. Recently, Congress has sometimes mandated dual sourcing, especially by the Department of Defense (DOD), in order to ensure competition in future procurements. CICA similarly recognizes the history of setting aside acquisitions for competitions limited to small businesses in general, or to specific subcategories of small businesses, by allowing "procurement of property or services ... using competitive procedures, but excluding other than small business concerns." The Small Business Act provides for such set-asides for small businesses generally; women-owned, service-disabled veteran-owned and Historically Underutilized Business Zone (HUBZone) small businesses; and small businesses owned and controlled by socially and economically disadvantaged individuals that are participating in the Business Development Program under Section 8(a) of the act. Set-asides can also be made for local firms during major disasters or emergencies under the authority of the Stafford Act (42 U.S.C. §5150). By definition, under CICA, any procurement contract entered into without full and open competition is noncompetitive. This is not to say, however, that every procurement contract entered into without using competitive procedures is in violation of CICA. To the contrary, CICA recognizes seven circumstances wherein agencies can use other than competitive procedures without violating the act's competition requirements. Such circumstances involve the following: 1. Single source for goods or services : The property or services needed by the agency are available from only one responsible source and no other type of property or service satisfies the agency's needs. 2. Unusual and compelling circumstances : The agency's need for property or services is of such an unusual and compelling urgency that the government would be seriously injured unless the agency is permitted to limit the number of sources from which it solicits bids or proposals. 3. Maintenance of the industrial base : It is necessary to award the contract to a particular source or sources in order (1) to maintain a facility, producer, manufacturer, or other supplier so that the maintained entity will be available to furnish property or services in the case of a national emergency or to achieve industrial mobilization; or (2) to establish or maintain an essential engineering, research, or development capability to be provided by an educational or other nonprofit institution or a federally funded research and development center. 4. Requirements of international agreements : The terms of an international agreement or treaty between the United States and a foreign government or international organization, or the written directions of a foreign government reimbursing a federal agency for the cost of procuring property or services, effectively require the use of procedures other than competitive procedures. 5. Statutory authorization or acquisition of brand-name items for resale : A statute expressly authorizes or requires that the procurement be made through another executive agency or from a specified source, or the agency's need is for brand-name commercial items for authorized resale. 6. National security : Disclosure of the agency's procurement needs would compromise national security unless the agency is permitted to limit the number of sources from which it solicits bids or proposals. 7. Necessary in the public interest : The head of an executive agency determines that it is necessary in the public interest to use other than competitive procedures in the procurement and notifies Congress in writing of this determination no less than 30 days before the award of the contract. These "exceptions" cover common situations where competition is not possible, or where the government values other objectives (e.g., maintaining the industrial base) more highly than full and open competition. The first exception, for example, allows what are commonly known as "sole-source awards." By law, sole-source awards can be used only when there is a single responsible source and no other supplies or services will satisfy agency requirements. Although sole-source awards have been reported to be the subject of much concern recently, especially among those worried about the reported increase in their use since FY2000, they can help agencies to efficiently meet their needs for goods and services when circumstances suggest there is little or no possibility of competition. The first exception also encompasses agencies' acceptance of unsolicited research proposals, as well as follow-on contracts for continued development or production of major systems. The second exception covers many so-called contingency contracting situations, when the government needs to enter into contracts quickly in response to natural disasters or combat operations. The third exception addresses situations akin to dual sourcing, when the government attempts to manage the industrial base by ensuring that companies receive enough orders to stay in business. The fifth exception includes purchases that agencies are required to make through Federal Prison Industries or qualified nonprofit agencies for the blind or "severely disabled." Despite covering many common situations, CICA's exceptions do not grant agencies unfettered discretion to contract for goods and services without using competitive procedures. This is because other provisions of CICA impose several conditions on agencies' ability to rely on the exceptions permitting other than full and open competition. What is arguably the most important of these conditions—the requirement that agency contracting officials justify and obtain approval for their use of other than competitive procedures—is discussed in more detail in the following section. Other conditions (1) specify that poor agency planning cannot give rise to unusual and compelling urgency; (2) bar agencies from obtaining through other agencies goods or services that were not obtained in compliance with CICA; (3) prohibit agency heads from delegating their authority to determine that use of other than competitive procedures is necessary in the public interest; and (4) require agencies to "request offers from as many potential sources as is practicable under the circumstances" whenever relying on the exceptions for unusual and compelling urgency or national security. The first condition is especially important because it precludes agencies from waiting until near the end of the fiscal year to procure items and then claiming unusual and compelling urgency because annual appropriations are about to expire. CICA's requirement that contracting officers provide justifications of, and obtain approvals for, all noncompetitive procurements conducted in reliance on a CICA exception further checks agencies' discretion in using noncompetitive procedures. Agencies can rely on the CICA exceptions only when contracting officers justify the use of other than competitive procedures in writing and certify the accuracy and completeness of their justifications. These justifications must then be approved by agency officials of a higher rank than the contracting officer, with the identity of the approving official determined by the expected value of the contract, as Table 1 illustrates. Written justifications and approvals must normally precede the contract award. They may follow the award only when the agency relies on the exception for unusual and compelling urgency, and, even then, the agency must have determined the existence of unusual and compelling urgency prior to making the award. Justifications can be omitted only when an agency (1) relies upon an agency head's determination that it is necessary, in the public interest, to use other than competitive procedures; (2) conducts a procurement under the authority of the Javits-Wagner-O'Day Act, or makes competitive or certain noncompetitive awards under the authority of Section 8(a) of the Small Business Act; or (3) purchases brand-name items for authorized resale. The omission of justifications when the agency relies upon the agency head's determination that it is necessary, in the public interest, to use other than competitive procedures can be explained, in part, by the requirement that agency heads must themselves document the existence of such circumstances in writing and notify Congress. Purchase of brand-name items for authorized resale involves purchases for use in commissaries or similar facilities, where the purchased articles are "desired or preferred by customers of the selling activities." It does not include agencies' purchase of brand-name commercial items for their own use. Justifications must include (1) a description of agency needs; (2) an identification of the statutory exception upon which the agency relied and a demonstration of the reasons for using the exception that is based upon the proposed contractor's qualifications or the nature of the procurement; (3) a determination that the anticipated cost will be fair and reasonable; (4) a description of any market survey conducted, or a statement of the reasons for not conducting a market survey; (5) a listing of any sources that expressed interest in the procurement in writing; and (6) a statement of any actions that the agency may take to remove or overcome barriers to competition before subsequent procurements. CICA originally required agencies to make their justifications for noncompetitive awards, as well as "any related information," available to the general public under the Freedom of Information Act (FOIA). However, it has since been amended to require that justifications and approvals be posted on FedBizOpps ( http://www.fedbizopps.gov ) within 14 days of contract award. Agencies are also required, under CICA, to publish notices regarding certain noncompetitive contracts that they propose to award on FedBizOpps prior to their award. These notices identify the intended recipient of the noncompetitive contract award and state the agencies' reasons for making a noncompetitive award. Because notice of these proposed awards precedes the awards, other contractors could submit proposals to the agency or protest the proposed award. In addition to authorizing the use of noncompetitive procedures in certain circumstances, CICA authorizes the use of "special simplified procedures" when agencies make "small purchases." CICA's drafters included this provision because they recognized that the costs of conducting competitions can exceed the savings resulting from competition when agencies procure items with low prices. CICA itself defined a "small purchase" as one whose expected value was less than $25,000, but was later amended to include purchases whose expected value was below the simplified acquisition threshold (currently, generally $150,000). Moreover, since 1996, under an amendment to CICA, agencies have also had authority to use simplified acquisition procedures in purchasing commercial items whose expected value exceeds the simplified acquisition threshold but is below $6.5 million (or $12 million in the case of goods or services purchased in support of contingency operations, or for defense against or recovery from nuclear, biological, chemical, or radiological attack). Agencies can rely on this latter authority only when their contracting officers reasonably expect, based upon market research and the nature of the goods or services sought, that offers will include only commercial items. CICA prohibits agencies from dividing proposed purchases in excess of the "small purchase" threshold into several purchases in order to take advantage of the simplified procedures, and it requires agencies to promote competition "to the maximum extent practicable" when using simplified procedures. CICA otherwise leaves the articulation of the simplified acquisition procedures to the FAR, which prescribes somewhat different regulations for acquiring different prices and types of goods and services (i.e., commercial or noncommercial). See Figure 1 . Under the FAR, purchases whose expected value is below the simplified acquisition threshold ($150,000) are further subdivided into (1) those below the micropurchase threshold (generally $3,000) and (2) those above it. When making "micropurchases," or purchases at or below $3,000, agencies are to promote competition, to at least a limited degree, by distributing their purchases "equitably" among qualified suppliers "[t]o the extent practicable." They may make micropurchases without soliciting competitive quotations only if the contracting officer, or other duly appointed official, considers the price to be reasonable. When purchases are above the micropurchase threshold but below the simplified acquisition threshold, agencies "shall use simplified acquisition procedures to the maximum extent practicable." These purchases are "reserved exclusively" for small businesses, making them "competitive procedures" under CICA. In such purchases, and in purchases of commercial items whose expected value exceeds the simplified acquisition threshold but is below $6.5 million (or $12 million in emergencies), agencies "must promote competition to the maximum extent practicable to obtain supplies and services from the source whose offer is the most advantageous to the Government, considering the administrative cost of the purchase." This generally means that agencies "must consider solicitation of at least three sources," two of which were not included in the previous solicitation. Contracting officers are prohibited from soliciting quotations based on personal preferences or restricting solicitations to suppliers of well-known and widely distributed makes or brands. Sole-source solicitations for purchases below the simplified acquisition threshold are permissible only if contracting officers determine that the circumstances of the contract action are such that only one source can be reasonably deemed available (e.g., urgency, exclusive licensing agreements, brand-name goods, industrial mobilization). Sole-source solicitations for purchases of commercial items whose expected costs exceed the simplified acquisition threshold are permissible only if (1) they are justified in writing; (2) they are approved at the levels specified in Table 2 ; and (3) notice of the proposed award is provided at the government-wide point of entry, FedBizOpps. In keeping with its drafters' belief that effective competition in government procurement involves more than just the mechanisms that agencies use to solicit offers, CICA also contains other provisions that promote competition by, among other things, barring agencies from using restrictive specifications and requiring them to give advance notice of upcoming solicitations. These provisions are not the primary focus of this report, but are briefly summarized below in order to provide a more comprehensive picture of CICA's competition requirements. 1. Planning and solicitation requirements : Under CICA, agencies must specify their needs and solicit bids or offers "in a manner designed to achieve full and open competition"; use advanced procurement planning and market research; and "develop specifications in such a manner as is necessary to obtain full and open competition." Specifications may be stated in terms of function, performance, or design requirements, but can include restrictive provisions or conditions only to the extent necessary to satisfy agency needs or as authorized by law. These requirements derive from the fact that competitive mechanisms for submitting bids or offers are of limited effectiveness if agencies can craft their procurement specifications in such a way as to effectively exclude contractors from the pool of potential offerors. 2. Evaluation and award requirements : Agencies must evaluate sealed bids and competitive proposals based solely on the factors specified in the solicitation. This requirement supports the competitive mechanisms for submitting bids and offers by ensuring that agencies properly consider bids and offers once they are received, rather than award contracts to favored companies on the basis of factors not disclosed to other competitors. 3. Competition advocates : CICA requires the head of each executive agency to designate, both for the agency as a whole and for each procuring activity within the agency, one officer or employee to serve as the "advocate for competition." Agency competition advocates are responsible, among other things, for challenging barriers to full and open competition, and promoting the use of full and open competition, in agency procurement activities. CICA initially required agency competition advocates to make annual reports to each chamber of Congress identifying actions the agency intended to take to increase competition for contracts and reduce the number and value of noncompetitive contracts. However, FASA removed thi s reporting requirement. 4. Procurement notices : Under CICA, agencies are generally required to publish "procurement notices" announcing upcoming IFBs and RFPs for contracts exceeding $25,000 and for likely subcontracts on awarded contracts exceeding $25,000. CICA also specifies that agencies may not issue solicitations earlier than 15 days after the notice is published, or establish a deadline for submission of bids or offers earlier than 30 days after the solicitation is issued. These requirements promote competition by ensuring that would-be offerors have ample notice of proposed agency procurement actions and adequate time to prepare their offers. Notices were originally published in Commerce Business Daily , but are now posted online at FedBizOpps. FASA supplemented CICA by, among other things, articulating competition requirements for task order and delivery order (TO/DO) contracts. TO/DO contracts are contracts for services or goods, respectively, that do not "procure or specify a firm quantity of supplies (other than a minimum or maximum quantity)," but rather "provide[] for the issuance of orders for the delivery of supplies during the period of the contract." Because the time of delivery and the quantity of goods or services to be delivered are not specified (outside of stated maximums or minimums) in TO/DO contracts, such contracts are sometimes referred to as indefinite delivery/indefinite quantity (ID/IQ) contracts. TO/DO contracts can also be described as "single-award" or "multiple-award" contracts, depending upon the number of firms—one or more than one, respectively—able to compete for task or delivery orders under the contract. Some commentators further refer to single-award TO/DO contracts as "monopoly contracts," but such usage could obscure the fact that single-award TO/DO contracts are themselves awarded competitively, even if task or delivery orders under them are not, and are of limited duration. Under FASA, agencies are effectively subject to CICA when awarding TO/DO contracts and can use other than competitive procedures only when one of the seven exceptions to full and open competition applies and there are the requisite justifications and approvals. FASA also establishes "a preference" for multiple-award contracts by requiring agencies to use them, as opposed to single-award contracts, "to the maximum extent practicable." Moreover, FASA requires agencies using multiple-award contracts to provide contractors "a fair opportunity to be considered" when issuing task or delivery orders in excess of $3,000 unless (1) the agency's need for the services or property is of such unusual urgency that providing such opportunity to all such contractors would result in unacceptable delays in fulfilling that need; (2) only one such contractor is capable of providing the services or property required at the level of quality required because the services or property ordered are unique or highly specialized; (3) the task or delivery order should be issued on a sole-source basis in the interest of economy and efficiency because it is a logical follow-on to a task or delivery order already issued on a competitive basis; or (4) it is necessary to place the order with a particular contractor in order to satisfy a minimum guarantee. FASA did not, however, subject the issuance of task or delivery orders under TO/DO contracts to CICA, and, even today, such orders remain outside the CICA framework. FASA further requires each agency issuing TO/DO contracts to designate a "task and delivery order ombudsman" to review contractors' complaints regarding TO/DO contracts and ensure that all contractors holding a multiple-award TO/DO contract have a "fair opportunity to be considered" for orders. Finally, FASA grants the Government Accountability Office (GAO) jurisdiction over protests alleging that the orders increase the scope, period, or maximum value of the contract. The National Defense Authorization Act for FY2008 (NDAA '08) further strengthened the competition requirements for TO/DO contracts established by FASA. See Figure 2 . The NDAA '08 limits agencies' ability to use single-award TO/DO contracts by requiring that agency heads make the following determinations, in writing, before awarding a single-award TO/DO contract whose expected value would exceed $103 million, including options: (i) the task or delivery orders expected under the contract are so integrally related that only a single source can reasonably perform the work; (ii) the contract provides only for firm, fixed-price task or delivery orders for (I) products for which unit prices are established in the contract or (II) services for which prices are established in the contract for the specific tasks to be performed; (iii) only one source is qualified and capable of performing the work at a reasonable price to the government; or (iv) because of exceptional circumstances, it is necessary in the public interest to award the contract to a single source. The NDAA '08 also specifies what constitutes a "fair opportunity to be considered" in competitions for orders in excess of $5.5 million under multiple-award TO/DO contracts. Under the NDAA, for contractors to have a fair opportunity, agencies must provide them with (1) a notice of the task or delivery order that includes a clear statement of the agency's requirements; (2) a reasonable period of time to provide a proposal in response to the notice; (3) disclosure of the significant factors and subfactors (including cost or price) that the agency expects to consider in evaluating proposals and their relative importance; (4) a written statement documenting the basis for the award and the relative importance of quality and price or cost factors, if the award is to be made on a best-value basis; and (5) an opportunity for post-award debriefing. Finally, the NDAA '08 granted GAO exclusive authority to hear protests alleging improprieties in agencies' award of task and delivery orders valued in excess of $10 million that do not increase the scope, period, or maximum value of the underlying contract. When granting such authority, Congress initially included a "sunset" provision, stating that the "subsection" granting this authority would be "in effect for three years, beginning on the date that is 120 days after [its] date of enactment" (i.e., May 27, 2011). However, the 112th Congress subsequently granted GAO permanent jurisdiction over the protests of "large" orders issued under defense contracts. It also extended GAO's jurisdiction over similar orders issued under civilian contracts through September 30, 2016. | Competition in federal procurement contracting has long been of interest to Congress and the executive branch, in part because of the belief that increased competition among potential vendors results in lower prices for the government. President Obama issued a memorandum calling for increased competition in federal contracting on March 4, 2009, shortly after taking office, and his Administration has sought to reduce the number of "noncompetitive" contracts by various means, including by issuing guidance on "Increasing Competition and Structuring Contracts for Best Results" in October 2009. Subsequently, in 2012, the Department of Defense (DOD), which accounts for 60% to 70% of federal procurement spending per year, amended its regulations to require that contracting officers re-solicit agency requirements if a solicitation allowed fewer than 30 days for the receipt of proposals and resulted in only one bid or offer. Further guidance was issued in 2014. The Competition in Contracting Act (CICA) of 1984 generally governs competition in federal procurement contracting. Any procurement contract not entered into through the use of procurement procedures expressly authorized by a particular statute is subject to CICA. CICA requires that contracts be entered into after "full and open competition through the use of competitive procedures" unless certain circumstances exist that would permit agencies to use noncompetitive procedures. Full and open competition can be obtained through the use of sealed bids, competitive proposals, or other procures defined as competitive under CICA (e.g., procurement of architectural or engineering services under the Brooks Act). Full and open competition under CICA also encompasses "full and open competition after exclusion of sources," such as results when agencies engage in dual sourcing or "set aside" acquisitions for small businesses (i.e., conduct competitions in which only small businesses may participate). Any contract entered into without full and open competition is noncompetitive, but noncompetitive contracts can still be in compliance with CICA when circumstances permitting other than full and open competition exist. CICA recognizes seven such circumstances, including (1) single source for goods or services; (2) unusual and compelling urgency; (3) maintenance of the industrial base; (4) requirements of international agreements; (5) statutory authorization or acquisition of brand-name items for resale; (6) national security; and (7) contracts necessary in the public interest. CICA also allows agencies to use "special simplified procedures" when acquiring goods or services whose expected value is less than $150,000, or commercial goods or services whose expected value is less than $6.5 million ($12 million in certain circumstances). Issuance of orders under task order and delivery order (TO/DO) contracts is not subject to CICA, although award of TO/DO contracts is. However, the Federal Acquisition Streamlining Act (FASA) of 1994 established a preference for multiple-award TO/DO contracts; required that agencies provide contractors "a fair opportunity" to compete for orders in excess of $3,000 under multiple-award contracts; and authorized the Government Accountability Office (GAO) to hear protests challenging the issuance of task or delivery orders that increase the scope, period, or maximum value of the underlying contract. The National Defense Authorization Act (NDAA) for FY2008 further limited the use of single-award TO/DO contracts. It also specified what constitutes a "fair opportunity to be considered" for orders in excess of $5.5 million under multiple-award contracts and granted GAO exclusive jurisdiction to hear protests of orders valued in excess of $10 million that do not increase the scope, period, or maximum value of the contract. This jurisdiction is permanent as to protests of defense agency contracts (P.L. 112-239), but only lasts through September 30, 2016, for protests of civilian agency contracts (P.L. 112-81). |
In the 111 th Congress, legislation was introduced that sought to clarify the scope of the Clean Water Act (CWA) in the wake of two Supreme Court decisions that interpreted the law's jurisdiction more narrowly than prior case law. The Court's narrow interpretation involved jurisdiction over some geographically isolated wetlands, intermittent streams, and other waters. These cases dealt specifically with CWA section 404, the so-called "dredge and fill" program, under which permits are required for discharges of dredged or fill material. But the decisions are significant for the act as a whole, since the regulatory definitions at issue govern not only section 404, but also many other provisions and requirements of the law, including section 402 (permit program for point source discharges into navigable waters), section 303 (water quality standards for navigable waters), and section 311 (discharges of oil and hazardous substances into navigable waters). First, in Solid Waste Agency of Northern Cook County v. Army Corps of Engineers (SWANCC), 531 U.S. 159 (2001), the Court addressed the issue of CWA jurisdiction over "isolated waters"—waters that are not traditional navigable waters (sometimes called navigable-in-fact waters), are not interstate, are not tributaries of the foregoing, and are not hydrologically connected to navigable or interstate waters or their tributaries. The Court held 5-4 that the scope of jurisdiction under the CWA does not extend to isolated, nonnavigable, intrastate waters in cases where jurisdiction is asserted purely on the ground that they are or might by used by migratory birds that cross state lines. However, the ruling created uncertainty about what isolated waters and wetlands would no longer be subject to federal regulation, because scientists and regulators recognize that many types of isolated wetlands that provide important ecological functions are not physically adjacent to navigable waters. Second, in Rapanos v. United States, 547 U.S. 715 (2006), the Court addressed CWA jurisdiction over "adjacent wetlands," specifically wetlands adjacent to tributaries of traditional navigable waters. The Court issued a split 4-1-4 ruling. A four-justice plurality opinion, written by Justice Scalia, adopted a test restricting jurisdiction under section 404 of the act to relatively permanent bodies of water and wetlands with a continuous surface connection to waterbodies that are themselves waters of the United States. In a concurring opinion, Justice Kennedy proposed a case-by-case test to establish a significant nexus to waters of the United States for jurisdiction over adjacent wetlands to exist under the act. A wetland, he declared, has the requisite significant nexus if, alone or in combination with similarly situated lands in the region, it significantly affects the chemical, physical, and biological integrity of traditional navigable waters. These ecological functions include flood retention, pollutant trapping, and filtration. Under Kennedy's opinion, the waters that perform these functions may be intermittent or ephemeral, and they need not have a surface hydrological connection to other waters. When, in contrast, their effects on water quality are speculative or insubstantial, the wetland is beyond section 404's reach. Because no single opinion in Rapanos commanded the support of five or more Justices, the scope of CWA jurisdiction has remained unsettled, and lower courts have diverged as to the rule of decision to be applied in specific cases. Bills to nullify SWANCC , or in later versions SWANCC and Rapanos , and reinstate the interpretation of "waters of the United States" prevailing before those decisions, have been introduced in recent Congresses, but none had advanced until the 111 th Congress. Obama Administration officials have supported the need for legislative clarification of these issues, marking the first time that the Administration has done so. In May 2009, the heads of the Environmental Protection Agency (EPA) and U.S. Army Corps of Engineers (Corps), the Department of Agriculture, the Department of the Interior, and the Council on Environmental Quality jointly wrote to congressional leaders to express that view and to identify certain principles that might help guide legislative and other actions. The 111 th Congress legislation introduced in response to these rulings was S. 787 (the Clean Water Restoration Act), introduced by Senator Feingold and approved, with amendments, by the Senate Environment and Public Works Committee in June 2009, and H.R. 5088 (America's Commitment to Clean Water Act), introduced by Representative Oberstar on April 21, 2010. Proponents of the legislation contended that the Court's rulings in these cases, and subsequent regulatory guidance issued by the Corps and EPA in 2003, 2007, and 2008, have unsettled several decades' worth of case law, misreading or ignoring congressional intent, and thus reinterpreting and narrowing the jurisdictional scope of the act. The rulings and agency responses, they said, have removed regulatory protection from some waters and wetlands and thereby weakened protection of the nation's water quality. Supporters stated that the intention of the legislation was to return to the CWA regulatory jurisdiction that was recognized before the Court's 2001 and 2006 rulings. Both S. 787 and H.R. 5088 shared that objective, but they would have done so in somewhat different ways, as described in this report. On the other hand, critics contended that the bills would greatly expand federal regulatory jurisdiction of the CWA over the pre- SWANCC interpretation, not simply reaffirm congressional intent. They were concerned that the proposed definition of "waters of the United States" was ambiguous, and that the changes proposed by the bills would have the potential to be interpreted far more broadly than what was understood to be jurisdictional before 2001—thus causing more uncertainty, rather than clarifying the issue. In general, supporters of the bills included many states and state environmental organizations, environmental and conservation advocacy groups, as well as a number of outdoor, hunting, fishing, and sporting organizations, who argued that enactment of the bills would provide needed strengthening of CWA protection for water quality and wetlands. In general, critics and opponents included many manufacturing industry groups and agricultural interests, as well as land development and home builder organizations, who contended that the bills would fundamentally alter the regulatory reach and balance of federal and state authority under the CWA. The bill approved by the Senate Committee on Environment and Public Works was an amended version of legislation introduced by Senator Feingold in April 2009. Section 1 was the Short Title of the bill, and Section 2 described two purposes: "to reaffirm the original intent of Congress" in enacting the CWA in 1972 (P.L. 92-500; 33 U.S.C. §§ 1257-1387) and to "clearly define the waters of the United States" subject to the CWA as the phrase was interpreted in applicable regulations and guidance in effect prior to the SWANCC ruling. Section 3 would have made 24 findings, including several about the economic and ecological importance of protecting intrastate waters and wetlands, and others about the importance of protecting small and intermittent streams from pollutant discharges. It also included findings that the legislation would overturn the Supreme Court's SWANCC and Rapanos rulings and reaffirm federal jurisdiction over all waters of the United States as the CWA was applied and interpreted in rules, guidance, and interpretations of EPA and the Corps prior to those decisions. The findings as approved by the Senate committee significantly modified findings in the bill as introduced, deleting many from the original bill and adding new findings. It should be noted that the findings in a statute are not binding, operative provisions, although they may influence to varying degrees agencies' regulatory decisions and the judicial interpretation of the operative provisions elsewhere in a statute or a court's assessment of a statute's constitutionality. Section 4 was the important definitional provision of the bill, because it would have affected the key CWA phrase which sets the act's reach, and which legislative history, regulations, and cases all attempt to interpret—the phrase "navigable waters." The current CWA defines "navigable waters" to mean "the waters of the United States, including the territorial seas." S. 787 would have struck this term and its definition and installed "waters of the United States" as the direct jurisdictional phrase, a term that is defined in EPA and Corps regulations, but currently not in statute (see Table A-1 which compares existing regulatory text and proposed statutory text). Section 4 would have defined the term "waters of the United States" in the CWA to mean all waters subject to the ebb and flow of the tide, the territorial seas, and all interstate and intrastate waters, including lakes, rivers, streams (including intermittent streams), mudflats, sandflats, wetlands, sloughs, prairie potholes, wet meadows, playa lakes, and natural ponds, all tributaries of any of the above waters, and all impoundments of the foregoing. Section 4 also would have excluded from the new statutory definition two terms that currently are excluded from jurisdiction by regulation only: prior converted cropland, and waste treatment systems. Prior converted cropland means a wetland that was manipulated or used to produce an agricultural commodity before December 23, 1985. Waste treatment systems refer to treatment ponds or lagoons designed to meet the requirements of the CWA, including only manmade bodies of water which neither were originally created in waters of the United States (such as disposal areas in wetlands), nor resulted from the impoundment of such waters. These two exemptions, not in S. 787 as introduced, were included in an amendment adopted during committee markup. Section 5 would have conformed the changes resulting from section 4 of the bill with the CWA as a whole by replacing the phrases "navigable waters of the United States" or "navigable waters" wherever they currently appear in the CWA with "waters of the United States." Section 6 was the Savings Clause. A savings clause is typically included in order to declare that the legislation preserves—or would not affect—provisions, such as exemptions, granted under existing law. Section 6 expressly would have preserved CWA permit exemptions found in two provisions of the act. First, subsections (6)(1) and (2) would have preserved two exemptions in CWA section 402(l), which is titled "Limitation on Permit Requirement." Section 402 is the section that authorizes National Pollutant Discharge Elimination System (NPDES) permits for point source discharges from, for example, municipal sewage treatment facilities and manufacturing plants. CWA section 402(l) prohibits the Administrator of EPA from requiring an NPDES permit for discharges composed entirely of return flows from irrigated agriculture, or for discharges of stormwater runoff from oil or gas mining operations. Complementing the exclusion of irrigated agricultural return flows in section 402(l) is this existing exclusion in the Definitions provision of the act: "This term ['point source'] does not include agricultural stormwater discharges and return flows from irrigated agriculture." Second, the legislation would have preserved six permit exemptions specified in CWA section 404(f)(1). As noted previously, section 404 authorizes the Corps to issue permits for dredged or fill materials into the navigable waters, including wetlands. Subsections 6(3) through (8) of S. 787 would have preserved the existing section 404 exemptions for normal farming, ranching, and silviculture; maintenance of currently serviceable structures; construction or maintenance of farm or stock ponds or irrigation and drainage ditches; temporary sedimentation basins on construction sites; farm or forest roads or temporary roads for moving mining equipment; and activities under a state program for placement of dredged or fill material (a program that is approved under CWA section 208(4)(B)). As approved by the committee, Section 6 only referenced the eight saved provisions by statutory citation. During markup, the committee adopted an amendment that dropped language in the bill as introduced that additionally would have paraphrased each provision. Critics of the legislation had argued that the paraphrasing language added confusion, rather than clarity. Section 7 would have directed EPA and the Corps, within 18 months of enactment, to promulgate such regulations as necessary to implement the legislation and amendments made by the legislation. Section 7 also stated that the term "waters of the United States" shall be construed consistently with the scope of federal jurisdiction under the CWA as interpreted and applied by EPA and the Corps prior to January 9, 2001 (the date of the SWANCC ruling), and "the legislative authority of Congress under the Constitution." The bill introduced by Representative Oberstar on April 21, 2010, was a modified version of legislation that he had introduced previously. Like the Senate measure, Section 1 was the Short Title of the bill, and Section 2 described the purposes of the legislation. It included two purposes similar to S. 787 : to "reaffirm the original objective of Congress" in enacting the CWA and to "reaffirm the definition of the waters of the United States" that are subject to the CWA consistent with interpretations prior to the two Supreme Court rulings. H.R. 5088 included a third purpose: to protect the "waters of the United States" as authorized by specific constitutional powers—section 8 of article I (scope of legislative power, including the Commerce Clause), section 2 of article II (presidential power, including treaties), and section 3 of article IV (congressional power over U.S. property) of the U.S. Constitution. Section 3 would have made 12 findings, for example about the importance of protecting small and intermittent streams, including seasonal streams and their headwaters, which can affect the introduction of pollutants to larger rivers and streams. It also included findings about the importance of water for agriculture, transportation, energy production, recreation, fishing and shellfishing, and municipal and commercial uses. Findings in H.R. 5088 would have stated that the SWANCC and Rapanos rulings impair the statutory protection of U.S. waters, contrary to congressional intent. Section 4 was the important definitional provision of the bill. Like the Senate committee bill, it would have affected the key CWA phrase which sets the act's reach. Also like the Senate committee bill, H.R. 5088 would have struck the term "navigable waters" and install "waters of the United States" as the direct jurisdictional phrase. A key difference between the bills, however, was that while S. 787 would have inserted the fairly short text quoted above, H.R. 5088 would have inserted a longer definition based closely on existing regulatory language of the Corps and EPA, but with some modifications (see Table A-1 which compares existing regulatory text and proposed statutory text). Section 4 of H.R. 5088 would have defined the term "waters of the United States" in the CWA as including (i) all waters that are currently used, were used in the past, or may be susceptible to use in interstate or foreign commerce, including all waters that are subject to the ebb and flow of the tide; (ii) all interstate and international waters, including interstate and international wetlands; (iii) all other waters, including intrastate lakes, rivers, streams (including intermittent streams), mudflats, sandflats, wetlands, sloughs, prairie potholes, wet meadows, playa lakes, or natural ponds, the use, degradation, or destruction of which does or would affect interstate or foreign commerce, the obligations of the United States under a treaty, or the territory or other property belonging to the United States; (iv) all impoundments of waters otherwise defined as waters of the United States under this paragraph; (v) tributaries of waters identified in clauses (i) through (iv); (vi) the territorial seas; and (vii) waters, including wetlands, adjacent to waters identified in clauses (i) through (vi). Section 4 of H.R. 5088 also would have excluded from the new statutory definition two terms that currently are excluded from jurisdiction by regulation only: prior converted cropland, and waste treatment systems, and it would expressly define both terms. As noted above, S. 787 similarly would have excluded both terms, but it did not include definitions. Section 5 would have conformed the changes resulting from section 4 of the bill with the rest of CWA as a whole by replacing the phrases "navigable waters of the United States" or "navigable waters" wherever they currently appear in the CWA with "waters of the United States." Unlike S. 787 , H.R. 5088 did not include a Savings Clause. The bill's principal sponsor said that creating a list of provisions not affected would be endless and of no legal value. Further, H.R. 5088 did not include either a provision addressing statutory construction or a provision calling for regulations. New regulations would be unnecessary, according to the bill's sponsor, because the legislation largely would codify existing regulatory language. Both proponents and critics of S. 787 and H.R. 5088 wanted to achieve predictability and certainty concerning what constitutes the geographic reach of CWA regulatory jurisdiction—that is, which waters are protected by the act and are subject to regulation, and which are not. Proponents worried that some waters are no longer protected, as a result of court rulings, while regulated entities said that uncertainties about interpreting the rulings have led to costly and time-consuming delays in obtaining jurisdictional determinations. But between the proponents and critics, there was wide disagreement whether the new statutory definition proposed in either bill, coupled with removing the word "navigable" from current law and other changes, would achieve the objective of clarity and certainty. The proposed definition of "waters of the United States" in both bills would have identified specific kinds of waters and wetlands that Congress intends be regulated. For example, prairie potholes and playa lakes are types of wetlands that typically are hydrologically isolated. Supporters said that including these as examples in the legislation would give a clear indication of congressional intent that the act's jurisdiction extends to hydrologically isolated waters—those waters that were the subject of the SWANCC ruling. The definitions in both bills were based on the existing Corps and EPA regulations, unchanged since 1993 (see footnote 9 ). Some stakeholder groups have urged Congress to codify the agencies' regulations verbatim in the statute in order to provide the greatest clarity of intent, but bill sponsors in the Senate rejected this approach and, instead, crafted a definition from several parts of the regulatory text (see Table A-1 ). Some said that complete regulatory codification alone would not solve all of the problems created by the Supreme Court's rulings, since those rulings were largely interpretations of those regulations. However, in a major change from the approach in prior House bills, the authors of H.R. 5088 in the 111 th Congress chose to include a statutory definition that more closely follows the full existing Corps-EPA regulatory language. Yet it also would have extended the regulatory definition in ways that some might criticize. In particular, H.R. 5088 would have included in the definition of "waters of the United States" "all ... international waters, including ... international wetlands," which are not included in the Corps-EPA regulations. Including "international waters" would seemingly extend the reach of the CWA beyond the traditional boundaries of national jurisdiction and could lead to disputes about whether particular international waters and wetlands are or should be regulated by the act. In another change from the regulatory definition, H.R. 5088 would have included in the term "waters of the United States" waters whose use, degradation, or destruction does or would affect "the obligations of the United States under a treaty, or the territory or other property belonging to the United States." One particular problem that both bills sought to remedy centers on the Court's discussion of "navigable waters." Proponents argued that the bills would restore the original intent of Congress when it enacted the Clean Water Act, which the Court misread, they contended. The conference report accompanying enactment of the CWA in 1972 contains this oft-quoted statement: The conferees fully intend that the term 'navigable waters' be given the broadest possible constitutional interpretation unencumbered by agency determinations which have been made or may be made for administrative purposes. For many supporters of S. 787 and H.R. 5088 , the core problem resulting from the Supreme Court's two rulings is the Court's discounting of the Corps' and EPA's broad interpretation of the word "navigable" in the statute. In SWANCC , the Court said, "the term 'navigable' in the statute has at least the import of showing us what Congress had in mind as its authority for enacting the CWA: its traditional jurisdiction over waters that were or had been navigable in fact or which could reasonably be so made." Further, the Scalia plurality opinion in Rapanos took a narrow view of jurisdiction, limiting the CWA's coverage to "those relatively permanent, standing or continuously flowing bodies of water: and "only those wetlands with a continuous surface connection to [other regulated wetlands.]" Environmentalists say that this would cut off jurisdiction for numerous waters and wetlands that may not be continuously, hydrologically connected to nearby waters and would put many upper-reach tributaries at risk of losing federal protection from pollution and destruction. In response, the 111 th Congress legislation was intended to clarify that Congress's primary concern in 1972 was to protect and broadly conserve waters from pollution. By removing the word "navigable" entirely from the statute, supporters said, the bills were intended to make clear Congress's original intent, while also following long-standing interpretation of the Corps and EPA. To supporters of the legislation, removing the word "navigable" is central to restoring the authority of the Clean Water Act. But retaining "navigable" is equally important to those who opposed the legislation. Critics contended that "navigability" is a term that has well recognized meaning. Without it, the scope of the law and federal jurisdiction would be overly broad, in their view, thus raising serious federalism issues, as a broadened CWA would conflict with the primary responsibility of states to manage and regulate water resources, including with regard to water allocation. The critics were not satisfied that the finding in section 2(5) of S. 787 , saying that Congress supports the policy in CWA section 101(g) regarding state authority over water rights and water allocation, would have addressed this concern. H.R. 5088 did not include a similar finding. Critics further contended that, by following the Corps' and EPA's long-standing interpretation, the legislation would have failed to do what its supporters asserted: rather than clarifying congressional intent, it would have expansively interpreted which waters are jurisdictional under the CWA. Both S. 787 and H.R. 5088 would have codified the regulatory encroachment that had developed in the years before the SWANCC ruling and that the Supreme Court sought to reverse, they said. Many environmentalists and other supporters of S. 787 and H.R. 5088 also were concerned that the Court's SWANCC and Rapanos rulings, while decided on statutory grounds, raised related questions about the outer limits of Congress's power to regulate waters with little or no connection to traditional navigable waters under the Commerce Clause of the Constitution. In particular, in the SWANCC ruling, the majority opinion stated: "Where an administrative interpretation of a statute invokes the outer limits of Congress' power, we expect a clear indication that Congress intended that result." In response, some commentators have argued that if Congress were to enact legislation to reverse the two rulings, it should definitively protect the nation's waters by explicitly stating the constitutional basis for the act's jurisdiction. Otherwise, they argue, future courts could build on past rulings to further challenge and limit Congress's authority in this area under the Constitution. One noted, "if Congress amends the CWA, it should include a clear jurisdictional element, even if that provision states only that the Act extends to the limits of, but not beyond, Congress' Commerce Clause power." As described above, section 7 of S. 787 would have included a Rule of Construction provision stating that the term "waters of the United States" shall be construed consistently with "the legislative authority of Congress under the Constitution." H.R. 5088 would have addressed this concern in section 2(3), stating that one of the purposes of the legislation was to define the term "waters of the United States" and to protect such waters, as authorized by provisions of the Constitution, including the Commerce Clause. Further, the definition in H.R. 5088 also would have applied to waters whose use, degradation, or destruction does or would affect U.S. treaty obligations (section 2 of article II) or U.S. territory or property (section 3 of article IV). However, legislative language addressing Congress's constitutional authority to regulate waters raised strong objections from critics who said that the language, together with eliminating "navigability" from the act, would have effectively expanded the law's reach, not simply clarified original congressional intent. Critics of the current legislation acknowledged that in the CWA Congress did broaden the federal regulatory authority over the nation's waters, but they contended that Congress intended to exercise its commerce power over navigation, and not its power over all things affecting interstate commerce. In response, supporters of S. 787 , who disputed the critics' narrow interpretation of the CWA's legislative history, pointed to another Rule of Construction provision in section 7 of that bill, which would have limited the term "waters of the United States" to the scope of federal jurisdiction under the CWA as interpreted and applied by EPA and the Corps prior to January 9, 2001 (the day of the SWANCC ruling). Likewise, section 3(12) of H.R. 5088 would have stated that the legislation would not affect the authority of the Corps or EPA under the provisions of the CWA as interpreted or applied by those agencies as of January 8, 2001 (the day before the SWANCC ruling). This point did not satisfy critics who were concerned that in the past the reach of the CWA has increased through "regulatory creep," and that this could well occur again in the future. The legislation approved by the Senate Environment and Public Works Committee in June 2009 was a modified version of the bill as introduced by Senator Feingold. During markup, the committee adopted an amendment co-sponsored by Senators Baucus, Klobuchar, and Boxer, while it rejected several amendments offered by Senators Barrasso and Vitter that would have limited the bill's application by, for example, striking some terms in the substitute amendment's definition of "waters of the United States" (e.g., prairie potholes, mudflats, wet meadows, and natural ponds) and exempting livestock production and agricultural cropping practices from CWA permitting requirements. Both before and after Senate markup, press accounts reported discussions about a number of legislative alternatives intended to, on the one hand, include additional permit exemptions sought by several industry groups, or, on the other hand, broaden bill language to more clearly assert constitutional authority to protect U.S. waters. Some of the requested exemptions were adopted (for example, for prior converted cropland), but others were not. The broadest possible language regarding constitutional authority, sought by many environmental groups, was not included in the bill as approved. After the committee's action, reports indicated that there continued to be great interest among both supporters and opponents in further changes to the bill. When he introduced H.R. 5088 , Representative Oberstar said that the House Transportation and Infrastructure Committee would not hold hearings on the bill, because it held three days of hearings on similar legislation in the 110 th Congress. The 111 th Congress bill reflected testimony at those hearings and subsequent comments, he said. No specific schedule for action on the bill was announced. The Administration did not take an official position on the legislation, although, as noted above, EPA, the Corps, and other agencies joined in a May 2009 letter expressing support for legislative clarification of issues raised by the two Supreme Court rulings. There was no further legislative action on either bill during the 111 th Congress. In light of the widely differing views of proponents and opponents, future prospects for similar legislation are highly uncertain. Future action also is uncertain because both of the two principal sponsors, Senator Feingold and Representative Oberstar, were defeated for re-election in November 2010. Nevertheless, the desire among stakeholders for greater certainty over which waters are jurisdictional under the Clean Water Act remains and could continue to draw attention in the 112 th Congress, although the direction of future legislation could differ from past proposals. One difficulty of legislating changes to the CWA in order to protect wetlands and other U.S. waters results from the fact that the complex scientific questions about such areas are not easily amenable to precise resolution in law. The debate over revising the act highlights the challenges of using the law to do so. The legal and policy questions associated with the SWANCC and Rapanos cases—concerning the outer geographic limit of CWA jurisdiction and the consequences of restricting that scope—have challenged regulators, landowners and developers, policymakers, and courts for more than 35 years. Ultimately, if Congress were to enact legislation like that in the 111 th Congress or an alternative, the implications of defining "waters of the United States" and making other statutory changes proposed in the legislation would depend on several factors: the new statutory language itself, accompanying legislative history, new regulations that the Corps and EPA might promulgate to implement the legislation, and interpretive case law resulting from likely future legal challenge. | In the 111th Congress, legislation was introduced that sought to clarify the scope of the Clean Water Act (CWA) in the wake of Supreme Court decisions in 2001 and 2006 that interpreted the law's jurisdiction more narrowly than prior case law. The Court's narrow interpretation involved jurisdiction over some geographically isolated wetlands, intermittent streams, and other waters. The two cases are Solid Waste Agency of Northern Cook County v. Army Corps of Engineers (SWANCC) and Rapanos v. United States. Bills to nullify the Court's rulings have been introduced repeatedly since the 107th Congress, but none had advanced until the 111th Congress. In June 2009, a Senate committee approved S. 787, the Clean Water Restoration Act. Companion legislation in the House, H.R. 5088 (America's Commitment to Clean Water Act), was introduced in April 2010. No further legislative action occurred on either bill. Under current law, the key CWA phrase which sets the act's reach is the phrase "navigable waters," defined to mean "the waters of the United States, including the territorial seas." Proponents of the current legislation contend that the Court misread Congress's intent when it enacted the CWA, and consequently the Court's ruling unduly restricted the scope of the act's water quality protections. Both S. 787 and H.R. 5088 would have replaced the phrase "navigable waters" in the CWA with "waters of the United States" and would have installed a definition of "waters of the United States," not found in the law now. The bills differed in how they would define the phrase. The Senate committee bill included a definition drawn from one paragraph of existing federal regulatory text, while H.R. 5088 included a longer definition based on the same regulatory language, but with some modifications. Both bills also included provisions affirming the constitutional basis for the act's jurisdiction. These provisions were intended to address the concern that the Court's rulings, while decided on statutory grounds, raised related questions about the outer limits of Congress's power to regulate waters with little or no connection to traditional navigable waters under the Commerce Clause of the Constitution. Proponents of the legislation, including many states and environmental advocacy groups, contended that the Court's ruling in these cases, and subsequent regulatory guidance by federal agencies, have unsettled several decades' worth of case law, misreading or ignoring congressional intent, and thus reinterpreting and narrowing the jurisdictional scope of the act. Supporters said that the intention was to return to the CWA regulatory jurisdiction that prevailed before the Court's rulings. On the other hand, critics, including many industry groups and development and home builder organizations, contended that the legislation would greatly expand federal regulatory jurisdiction of the CWA beyond interpretations that existed before the two Supreme Court rulings, not simply reaffirm congressional intent. They were concerned that the legislation, were it enacted, had the potential to be interpreted far more broadly than what was previously understood to be jurisdictional—thus causing more uncertainty, rather than clarifying the issue. Between proponents and critics, there was wide disagreement whether the new statutory definition proposed in either bill, coupled with other changes, would achieve the objective of clarity and certainty that has been broadly desired. In light of the differing views on the issues, future prospects for similar legislation in the 112th Congress are highly uncertain. The legal and policy questions associated with the SWANCC and Rapanos cases—concerning the outer geographic limits of CWA jurisdiction and consequences of restricting that scope—have challenged regulators, landowners and developers, and policymakers for more than 35 years. |
On May 25, 2006, the House passed H.R. 5429 to open ANWR to development(yeas 225, nays 201, Roll Call #209). On March 16, 2006, the Senate passed the FY2007 budgetresolution ( S.Con.Res. 83 ; yeas 51, nays 49, Roll Call #74; no written report). Its solereconciliation instruction (§201) directed the Committee on Energy and Natural Resources to reducebudget authority by an amount equal to predicted revenues from ANWR development. The Housebudget resolution, as passed ( H.Con.Res. 376 , H.Rept. 109-402 ), did not have anyANWR language, nor direction for the House Resources Committee. If the Senate version isretained in the conference report, the language would facilitate inclusion of ANWR development ina reconciliation bill; reconciliation bills are not subject to Senate filibusters. However, it is unclearwhether agreement will be reached, and the House is proceeding on appropriations bills in theabsence of a final agreement. The Arctic National Wildlife Refuge (ANWR) consists of 19 million acres in northeastAlaska. It is administered by the Fish and Wildlife Service (FWS) in the Department of the Interior(DOI). Its 1.5-million-acre coastal plain is viewed as one of the most promising U.S. onshore oil andgas prospects. According to the U.S. Geological Survey (USGS), the mean estimate of technically recoverable oil on the federally-owned land in the Refuge is 7.7 billion barrels (billion bbl), and thereis a small chance that over 11.8 billion bbl could be recovered on the federal lands. The meanestimate of economically recoverable oil (at $55/bbl in 2003 dollars) on the federal lands id 7.14billion bbl and there is a small chance that the federal lands could have over 10.7 billion bbl of economically recoverable oil. That amount would be nearly as much as the single giant field atPrudhoe Bay, found in 1967 on the state-owned portion of the coastal plain west of ANWR, nowestimated to have held almost 14 billion bbl of economically recoverable oil. Moreover, if Congress opens federal lands in ANWR to development, current law would alsoopen Native lands. In addition, nearby onshore development would also make state lands (alreadylegally open to development) along the coast more economically attractive, and as a result, thesestate lands might also become more attractive to industry. While only the federal lands wouldproduce income from bonus bids, rents, and royalties, USGS figures show that when state and Nativelands are considered, the mean estimates of economically recoverable oil rises to 9.7 billion bbl, andthere is a small chance that economically recoverable oil in the three ownerships might total over14.6 billion bbl. (See "Oil," below, for further discussion.) The Refuge, especially the nearly undisturbed coastal plain, also is home to a wide varietyof plants and animals. The presence of caribou, polar bears, grizzly bears, wolves, migratory birds,and other species in this wild area has led some to call the area "America's Serengeti." Someadvocates have proposed that the Refuge and two neighboring parks in Canada become aninternational park, and several species found in the area (including polar bears, caribou, migratorybirds, and whales) are protected by international treaties or agreements. The analysis below covers,first, the economic and geological factors that have triggered interest in development, then thephilosophical, biological, and environmental quality factors that have generated opposition to it. The conflict between high oil potential and nearly pristine nature in the Refuge creates adilemma: should Congress open the area for energy development or should the area's ecosystemcontinue to be protected from development, perhaps permanently? What factors should determinewhether, or when, to open the area? If the area is opened, to what extent can damages be avoided,minimized, or mitigated? To what extent should Congress legislate special management to guidethe manner of development, and to what extent should federal agencies be allowed to manage thearea under existing law? Basic information on the Refuge can be found in CRS Report RL31278 , Arctic NationalWildlife Refuge: Background and Issues , by [author name scrubbed], coordinator, (hereafter cited as CRS Report RL31278 ). For legal background, see CRS Report RL31115 , Legal Issues Related toProposed Drilling for Oil and Gas in the Arctic National Wildlife Refuge (ANWR) , by PamelaBaldwin (hereafter cited as CRS Report RL31115 ). State lands on the coastal plain are shown at http://www.dog.dnr.state.ak.us/oil/products/maps/maps.htm . An extensive presentation ofdevelopment arguments can be found at http://www.anwr.org , sponsored by a consortium ofgroups. Opponents' arguments can be found variously at http://www.alaskawild.org/ , http://www.dfait-maeci.gc.ca/can-am/washington/shared_env/default-en.asp , http://www.protectthearctic.com/ , or http://www.tws.org/OurIssues/Arctic/index.cfm?TopLevel=Home . The energy and biological resources of northern Alaska have been controversial for decades,from legislation in the 1970s, to a 1989 oil spill, to more recent efforts to use ANWR resources toaddress energy needs or to help balance the federal budget. In November 1957, an application wasfiled to the withdraw lands in northeastern Alaska to create an "Arctic National Wildlife Range " wasfiled. On December 6, 1960, after statehood, the Secretary of the Interior issued Public Land Order2214 reserving the area as the Arctic National Wildlife Range . The potential for oil and gas leasingwas expressly preserved at that time. In 1971, Congress enacted the Alaska Native Claims Settlement Act (ANCSA, P.L. 92-203)to resolve all Native aboriginal land claims against the United States. ANCSA provided formonetary payments and created Village Corporations that received the surface estate to roughly 22million acres of lands in Alaska, including some in the National Wildlife Refuge System. Under§22(g) of ANCSA, these lands in Refuges were to remain subject to the laws and regulationsgoverning use and development of the particular Refuge. Kaktovik Inupiat Corporation (KIC, theNative corporation in the ANWR area) received rights to three townships in the geographic coastalplain of ANWR (and a fourth was added later). ANCSA also created Regional Corporations whichcould select subsurface rights to some lands and full title to others. Subsurface rights in Refugeswere not available. The Alaska National Interest Lands Conservation Act of 1980 (ANILCA, P.L. 96-487 , 94Stat. 2371) renamed the Range as the Arctic National Wildlife Refuge, and expanded the Refuge,mostly south and west, to include another 9.2 million acres. Section 702(3) designated much of theoriginal Refuge as a wilderness area, but not the coastal plain, nor the newer portions of the Refuge. Instead, Congress postponed decisions on the development or further protection of the coastal plain. Section 1002 directed a study of ANWR's "coastal plain" (therefore often referred to as the 1002area ) and its resources. The resulting 1987 report (by FWS, USGS, and the Bureau of LandManagement (BLM)) was called the 1002 report or the Final Legislative Environmental ImpactStatement (FLEIS). ANILCA defined the "coastal plain" as the lands specified on an August 1980map -- language that was later administratively interpreted as excluding many Native lands, eventhough these lands are geographically part of the coastal plain. (1) Section 1003 of ANILCA prohibited oil and gas development in the entire Refuge, or "leasing or other development leading to production of oil and gas from the range" unless authorizedby an act of Congress. (For more history of legislation on ANWR and related developments, see CRS Report RL31278 ; for legal issues, see CRS Report RL31115 . For specific actions, includingkey votes, see CRS Report RL32838 , Arctic National Wildlife Refuge: Legislative Actions Throughthe 109th Congress, First Session , by Anne Gillis, [author name scrubbed], [author name scrubbed], and PamelaBaldwin.) Actions in the 109th Congress, First Session. Asexplained below, the ANWR debate has taken two basic routes in the 109th Congress: (a)reconciliation bills ( S. 1932 and H.R. 4241 ) under the budget process,which cannot be filibustered; and (b) other bills ( H.R. 6 , an energy bill; H.R. 2863 , Defense appropriations; and H.R. 5429 , a bill in the secondsession to open the Refuge to development) which can be. (2) (See "Omnibus Energy Legislation," below.) The FY2006 Senatebudget resolution ( S.Con.Res. 18 ) passed by the Senate Budget Committee includedinstructions to the Senate Committee on Energy and Natural Resources to "report changes in lawswithin its jurisdiction sufficient to reduce outlays by $33,000,000 in FY2006, and $2,658,000,000for the period of fiscal years 2006 through 2010." This resolution assumed that the committee wouldreport legislation to open ANWR to development, and that leasing would generate $2.5 billion inrevenues for the federal government over five years. An amendment ( S.Amdt. 168 ) onMarch 16, 2005, to remove these instructions was defeated (yeas 49, nays 51, Roll Call #52). TheHouse FY2006 budget resolution ( H.Con.Res. 95 , H.Rept. 109-17 ), while instructingthe House Resources Committee to provide somewhat smaller reductions in outlays, did not includeassumptions about ANWR revenues. The conference agreement ( H.Con.Res. 95 , H.Rept. 109-62 ) approved by theHouse and Senate on April 28, 2005, contained reductions in spending targets of $2.4 billion overFY2006 to FY2010 for the House Resources and Senate Energy Committees that would be difficultto achieve unless ANWR development legislation were passed. The inclusion of the Senate targetparticularly set the stage for including ANWR development legislation in a reconciliation bill, sincereconciliation bills cannot be filibustered. (Reconciliation bills require only a simple majority, ratherthan the 60 votes to stop a filibuster.) Under the Congressional Budget Act of 1974 (Titles I-IX of P.L. 93-344 , as amended; 2U.S.C. §§601-688), while the target reductions of the budget resolutions are binding on thecommittees, the associated assumptions are not. The Senate Energy and Natural ResourcesCommittee did choose to meet its target by recommending ANWR legislation, and the BudgetCommittee incorporated the recommendation as Title IV of S. 1932 , the DeficitReduction Act of 2005. (3) The House Resources Committee included ANWR legislation, and other spending reductions andoffsetting collections, thereby more than meeting the Committee's targets. These measures wereincorporated by the House Budget Committee into an omnibus reconciliation bill. However, beforethe House bill came to the floor, considerable opposition to the ANWR provision developed among a number of Republicans, 24 of whom signed a letter to the Speaker opposing its inclusion. Theprovision was removed before floor consideration; S. 1932 (with the text of H.R. 4241 inserted in lieu -- i.e., minus an ANWR provision) passed the House onNovember 18, 2005 (yeas 217, Nays 215; Roll Call #601). ANWR was a major issue in conference. In the end, the conference report ( H.Rept. 109-362 ) omitted ANWR development, and thePresident signed the measure on February 8, 2006 ( P.L. 109-171 ). ANWR in the Defense Appropriations Bill. AsCongress moved toward the December recess, and the chance of an agreement on reconciliation withan ANWR provision seemed to fade, Senator Stevens (Chair of the Defense AppropriationsSubcommittee) added an ANWR development title to the "must-pass" FY2006 Defenseappropriations bill ( H.R. 2863 ) during conference. Senators opposing ANWR wereforced to choose between filibuster of the popular measure or acquiescing to opening the Refuge. Members began a filibuster, and a cloture motion failed (yeas 56, nays 44, Roll Call #364). Whilethe conference report was approved, the relevant two Divisions (C and D) were removed throughHouse and Senate passage of S.Con.Res. 74 , correcting the enrollment of the bill ( P.L.109-148 ). Omnibus Energy Legislation. The House ResourcesCommittee considered and marked up its portion of the omnibus energy bill on April 13, 2005,before the bill was introduced. The provisions, including an ANWR development title, wereapproved by the committee and incorporated into the House version of H.R. 6 ,introduced on April 18. The House passed H.R. 6 on April 21 (yeas 249, nays 183, RollCall #132). The Senate passed its version of H.R. 6 on June 28, 2005 (yeas 85, nays 12,Roll Call #158). The Senate' bill contained no ANWR provisions. The ANWR title was omittedin the final measure ( P.L. 109-58 ). Actions in the 109th Congress, Second Session. On May 25, 2006, the House passed H.R. 5429 , to open ANWR to development (yeas225, nays 201, Roll Call #209). In nearly all respects, the bill was similar to the ANWR title in theHouse version of H.R. 6 . (See "Major Legislative Issues," below, for details.) Previously, the Senate passed the FY2007 budget resolution ( S.Con.Res. 83 ;yeas 51, nays 49, Roll Call #74; no written report) on March 16, 2006. Its sole reconciliationinstruction (§201) directs the Committee on Energy and Natural Resources to reduce budgetauthority by an amount equal to predicted bonus bids, royalties, and rental revenues from ANWRdevelopment. According to press reports, some Senators hoped that if the final budget resolutionhas such instructions -- on this topic alone -- there would be (a) an FY2007 reconciliation bill onANWR alone; and (b) sufficient bipartisan support for this single-purpose reconciliation bill in theHouse to counterbalance opposition of the 24 Republican Members who opposed its inclusion in amuch larger FY2006 reconciliation measure in the first session. The FY2007 budget resolution aspassed by the House on May 18, 2006, did not include any such instruction ( H.Con.Res. 376 , H.Rept. 109-402 ; yeas 218, nays 210, Roll Call #158). By late June 2006, no conferenceagreement had been reached on the FY2007 budget resolution, and a reconciliation bill will not beexpected without prior agreement on a budget resolution. The developed parts of Alaska's North Slope suggest promise for ANWR's prospects. Oil-bearing strata extend eastward from structures in the National Petroleum Reserve-Alaska throughthe Prudhoe Bay field, and may continue into and through ANWR's 1002 area. Oil. Estimates of ANWR oil potential, both oldand new, are based on limited data and numerous assumptions about geology and economics. Recent interest has centered especially on parts of the 1002 area west and north of the Marsh Creekanticline, roughly a third of the 1002 area. (See Figure 5 in CRS Report RL31278 .) The most recentgovernment geologic study of oil and natural gas prospects in ANWR, completed in 1998 by theUSGS, (4) found anexcellent chance (95%) that at least 11.6 billion bbl of oil are present on federal lands in the 1002area. (For comparison, annual U.S. oil consumption from all sources is about 7.5 billion bbl.) But the amount that would be economically recoverable depends on the price of oil, andcrude oil prices have increased substantially in the last two years, bringing about $70/bbl in thefutures market in late June 2006. In its latest economic assessment, USGS estimated that, at $55/bblin 2003 dollars, there is a 95% chance that 3.9 billion bbl or more could be economically recoveredand a 5% chance of 10.7 billion bbl or more on the federal lands. (5) These estimates reflect newfield development practices, and cost and price changes since USGS's 1998 assessment. Moreover,as noted earlier, about one-third more oil may be under adjacent state waters and Native lands. (6) The state waters adjacent tothe 1002 area are far from any support system or land-based development and any oil under themis not presently economic. If onshore development were to occur, allowing leases in state waters tobenefit from onshore transportation systems (airstrips, haul roads, pipelines, etc.) and supply bases(gravel mines, water treatment plants, staging areas, etc.), these areas might become more attractiveto industry. In addition, a lifting of the statutory prohibition on oil and gas development in theRefuge would not only lift the ban on Native lands but might make smaller fields on Native landsmore attractive, if they were able to share facilities with nearby development, or if they becamepreferred locations for support facilities, due to fewer restrictions on surface development. (7) The U.S. Energy Information Administration estimated that, at a relatively fast developmentrate, production would peak 15-20 years after the start of development, with maximum dailyproduction rates of roughly 0.015% of the resource. Production at the slower rate would peak about25 years after the start of development, at a daily rate equal to about 0.0105% of the resource. Peakproduction associated with a technically recoverable resource of 5.0 billion bbl at the fasterdevelopment rate would be 750,000 bbl per day, roughly 4% of current U.S. petroleum consumption(about 20.5 million bbl per day). (For economic impacts of development, see CRS Report RS21030 , ANWR Development: Economic Impacts , by [author name scrubbed].) Natural Gas. Large quantities of natural gas arealso estimated to be in the 1002 area. Being able to sell this gas probably would enhancedevelopment prospects of the 1002 area and the rest of the North Slope -- oil as well as gas. However, there currently is no way to deliver the gas to market. Higher gas prices in the last fewyears increased interest in the construction of a pipeline to transport natural gas from the North Slopeto North American markets -- directly and/or via shipment in liquified form in tankers. The 108thCongress acted to facilitate such a pipeline through loan guarantees ( P.L. 108-324 ). Advanced Technologies. As North Slopedevelopment proceeded after the initial discovery at Prudhoe Bay, oil field operators developed lessenvironmentally intrusive ways to develop arctic oil, primarily through innovations in technology. New drilling bits and fluids and advanced forms of drilling -- such as extended reach, horizontal, and"designer" wells -- permit drilling to reach laterally far beyond a drill platform, with the currentrecord being seven miles at one site in China. (See CRS Report RL31022(pdf) , Arctic PetroleumTechnology Developments , by [author name scrubbed], [author name scrubbed], and Terry R. Twyman, for moreinformation.) Reducing the footprints of development has been a major goal of development. Improvedice-based transportation infrastructure can serve remote areas during the exploratory drilling phaseon insulated ice pads. However, for safety reasons, use of ice roads and pads may be limited in themore hilly terrain of the 1002 area: on a slope, gravel structures provide greater traction than icestructures, and have been permitted for exploration on state lands south of Prudhoe Bay. In additionto ice technology, industry has been experimenting with essentially modified offshore platformsmounted on supporting legs to hold exploration rigs above the tundra. These rigs may offer accessfor exploration in areas lacking sufficient water or too hilly to permit ice technology. At the same time, warming trends in arctic latitudes have already shortened winter accessacross the tundra by 50% over the last 30 years and led to changes in the standards for use of iceroads. If these trends continue, heavy reliance on ice technology could be infeasible and might forcegreater reliance on gravel structures, with inherently longer-lasting impacts. Rigid adherence to icetechnology (instead of gravel construction) might put some marginal fields out of reach due to thehigh cost of exploration, development, or operation. Moreover, fields that begin with few roads mayexpand their gravel road network as the field expands. Because it is held as a model of modern development, the history of the Alpine field, locatedalong the border of the National Petroleum Reserve-Alaska (NPRA) west of Prudhoe Bay, isrelevant. Run by ConocoPhillips, it was considered innovative because of the short road connectingthe two initial pads, and the lack of a road connection with the remainder of North Slopedevelopment, except in winter via ice road. However, with the approval of five additional pads, theexpansion of the field will add roughly 27.5 miles of gravel roads to the existing 3 miles of roads,and create 1,845 acres of disturbed soils, including 316 acres of gravel mines or gravelstructures. (8) Approximately 150 miles of roads would be constructed if the field is fully developed. If ANWRdevelopment follows a similar pattern, it is unclear whether energy development could be held toa stringent limit on road or other gravel construction and still allow producers to have access tootherwise economic fields. Proponents of opening ANWR note that these technologies would mitigate the environmentalimpact of petroleum operations, but not eliminate it. Opponents maintain that facilities of any sizewould still be industrial sites and would change the character of the coastal plain, in part because thesites would be spread out in the 1002 area and connected by pipelines and (probably) roads. The FLEIS rated the Refuge's biological resources highly: "The Arctic Refuge is the onlyconservation system unit that protects, in an undisturbed condition, a complete spectrum of the arcticecosystems in North America" (p. 46). It also said "The 1002 area is the most biologicallyproductive part of the Arctic Refuge for wildlife and is the center of wildlife activity" (p. 46). Thebiological value of the 1002 area rests on intense productivity in the short arctic summer; manyspecies arrive or awake from dormancy to take advantage of this richness, and leave or becomedormant during the remainder of the year. Caribou have long been the center of the debate over thebiological impacts of Refuge development, but other species have also been at issue. Among theother species most frequently mentioned are polar bears, musk oxen, and the 135 species ofmigratory birds that breed or feed there. (For more information on biological resources of the 1002area, see CRS Report RL31278 .) An updated assessment of the array of biological resources in the coastal plain was publishedin 2002 by the Biological Research Division of USGS. (9) The report analyzed new information about caribou, musk oxen,snow geese and other species in the Arctic Refuge, and concluded that development impacts wouldbe significant. A follow-up memo (10) on caribou by one of the assessment's authors to the Director ofUSGS clarified that if development were restricted to the western portion of the refuge (an optionthat was being considered by the Administration), the Porcupine Caribou Herd (PCH) would not beaffected during the early calving period, since the herd is not normally found in the area at that time. Any impacts that might occur when the herd subsequently moves into the area were not discussedin the memo. A March 2003 report by the National Academy of Sciences (NAS) highlighted impacts ofexisting development at Prudhoe Bay on arctic ecosystems. (11) Among the harmfulenvironmental impacts noted were changes in the migration of bowhead whales, in distribution andreproduction of caribou, and in populations of predators and scavengers that prey on birds. NASnoted beneficial economic and social effects of oil development in northern Alaska and creditedindustry for its strides in decreasing or mitigating environmental impacts. It also said that somesocial and economic impacts have not been beneficial. The NAS report specifically avoideddetermining whether any beneficial effects were outweighed by harmful effects. FWS has recently begun a review to determine whether polar bears should be listed asthreatened under the Endangered Species Act (71 Fed. Reg. 6745, Feb. 9, 2006). Among theinformation to be considered are the effects of accelerated polar climate change on polar bears andtheir prey (primarily seals), threats to denning habitat, and effects of oil and gas development. Thelisting of polar bears could have a significant impact on energy development in ANWR, since theFLEIS stressed the unusual importance of the 1002 area as a location for dens of pregnant femalepolar bears. In a larger context, many opponents of development see the central issue as whether the areashould be maintained as an intact ecosystem -- off limits to development -- not whether developmentcan be accomplished in an environmentally sound manner. In terms that emphasize deeply heldvalues, supporters of wilderness designation argue that few places as untrammeled as the 1002 arearemain on the planet, and fewer still on the same magnificent scale. Any but the most transitoryintrusions (e.g., visits for recreation, hunting, fishing, subsistence use, research) would, in their view,damage the integrity and the "sense of wonder" they see in the area. The mere knowledge that apristine place exists, regardless of whether one ever visits it, can be important to those who view thedebate in this light. Some of the issues that have been raised most frequently in the current ANWR debate aredescribed briefly below. In addition to the issue of whether development should be permitted at all,key aspects of the current debate include restrictions that might be specified in legislation, includingthe physical size -- or footprints -- of development; the regulation of activities on Native lands; thedisposition of revenues; labor issues; oil export restrictions; compliance with the NationalEnvironmental Policy Act; and other matters. (References below to the "Secretary" refer to theSecretary of the Interior, unless stated otherwise.) The analysis below describes H.R. 5429 as passed by the House; the provisions of Division C of the conference report on H.R. 2863 (the Defense bill), and §4001 of S. 1932 , the Senatereconciliation bill. Because of the lack of detail in §4001, many aspects of ANWR leasing wouldbe left to administrative decisions, with levels of public participation in some instances curtailedalong with judicial review, as noted below. Environmental Direction. If Congress authorizesdevelopment, it could address environmental matters in several ways. Congress could impose ahigher standard of environmental protection because the 1002 area is in a national wildlife refugeor because of the fragility of the arctic environment, or it could legislate a lower standard to facilitatedevelopment. The choice of administering agency and the degree of discretion given to it could alsoaffect the approaches to environmental protection. For example, Congress could make either FWSor BLM the lead agency (with many observers assuming that FWS management would give moresupport to protecting wildlife values.. It could include provisions requiring use of "the best availabletechnology" or "the best commercially available technology" or some other general standard. Congress could also limit judicial review of some or all of a development program, includingstandards and implementation. Or, Congress could leave much of the environmental direction to theSecretary. H.R. 5429 would name BLM as the lead agency. Section 7(a) would require theSecretary to administer the leasing program so as to "result in no significant adverse effect on fishand wildlife, their habitat, and the environment, [and to require] the application of the bestcommercially available technology...." Section 3(a)(2) would also require that this program be done"in a manner that ensures the receipt of fair market value by the public for the mineral resources tobe leased." It is unclear how the two goals of environmental protection and fair market value are torelate to each other (e.g., if environmental restrictions make some fields uneconomic). Subsections6(a)(3) and (5) would require lessees to be responsible and liable for reclamation of lands within theCoastal Plain (unless the Secretary approves other arrangements), and the lands must supportpre-leasing uses or a higher use approved by the Secretary. There are requirements for mitigation,development of regulations, and other measures to protect the environment. These includeprohibitions on public access to service roads, and other transportation restrictions. Other provisionsmight also affect environmental protection. (See "Judicial Review," below.) H.R. 2863 (§7) was similar to H.R. 5429. S. 1932 (§4001(b)(1)(B)) directed theSecretary to establish and implement an "environmentally sound" leasing system, but did not providefurther direction. The Size of Footprints. Newer technologiespermit greater consolidation of leasing operations, which tends to reduce the size and theenvironmental impacts of development. One aspect of the debate in Congress has focused on thesize of the footprints in the development and production phases of energy leasing. The term footprint does not have a universally accepted definition, and therefore the types of structures fallingunder a "footprint restriction" are arguable (e.g., the inclusion of exploratory structures, roads, gravelmines, port facilities, etc.). (12) In addition, it is unclear whether exploratory structures, orstructures on Native lands, would be included under any provision limiting footprints. (13) The new mapaccompanying S. 1932 includes the Native lands in its definition of the Coastal Plainleasing area, but how the federal leasing program will apply to those lands is not clear. See "NewMaps," below. Development advocates have emphasized a limit on the acreage of surface disturbance, whileopponents have emphasized the dispersal of not only the structures themselves but also their impactsover much of the 1.5 million acres of the 1002 area. One single consolidated facility of 2,000 acres(3.1 square miles) would not permit full development of the 1002 area. Instead, full developmentof the 1002 area would require that facilities, even if limited to 2,000 acres in total surface area, bewidely dispersed. Dispersal is necessary due to the limits of lateral (or extended reach) drilling: thecurrent North Slope record for this technology is 4 miles. If that record were matched on all sidesof a single pad, at most about 4% of the Coastal Plain could be developed from the single pad. Evenif the current world record (7 miles) were matched, only about 11% of the 1002 area could beaccessed from a single compact 2,000-acre facility. In addition, drilling opponents argue that energyfacilities have impacts on recreation, subsistence, vegetation, and wildlife well beyond areas actuallycovered by development. H.R. 5429 (§7(d)(9)) would provide for consolidation of leasing operations toreduce environmental impacts of development. Section 7(a)(3) would further require, "consistentwith the provisions of section 3" (which include ensuring receipt of fair market value for mineralresources), that the Secretary administer the leasing program to "ensure that the maximum amountof surface acreage covered by production and support facilities, including airstrips and any areascovered by gravel berms or piers for the support of pipelines, does not exceed 2,000 acres on theCoastal Plain." The terms used are not defined in the bill and therefore the range of structurescovered by the restriction is arguable (e.g., whether roads, gravel mines, causeways, and watertreatment plants would be included under this provision). In addition, the wording might not applyto structures built during the exploratory phase. An essentially identical provision is in S. 1932 (§4001(f)) and H.R. 2863 (§7(a)(3)). H.R. 2863 alsocalled for facility consolidation (§7(d)(4)) and for the Secretary to develop a consolidation plan(§7(f)). Native Lands. Generally, the Alaska Natives(Inuit) along the North Slope have supported ANWR development, while the Natives of interiorAlaska (Gwich'in) have opposed it, though neither group is unanimous. ANCSA resolved aboriginalclaims against the United States by (among other things) creating Village Corporations that couldselect surface lands and Regional Corporations that could select surface and subsurface rights aswell. Kaktovik Inupiat Corporation (KIC) selected surface lands (originally approximately threetownships) on the coastal plain of ANWR, but these KIC lands were administratively excluded frombeing considered as within the administratively defined "1002 Coastal Plain." A fourth townshipwas added by ANILCA, and is within the defined Coastal Plain. The four townships, totalingapproximately 92,000 acres, are all within the Refuge and subject to its regulations. The ArcticSlope Regional Corporation (ASRC) obtained subsurface rights beneath the KIC lands pursuant toa 1983 land exchange agreement. In addition, there are currently thousands of acres of conveyed orclaimed individual Native allotments in the 1002 area that are not expressly subject to its regulations. Were oil and gas development authorized for the federal lands in the Refuge, development wouldthen be allowed or become feasible on the nearly 100,000 acres of Native lands, possibly free of anyacreage limitation applying to development on the federal lands, depending on how legislation isframed. The extent to which the Native lands could be regulated to protect the environment isuncertain, given the status of allotments and some of the language in the 1983 Agreement withASRC. None of the current bills address development on the Native lands in ANWR. (See also CRS Report RL31115 , and "New Maps," below.) New Maps. During the 109th Congress, both theHouse and Senate have created new maps of the "Coastal Plain" that will be the subject of leasing. (See CRS Report RS22326 , Legislative Maps of ANWR , by [author name scrubbed] and [author name scrubbed](hereafter cited as "CRS Report RL22326").) The Coastal Plain was defined in §1002 of ANILCAas the area indicated on an August, 1980 map. An administrative articulation of the boundary wasauthorized by §103(b) of ANILCA, and has the force of law. The 1980 map is now missing. Sincethe 1980 map is missing, evaluating whether the administrative description properly excluded theNative lands is impossible, and, as noted, the fourth Native township (selected later) is not excludedfrom the Coastal Plain by that description. The legal description required under ANILCA wascompleted in 1983 (48 Fed. Reg. 16858, Apr. 19, 1983; 50 C.F.R. Part 37, App. I), but questions alsosurround this description. (See CRS Report RL31115 .) The description excluded three Nativetownships from the articulated Coastal Plain. Some bills in various Congresses also have excludedthese same Native lands by referring to the 1980 map and the administrative description. S. 1932 (§4001(a)) provided a new map, dated September 2005, to accompanyits submission to the Budget Committee for reconciliation. This map included all Native lands inthe term Coastal Plain to which the leasing provisions would apply. (See Figure 1 in CRS Report RS22326 .) However, the bill text did not refer to the Native lands, and the extent of federal controlof Native lands intended or accomplished by the map change is not clear. For example, the billdirected a 50/50 revenue split between the State of Alaska and the federal government, therebypossibly giving rise to Native claims for compensation for revenues from their lands. If this revenueprovision was not intended to apply to Native lands, it is not clear whether other provisions alsomight not apply. Also, some of the terms in the 1983 Agreement call for an express congressionaloverride to negate some of its terms, and the text of the bill did not discuss the Native lands or theAgreement. The Defense bill also rested on a USGS map dated September 2005 (§2(4)); it is notclear whether the map is the one referred to in the Senate bill. H.R. 5429 does not refer to a map, but instead defines the Coastal Plain as thearea described in 50 C.F.R. Part 37, App. I (the administrative articulation of the Coastal Plain). Asdiscussed, this regulation currently excludes three Native townships, but leaves the fourth within theCoastal Plain, and arguably the leasing provisions would apply to it. The House bill raises thepossibility that the defined Coastal Plain could be expanded or reduced at some later time throughrule-making procedures. Revenue Disposition. Another issue is whetherCongress may validly provide for a disposition of revenues other than the (essentially) 90% state -10% federal split mentioned in the Alaska Statehood Act. A court in Alaska v. United States (35Fed. Cl. 685, 701 (1996)) indicated that the language in the Statehood Act means that Alaska is tobe treated like other states for federal leasing conducted under the Mineral Leasing Act (MLA),which contains (basically) a 90%- 10% split. Arguably, Congress can establish a different, non-MLA leasing regimen -- for example, the separate leasing arrangements that govern the National PetroleumReserve-Alaska, where the revenue sharing formula is 50/50 -- but this issue was not before the courtand hence remains an open issue. (For more on this issue, see CRS Report RL31115 .) Under §3(a) of H.R. 5429 , the Secretary is to establish and implement a leasingprogram for ANWR in accordance with the bill, and §9 states that "notwithstanding any otherprovision of law," revenues are to be shared 50/50 between the federal government and Alaska (withsome special provisions on the federal share). It can be argued that the leasing program is not "underthe MLA" and hence the different revenue-sharing provisions are not contrary to the AlaskaStatehood Act. However, if a court struck down the revenue-sharing provision, it would then haveto determine if that provision was severable -- whether Congress would have enacted the rest of thestatute without the flawed provision. H.R. 5429 does not have a "severability" provisionthat states the intent of Congress in this regard. If a court both struck down the revenue-sharingprovision and found it to be severable, then Alaska could receive 90% of ANWR revenues. Similarly, S. 1932 also did not state that leasing would be under the MLA, andalso set out many requirements that differ from those of the MLA. "Notwithstanding any otherprovision of law," it too directed that receipts from leasing and operations "authorized under thissection" be divided equally between the state of Alaska and the federal government. Because of thechange in the Senate definition of Coastal Plain and the accompanying map, the bill might haveincluded revenues from Native lands in the 50/50 split. The Defense bill (Division D, §1) alsoprovided for a 50/50 split, and contained various provisions for distribution of certain percentagesof the federal share to various purposes, including hurricane relief. In addition, §14 of Division Cof the Defense bill contained a severability provision that provided explicitly that if any portion ofeither Division C or D were held to be unconstitutional , the remainder of the two divisions wouldnot be affected. It is not clear to what provisions the severability language might have applied. Asdiscussed, some issues regarding the revenue split might remain, but those issues might rest oncontractual interpretations, rather than constitutional concerns. However, if the 50/50 revenue splitwere struck down, Alaska could receive 90% of the ANWR revenues and, if so, fewer federal fundswould be available for programs premised on the 50% federal share. Project Labor Agreements (PLAs). A recurringissue in federal and federally funded projects is whether project owners or contractors should berequired, by agreement, to use union workers. PLAs establish the terms and conditions of work thatwill apply for the particular project, and may also specify a source to supply the craft workers. Proponents of PLAs, including construction and other unions, argue that PLAs ensure a reliable,efficient labor source, help keep costs down, and ensure access for union members to federal andfederally funded projects. Opponents, including nonunion firms and their supporters, believe thatPLAs inflate costs, reduce competition, and unfairly restrict access to those projects. There is littleindependent information to weigh the validity of the conflicting assertions. H.R. 5429 (§6(b)) would direct the Secretary to require lessees in the 1002 areato "negotiate to obtain a project labor agreement" -- "recognizing the Government's proprietaryinterest in labor stability and the ability of construction labor and management to meet the particularneeds and conditions of projects to be developed...." H.R. 2863 (§6(b)) containedsimilar provisions, but S. 1932 had no similar provision. Oil Export Restrictions. Export of North Slopeoil in general, and any ANWR oil in particular, has been an issue, beginning at least with theauthorization of the Trans Alaska Pipeline System (TAPS) and continuing into the current ANWRdebate. The Trans Alaska Pipeline Authorization Act ( P.L. 93-153 , 43 U.S.C.§1651 et seq.)specified that oil shipped through it could be exported, but only under restrictive conditions. WhenCalifornia prices fell in the mid-1990s, causing complaints from California and North Slopeproducers, Congress amended the MLA to provide that oil transported through the pipeline may beexported unless the President finds, after considering stated criteria, that exports are not in thenational interest ( P.L. 104-58 , 30 U.S.C. §185(s)). North Slope exports rose to a peak of 74,000bbl/day in 1999, or 7% of North Slope production. These exports ceased voluntarily in May 2000,and have since been minimal. If Congress wished to limit export of oil from the 1002 area byapplying the restriction to oil transported through TAPS, the restriction might not be effective: oilshipment via tanker could become practical if current warming trends in the Arctic continue and ifcrude oil prices provide sufficient incentive. Recent proposed bans on export of ANWR oil have not been tied to shipment through TAPS. H.R. 5429 (§6(a)(8)) would prohibit any export of oil produced in the 1002 area as acondition of a lease. S. 1932 (§4001(g)) contained a similar provision, as did H.R. 2863 (§12). However, inasmuch as other North Slope oil is allowed to beexported, it would appear that prohibiting the export of ANWR oil could be moot: producers aimingto tap the export market would substitute other North Slope oil to meet the demand. NEPA Compliance. The National EnvironmentalPolicy Act of 1969 (NEPA, P.L. 91-190; 43 U.S.C. §§4321-4347) requires the preparation of anenvironmental impact statement (EIS) to examine major federal actions with significant effects onthe environment, and to provide public involvement in agency decisions. The last full EISexamining the effects of leasing development in ANWR was completed in 1987, and some observersassert that a new EIS is needed to support development now. NEPA requires an EIS to analyze anarray of alternatives, including a "no action" alternative. Some development supporters would liketo see the process truncated, in light of past analyses and to hasten production. Developmentopponents, and NEPA supporters, argue that the 19-year gap and changed circumstances since thelast analysis necessitates a thorough update, and stress the flaws they found in the 1987 FLEIS. Section 3(c) of H.R. 5429 would deem the 1987 FLEIS to satisfy NEPArequirements with respect to prelease activities and the development and promulgation of leasingregulations, and require the Secretary to prepare an EIS of all other actions authorized by the subtitlebefore the first lease sale. Consideration of alternatives would be limited to two choices, a preferredleasing action and a "single leasing alternative." Compliance with the subsection would be deemedto satisfy all requirements to analyze the environmental effects of proposed leasing. H.R. 2863 (Division C, §3(c)) was essentially identical. S. 1932 (§4001(c)) had similar provisions, but did not expressly require an EIS for leasing. Compatibility with Refuge Purposes. Undercurrent law for the management of national wildlife refuges (16 U.S.C.§668dd), and under 43 C.F.R.§3101.5-3 for Alaskan refuges specifically, an activity may be allowed in a refuge only if it iscompatible with the purposes of the particular Refuge and with those of the Refuge System as awhole. Section 3(c) of H.R. 5429 , §3(c) of H.R. 2863 , and §4001(c) of S. 1932 state that the energy leasing program and activities in the coastal plain aredeemed to be compatible with the purposes for which ANWR was established and that no furtherfindings or decisions are required to implement this determination. This language appears toeliminate the usual compatibility determination processes. The extent of leasing "activities" thatmight be included as compatible is debatable and arguably might encompass necessary supportactivities, such as construction and operation of port facilities, staging areas, and personnel centers. Judicial Review. Leasing proponents urge thatany ANWR leasing program be put in place promptly and argue that expediting, curtailing, orprohibiting judicial review is desirable to achieve that goal. Judicial review can be expeditedthrough procedural changes such as reducing the time limits within which suits must be filed,avoiding some level of review, curtailing the scope of the review, or increasing the burden imposedon challengers. H.R. 5429 (§8) would require that any complaints seeking judicialreview be filed within 90 days. Section 8(a)(2) provides that suits are to be filed in the Court ofAppeals in Washington, DC, as did H.R. 2863 (§8(a)). H.R. 5429 (§8(a)(3))would also limit the scope of review by stating that review of a secretarial decision, includingenvironmental analyses, would be limited to whether the Secretary complied with the terms of theANWR subtitle, that it would be based on the administrative record, and that the Secretary's analysisof environmental effects is "presumed to be correct unless shown otherwise by clear and convincingevidence to the contrary." This standard is unclear, but in this context arguably could makeoverturning a decision of the Secretary more difficult. S. 1932 and H.R. 2863(§4001(c) and §8(a) respectively) were similar. S. 1932 omitted the presumptionconcerning the Secretary's analysis of environmental effects. Special Areas. Some have supported setting asidecertain areas in the Coastal Plain for protection of their ecological or cultural values. This could bedone by designating the areas specifically in legislation, or by authorizing the Secretary to set asideareas to be selected after enactment. The FLEIS identified four special areas that together total morethan 52,000 acres. The Secretary could be required to restrict or prevent development in these areasor any others that may seem significant, or to select among areas if an acreage limitation on suchset-asides is imposed. H.R. 5429 (§3(e)) would allow the Secretary to set aside up to45,000 acres (and names one specific special area) in which leases, if permitted, would forbid surfaceoccupancy. Because the four special areas are larger than this total, the Secretary would be requiredto select among these areas or any others that may seem significant. Section 3(f) also states that theclosure authority in the ANWR title is to be the Secretary's sole closure authority, which might limitpossible secretarial actions under the Endangered Species Act. H.R. 2863 (§3(e)) wasessentially identical. S. 1932 had no provision for special areas. Non-Development Options. Several options areavailable to Congress that would either postpone or forbid development, unless Congress were tochange the law. These options include allowing exploration only, designating the 1002 area aswilderness, and taking no action. Some have argued that the 1002 area should be opened toexploration first, before a decision is made on whether to proceed to leasing. Those with this viewhold that with greater certainty about any energy resources in the area, a better decision could bemade about opening some or all of the 1002 area for leasing. This idea has had little support overthe years because various interests see insufficient gain from such a proposal. ( CRS Report RL31278 discusses the pros and cons of this approach.) Another option is wilderness designation. Energy development is not permitted in wildernessareas, unless there are pre-existing rights or unless Congress specifically allows it or reverses thedesignation. Wilderness designation would tend to preserve existing recreational opportunities andrelated jobs, as well as the existing level of protection of subsistence resources, including thePorcupine Caribou Herd. H.R. 567 and S. 261 would designate the 1002area as part of the National Wilderness System. Under ANILCA and the 1983 Agreement, development of the surface and subsurfaceholdings of Native corporations in the Refuge is precluded as long as oil and gas development is notallowed on the federal lands in the Refuge. Because current law prohibits development unlessCongress acts, the no action option also prevents energy development on both federal and Nativelands. Those supporting delay often argue that not enough is known about either the probability ofdiscoveries or about the environmental impact if development is permitted. Others argue that oildeposits should be saved for an unspecified "right time." P.L. 109-58 ( H.R. 6 , Barton) An omnibus energy act; Title XXII opens ANWR coastal plain to energy development. Introduced April 18, 2005; considered and marked up by Committee on Resources April 13, 2005(no report). Considered by House April 20-21, 2005. Markey/Johnson amendment( H.Amdt. 73 ) to strike ANWR title rejected (yeas 200, nays 231, Roll Call #122) April20. Passed April 21, 2005 (yeas 249, nays 183, Roll Call #132). Passed Senate, with no ANWRdevelopment provision, June 28, 2005 (yeas 85, nays 12, Roll Call #158). Conference agreementomits ANWR title; signed by President August 8, 2005. P.L. 109-148 ( H.R. 2863 ) Provides for Defense appropriations. Conference report ( H.Rept. 109-359 ) filed December18, 2005 (Division C & D provided for ANWR development and revenue disposition). Cloturemotion on filibuster on ANWR provision failed December 21, 2005 (yeas 56, nays 44, Roll Call#364). S.Con.Res. 74 corrected enrollment of the bill to delete Divisions C and D. Passed Senate December 21, 2005 (yeas 48, nays 45, Roll Call #365). Passed House December 22,2005 on voice vote. Signed by President, December 30, 2005. P.L. 109-171 ( S. 1932 ) Omnibus budget reconciliation; Title IV would have provided for ANWR development. Introduced, referred to Committee on Budget, and reported October 27, 2005 (no written report). Passed Senate November 3, 2005 (yeas 52, nays 47, Roll Call #303). Passed House (amended)November 18, 2005. (For House action, see also H.R. 4241 .) Title IV dropped inconference. House approved conference report ( H.Rept. 109-362 ; yeas 212, nays 206, Roll Call#670). Senate approved report with an amendment (yeas 51, nays 50, Roll Call #363), December21, 2005. House agreed to Senate amendment (yeas 216, nays 214, Roll Call #4), February 1, 2006. Signed by President, February 8, 2006. H.Con.Res. 95 (Nussle) FY2006 budget resolution, included spending targets for Committee on Resources. Introduced, referred to Committee on Budget, and reported March 11, 2005 ( H.Rept. 109-17 ). Passed House March 17, 2005 (yeas 218, nays 214, Roll Call #88). Passed (amended) Senate in lieuof S.Con.Res. 18 (no report). April 28, 2005, House approved conference report( H.Rept. 109-62 ; yeas 214, nays 211, Roll Call #149), and Senate approved conference report (yeas52, nays 47, Roll Call #114). H.Con.Res. 376 (Nussle) FY2007 budget resolution, included spending targets for Committee on Resources. Introduced, referred to Committee on Budget, and reported March 31, 2006 ( H.Rept. 109-402 ). Passed House May 18, 2006 (yeas 218, nays 210, Roll Call #158). H.R. 4241 (Nussle) FY2006 budget reconciliation. Title to open ANWR struck before floor consideration. Introduced November 7, 2005; passed House November 18, 2005 (yeas 217, nays 215, Roll Call#601). Inserted in lieu of the text of S. 1932 . H.R. 5429 (Pombo) Would create a leasing program to open ANWR to energy development. Introduced May 19,2006; referred to Committee on Resources; passed House May 25, 2006 (yeas 225, nays 201, RollCall #209). S.Con.Res. 18 (Gregg) FY2006 budget resolution; includes spending targets for Committee on Energy and NaturalResources. Introduced January 31, 2005; referred to Committee on Budget. Reported March 10,2005 (no written report). Cantwell amendment ( S.Amdt. 168 , relating to ANWR)defeated March 16, 2005 (yeas 49, nays 51, Roll Call #52). Passed Senate March 17, 2005 (yeas 51,nays 49, Roll Call #81). Senate incorporated measure in H.Con.Res. 95 as anamendment; passed H.Con.Res. 95 in lieu. S.Con.Res. 83 (Gregg) FY2007 budget resolution; direction for cuts in mandatory spending targets only forCommittee on Energy and Natural Resources. Introduced and reported by Committee on Budget onMarch 10, 2006 (no written report). Passed Senate March 16, 2006 (yeas 51, nays 49, Roll Call#74). National Academy of Sciences Cumulative Environmental Effects of Oil and Gas Activities onAlaska's North Slope (March 2003). 452 p. (See http://www.nas.edu/ .) Nellemann, C. and R. D. Cameron. Cumulative Impacts of an Evolving Oil-field Complex on theDistribution of Calving Caribou . Canadian Jour. of Zoology. 1998. Vol. 76, p. 1425. U.S. Department of the Interior. Bureau of Land Management. Overview of the 1991 ArcticNational Wildlife Refuge Recoverable Petroleum Resource Update . Washington, DC, April8, 1991. 2 maps. U.S. Department of the Interior. Fish and Wildlife Service, Geological Survey, and Bureau of LandManagement. Arctic National Wildlife Refuge, Alaska, Coastal Plain Resource Assessment . Report and Recommendation to the Congress of the United States and Final LegislativeEnvironmental Impact Statement. Washington, DC, 1987. U.S. Department of the Interior. Geological Survey. The Oil and Gas Resource Potential of theArctic National Wildlife Refuge 1002 Area, Alaska . 1999. 2 CD set. USGS Open FileReport 98-34. U.S. Department of the Interior. Geological Survey. Arctic Refuge Coastal Plain TerrestrialWildlife Research Summaries . Biological Science Report USGS/BRD/BSR-2002-0001. U.S. Department of the Interior. Geological Survey. "Evaluation of additional potentialdevelopment scenarios for the 1002 Area of the Arctic National Wildlife Refuge." Memorandum from Brad Griffith, Assistant Leader, Alaska Cooperative Fish and WildlifeResearch Unit, to Charles D. Groat, Director, U.S. Geological Survey. April 4, 2002. U.S. Department of the Interior. Geological Survey. Economics of 1998 U.S. Geological Survey's1002 Area Regional Assessment: An Economic Update . USGS Open File Report 2005-1359. Washington, DC, 2005. U.S. General Accounting Office. Arctic National Wildlife Refuge: An Assessment of Interior'sEstimate of an Economically Viable Oil Field . Washington, DC. July, 1993. GAO/RCED-93-130. U.S. National Energy Policy Development Group. National Energy Policy . Washington, DC. May,2001. | One part of the energy debate is whether to approve energy development in the ArcticNational Wildlife Refuge (ANWR) in northeastern Alaska, and if so, under what conditions, orwhether to continue to prohibit development to protect the area's biological, recreational, andsubsistence values. ANWR is rich in fauna, flora, and oil potential. Its development has beendebated for over 40 years, but sharp increases in energy prices from late 2000 to early 2001, terroristattacks, more price increases in 2004-2006, and energy infrastructure damage from hurricanes haveintensified debate. Few onshore U.S. areas stir as much industry interest as ANWR. At the sametime, few areas are considered more worthy of protection in the eyes of conservation and someNative groups. Current law prohibits oil and gas leasing in the Refuge. In the first session of the 109th Congress, development advocates added ANWR developmentto the conference report for the Defense appropriations bill ( H.R. 2863 ). The Housepassed the conference report with the ANWR provision, but the ANWR title was removed from thebill ( P.L. 109-148 ) after failure of a cloture motion in the Senate. In the second session, on March 16, 2006, the Senate passed S.Con.Res. 83 , theFY2007 budget resolution. Its sole reconciliation instruction was to the Senate Committee onEnergy and Natural Resources, and it assumed revenues from leasing in ANWR. On May 25, 2006,the House passed the American-Made Energy and Good Jobs Act ( H.R. 5429 ), whichwould open ANWR to development. Development advocates argue that ANWR oil would reduce U.S. energy markets' exposureto Middle East crises; lower oil prices; extend the economic life of the Trans Alaska Pipeline; andcreate jobs in Alaska and elsewhere in the United States. They maintain that ANWR oil could bedeveloped with minimal environmental harm, and that the footprint of development could be limitedto a total of 2,000 acres. Opponents argue that intrusion on such a remarkable ecosystem cannot bejustified on any terms; that economically recoverable oil found (if any) would provide little energysecurity and could be replaced by cost-effective alternatives, including conservation; and that jobclaims are exaggerated. They maintain that development's footprints would have a greater impactthan is implied by a limit on total acreage. They also argue that limits on footprints have not beenworded to apply to extensive Native lands in the Refuge, which could be developed if the Refugewere opened. This report will be updated as events warrant. |
The September 11, 2001 terrorist attacks prompted congressional action on many fronts,including passage of the Uniting and Strengthening America by Providing Appropriate ToolsRequired to Intercept and Obstruct Terrorism (USA PATRIOT) Act. The Act is broadlyscoped, (1) and some of itsprovisions may affect use of the Internet, computer security, and critical infrastructure protection. The legislation initially passed the Senate (96-1) as S. 1510 on October 11,2001. The House passed H.R. 2975 (337-79) on October 12. A compromise bill, H.R. 3162 , passed the House (under suspension) on October 24 and the Senate (98-1)on October 25. The President signed it into law on October 26 ( P.L. 107-56 ). The implementation of the Act will be carefully scrutinized. While law enforcement officialsheralded the passage of what they regard as necessary provisions for counteracting terrorists andother criminals, civil liberties groups urged caution in passing a new law in an emotionally chargedenvironment. During debate, some Representatives raised concerns about the process used to bringthe bills to the floor. In the House, for example, the version of H.R. 2975 as reportedfrom the Judiciary Committee on October 11 ( H.Rept. 107-236 , Part 1) was replaced by the text ofa new bill, H.R. 3801 , for the purposes of debate. (2) H.R. 3801 wasvery similar, but not identical, to S. 1510 as it had passed the Senate hours earlier. Hence, some Representatives felt they had insufficient time to review the legislation they were beingasked to vote on. Among the changes in H.R. 3801 was an extension of the sunsetperiod on several of the electronic surveillance provisions from 2 years to 5 years. Some Membershad argued for a short sunset period, maintaining that the changes in the law were being madehurriedly. In light of this history, it appears that oversight of the Act's implementation will be ofconsiderable interest to Congress and a broad range of interest groups. This report summarizes the potential effect of the Act on electronic privacy, security,commerce, and government, and identifies issues that are arising. Every day, persons gain access (or try to gain access) to other people's computers withoutauthorization to read, copy, modify, or destroy the information contained within--webpages aredefaced, unwanted messages and pictures are conveyed, information (or money) is stolen,communications are jammed and services denied. The list of perpetrators includes juveniles,disgruntled (ex)employees, criminals, competitors, politically or socially motivated groups, andagents of foreign governments. For the purposes of this report, people who engage in such activitieswill be called computer trespassers (adopting a term which the USA PATRIOT Act defines, asexplained below). The damage computer trespassers can inflict, either knowingly or unwittingly,often goes beyond merely being a nuisance and in most cases rises to the level of a federal crime(pursuant to 18 U.S.C. 1030). It is also conceivable that under certain conditions such actions couldbe considered a terrorist act or rise to the level of endangering national security by threatening thefunctioning of the country's critical infrastructure. For the most part, law enforcement agencies seem to have had adequate tools to investigate,prosecute and penalize these offenses. One area where officials have sought improvement for sometime, however, is in streamlining their ability to track computer trespassers, both in real time or afterthe fact. Prior to passage of the USA PATRIOT Act, procedures required investigators to requestcourt orders, warrants, subpoenas, etc. from a multitude of jurisdictions, since most computertrespassers will route their communications around the world. While the USA PATRIOT Act isdirected primarily to improve the ability of the government to detect, prevent, and respond to thekinds of terrorist attacks experienced last September and October, a number of the provisions affectthe government's law enforcement surveillance and investigatory powers more generally. Those thatdirectly and indirectly affect the ability of the government to investigate, prosecute, and perhapsdeter computer trespassers, whatever their intent, are listed below. Section 105 expands upon the U.S. Secret Service's National Electronic CrimeTask Force Initiative. The U.S. Secret Service has been leading a New York Electronic Crime TaskForce that has been held up as a model of success for investigating a variety of electronic crimes,ranging from "cloning" cell phones to denial-of-service attacks against on-line tradingcompanies. (4) The taskforce includes experts from other government agencies as well as the private sector. Section 105directs the Director of the Secret Service to develop a national network of such taskforces. Section 202 and Section 217 clarify that law enforcement officials may seekpermission to intercept electronic communications of "computer trespassers." Section 202 adds 18U.S.C. 1030 (computer fraud and abuse) offenses to the list of offenses for which the AttorneyGeneral, or other designated officials, may authorize a request for a court order to intercept targeted communications. Section 217 defines a "computer trespasser" as someone "who accesses a protectedcomputer (5) withoutauthorization and thus has no reasonable expectation of privacy in any communication to, through,or from the protected computer." Section 217 also specifies the conditions under which thecommunications of a computer trespasser may be intercepted. Those conditions are: the owner oroperator of the protected computer authorizes the interception; the person acting under color of lawis lawfully engaged in an investigation; the person acting under color of law has reasonable groundsto expect the content of the computer trespasser's communication is relevant to the investigation; andthe interception acquires only the trespasser's communications within the invaded computer. (6) Prior to the Act, the statutewas less explicit in specifying the terms under which a computer trespasser's communications couldbe intercepted. Section 210 expands the information that law enforcement officials may obtain(with appropriate authorization) from providers of electronic communications service or remotecomputing services regarding a subscriber or customer of those services. The information may nowinclude a subscriber's or customer's means and source of payment. The language is also modifiedto include information more clearly related to Internet use (e.g. session times and temporarilyassigned network addresses). These changes are to improve the ability of law enforcement officialsto track the activity and identity of suspects concerning a wide range of offenses, including terroristactivities and those of computer trespassers. Section 211 clarifies that in the deregulated telecommunications environment,cable providers that also provide communication services are governed by the same statutes as otherelectronic communication providers in regard to interception of communications, disclosure ofcustomer records, and application of pen registers and trap and trace devices. (7) Prior to deregulation, cableproviders followed different rules. Therefore, law enforcement officials now have the samesurveillance and investigatory powers in regard to cases involving cable internet services.Information regarding a subscriber's selection of video programming, however, continues to begoverned separately. Section 216 modifies the authorities relating to use of pen registers and trapand trace devices. As a result of Section 216, a single court order authorizing the use of a penregister or trap and trace device can be used to apply those devices to any computer or facilityanywhere in the country. Prior to the Act, authorization had to be obtained in each jurisdiction wherethe devices needed to be applied. Also, the availability of this authority with respect to computercommunications was unclear. It was generally thought that these devices could only be used ontelephone equipment. Section 220 allows a single court with jurisdiction over the offense underinvestigation to issue a warrant allowing the search of electronic evidence anywhere in the country. Prior to this, the warrant needed to be issued by a court within the jurisdiction where the informationresided. Section 808 adds certain computer fraud and abuse offenses to the list ofviolations that may constitute a federal crime of terrorism. The new provisions apply to: anyone whoknowingly accesses a computer without authorization and obtains classified information; and,anyone who knowingly causes the transmission of a program, information, code, or command, andas a result intentionally causes damage to a protected computer. The inclusion of these offenses inthe definition of a federal crime of terrorism in Section 2332b(g)(5)(B) relates primarily to who hasinvestigatory authority over the offenses (the Attorney General, in this case). However, by virtueof cross-references in other parts of the Act, including these offenses in the definition of terrorismalso affects: the extension of their statute of limitations (Section 809 of the Act); post-releasesupervision of someone convicted of these offenses under certain circumstances (Section 812 of theAct); and, applicability of the racketeering statutes (Section 813 of the Act). According to Section809, should these computer offenses result in or create a foreseeable risk of death or serious bodilyinjury, there is no statute of limitations. Under similar conditions, Section 812 could lead tolife-time post-release supervision. The cross-reference to racketeering statutes gives lawenforcement officials more tools with which to prosecute computertrespassers. Section 814 increases the penalties for certain computer fraud and abuseoffenses. The penalty for a first offense of causing the transmission of a program, information, codeor command that intentionally causes damage to a protected computer increases from 5 years to 10years. The penalty for a second such offense or a second offense of intentionally gainingunauthorized access to a protected computer and, as a result, recklessly causing damage is increasedfrom 10 years to 20 years. Also, it is now an offense to attempt to commit these offenses. Thissection also redefines "damage." Damage is now defined as: i) loss to one or more persons duringany 1-year period aggregating at least $5,000 in value; ii) modification or impairment, or potentialmodification or impairment, of the medical examination, diagnosis, treatment, or care of one or moreindividuals; iii) physical injury to any person; iv) a threat to public health or safety; v) damageaffecting a computer system used by or for a government entity in furtherance of the administrationof justice, national defense, or national security. Item "v" is new. Also, item "i" is rewritten. Priorto this, it was not clear whether the $5,000 threshold was per person affected or the total value ofdamages caused to all people affected. The new language clarifies that it is the latter. Finally, theSection also modifies the language in 18 U.S.C. 1030 regarding civil suits. This includes newlanguage that says victims suffering damages resulting from an offense listed in section 1030 maynot sue under this section for negligent design or manufacture of hardware, software, or firmware. This is a broad immunity that protects manufacturers should any design or manufacture problemlead to damages, including, one would expect, security vulnerabilities which are a common problemin trying to make information systems more secure. Section 816 authorizes the expenditure of $50 million to develop and supportregional cybersecurity forensic capabilities. There are already a number of computer forensiclaboratories established. This would encourage the establishment of additional ones. In addition toassisting federal authorities to investigate and prosecute computer crimes, the laboratories are to trainfederal, state and local officials in computer forensics, to assist state and local officials ininvestigating and prosecuting state and local computer offenses, and to share expertise andinformation on the latest developments in computer forensics. Since information networks (including the Internet) are considered critical infrastructures,the above sections are also relevant to this discussion. However, there are two additional provisionsthat affect the protection of other critical infrastructures more generally. Title VII is entitled Increased Information Sharing for Critical InfrastructureProtection. However, the lone section in the Title (Section 701) really addresses a set of illegalactivities much broader than attacks on critical infrastructures. There exists, within the Departmentof Justice, a Bureau of Justice grant program that helps establish information sharing systemsbetween federal, state, local and non-profit entities for the purpose of identifying, targeting, andremoving criminal conspiracies that cross jurisdictional boundaries. These information sharingsystems are to include a number of capabilities, such as rapid information retrieval and systematizedupdates. Section 701 would add that the information sharing system be secure. The Section alsoadds multi-jurisdictional terrorist conspiracies to the list of activities tracked by the informationsharing system. Section 1016 puts into statute elements of the critical infrastructure policy thathave been articulated by both the Clinton and the Bush Administrations. (8) That is, to ensure that anyphysical or virtual (i.e. computer-induced) disruption of the nation's critical infrastructures be rare,brief, geographically limited, manageable, and minimally detrimental to the economy, human andgovernment services, and national security of the United States. The section defines criticalinfrastructure as "systems and assets, whether physical or virtual, so vital to the United States thatthe incapacity or destruction of such systems and assets would have debilitating impact on security,national economic security, national public health or safety, or any combination of those matters." The Section also establishes a National Infrastructure Simulation and Analysis Center. The Centeris to support related counter-terrorism, threat assessment, and risk mitigation activities. In particularthe Center is to model and analyze the large-scale complexity of critical infrastructures, and usethose models and analyses to train authorities in incident response, to recommend changes in systemdesigns or protections, and to provide recommendations to policymakers. The Center is to receivedata from state and local governments and the private sector to assist in developing its models. TheSection also authorizes the appropriation of $20 million through the Department of Defense'sDefense Threat Reduction Agency to support activities at the Center. Many of the provisions related to the surveillance and investigatory powers of lawenforcement have raised concerns within the privacy and civil liberties communities. These arediscussed in more detail later in this report. Some of the provisions do not necessarily grant lawenforcement officials more power in practice, but clarify that those powers exist and put them on asounder basis. Many observers believe that the most important changes affecting law enforcementofficials are those provisions allowing for nationwide warrants, court orders, etc. to facilitate thetracking of computer trespassers. In the case of investigating offenses after the fact, these provisionsmay save more resources than time. However, in cases where officials are trying to track computertrespassers in real time, time is of great importance and the provisions should be that much moreeffective. In regard to increasing the penalties for computer trespassers, there is some debate aboutwhether doing so will have the hoped for deterrent effect. (9) Others suggest that, deterrence aside, increasing penalties betterreflects the seriousness of the offenses. (10) The Act primarily strengthens law enforcement's tools to policewhat many believe is a network ill-designed for security. Aside from the provision to develop aNational Infrastructure and Analysis Center, none of the provisions relate to providing for orensuring more secure systems. The convergence of computer and telecommunications technologies has revolutionized howwe get, store, retrieve, and share information. Commercial transactions on the Internet, whetherretail business-to-customer or business-to-business, are commonly called electronic commerce, or"e-commerce." Since the mid-1990s, commercial transactions on the Internet have grownsubstantially. (12) AJanuary 2002 study by the Pew Internet and American Life Project found that overall, 29 millionAmerican shoppers made purchases on-line during the fourth quarter of 2001, spending an averageof $392, up from $330 in the fourth quarter of 2000. A quarter of all Internet users did someshopping on the Internet last year, up from one-fifth of Internet users in 2000. The USA PATRIOT Act does not address e-commerce directly; (13) however Title III of theAct, International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001,addresses concerns of policymakers that, in the wake of the September 11 terrorist attacks, more canbe done to prevent, detect, and prosecute international money laundering and the financing ofterrorism. Title III contains three subtitles with provisions that address international moneylaundering, voluntary disclosure by U.S. banks of suspicious financial activity, and the bulksmuggling of currency across U.S. borders and counterfeiting. Subtitle A, International Counter Money Laundering and Related Measures,has among its many provisions requirements that U.S. financial institutions do more to prevent anddetect money laundering actions.. It requires that financial institutions provide greater monitoringand due diligence concerning certain foreign financial activities, including wire transfers, interbankaccounts, and correspondent accounts involving foreign financial institutions. Subtitle B, Bank Secrecy Act Amendments and Related Improvements, amendsprevious law by revising immunity and liability provisions for financial institutions which mightdisclose suspicious activities and persons to the federal government, including those which mayconstitute an "underground" system of financial transactions. Subtitle C, Currency Crimes and Protection, provides new penalties for bulkcash smuggling in and out of the United States as well as counterfeiting activities. Many of the provisions in Title III do not go into effect until regulations arepromulgated. (14) Upon signing the USA PATRIOT Act, President Bush said "this legislation gives lawenforcement officials better tools to put an end to financial counterfeiting, smuggling and moneylaundering." The President added: "We're making it easier to seize the assets of groups andindividuals involved in terrorism." (15) Among the many provisions in Title III, law enforcementofficials point to two of the Act's objectives--establishing new standards and requirements forincreased cooperation by financial institutions when responding to federal government requests forinformation; and extending the federal jurisdiction over non-U.S. financial institutions in moneylaundering--as particularly vital to U.S. counter-terrorism efforts. (16) However, some have raised concerns that Title III (as well as other provisions) may have abroader scope than many of its supporters intend. (17) While many are concerned that the civil liberties of individualsmay be compromised if law enforcement officials extend their reach, Title III may also haveimplications for a wide range of e-commerce activities. It is unlikely that the Act will immediatelyaffect retail e-commerce (e.g., online catalogue orders) or business-to-business e-commerce (e.g.,the use of the Internet for inventory ordering and management). While these forms of e-commerceare growing very rapidly, to date they have not been identified as being particularly susceptible tomisuse by terrorists. Retail e-commerce and business-to-business e-commerce require verifiableinformation between parties that may include names, addresses, credit card numbers and otherinformation, and can be traced relatively easily. However, some observers have not ruled outterrorists using existing e-commerce exchanges to facilitate their activities in the future. (18) The more common method of using e-commerce for illicit and terrorist purposes is throughfinancial transactions. For example, the terrorists involved in the September 11 attacks reportedlyused wire transfers routinely to fund their activities in the United States. Most money transfers,even relatively small amounts transferred as money orders by firms like Western Union, MoneyGram, and other smaller companies, are done electronically. There is no need to establish a bankaccount or fill out credit reporting forms, identification requirements are minimal, a money wirefirm's outlet may be located in a supermarket or drugstore and staffed by store employees, and it cantake less than fifteen minutes to send money around the world. (19) The USA PATRIOT Actaddresses wire transfers and money orders by requiring, among other provisions, the registration ofall money order agents by December 31, 2001, and increasing the criminal penalties for those whoknowingly conduct or assist in transferring money that is intended to promote or support an illegalactivity. These provisions not only cover the physical transfer of money for these purposes, butelectronic transfers as well. (20) Larger financial institutions which conduct much of their business electronically--andtherefore are part of the e-commerce business sector--are also affected by the USA PATRIOT Act. Among the provisions affecting large multinational financial corporations are increased authorityfor U.S. law enforcement officials to gain access to institutions' records and data bases; due diligenceby U.S. financial institutions concerning money laundering by non-U.S. persons; enhanced standardsfor correspondent accounts held by U.S. banks; and prohibition of correspondent accounts with shellbanks (banks which have no physical presence in their chartering country). (21) Critics contend that the USA PATRIOT Act will not prevent nor prohibit the types ofactivities that terrorists engaged in before September 11. While U.S. money order and wire transfer firms will have greater reporting responsibilities and tighter restrictions under the Act, the sheervolume of transactions, many under $3,000, is enormous--in 2000, Western Union alone did 89million wire transfers of money. Particularly in the Middle East a significant amount of money istransferred or exchanged by hawla , a remittance system outside of, and running parallel to, thebanking system. Whether the USA PATRIOT Act can be effectively applied to terrorists' use of hawla is not clear. Some also question whether the time and cost to track large portions of electroniccommerce conducted through hawla will prove to be an efficient use of government and privatesector resources. (22) Others contend that large U.S. financial institutions may also expend significant time andresources to comply with the Act without providing any assistance in the war against terrorism. According to Ellen Zimiles, a partner in KPMG's forensics practice, a large U.S. bank spends $10million per year to fight money laundering--and the Act may add to that cost, as well as adding newcosts for brokers, insurers, and others connected with the financial industry. (23) According to anotherexpert, a U.S. bank typically has one million to five million ATM transactions daily, and 100,000wire transactions per day. U.S. financial institutions will likely have to address how they willbalance increased security provisions, broader access to their accounts by law enforcement officials,and ensuring customers that the privacy and integrity of financial accounts will not be compromisedby compliance with the Act. (24) Abroad, many U.S. financial institutions and multinational organizations routinely transfercurrency internally and externally, often crossing national borders. These institutions andcorporations often engage in routine short-term lending or borrowing to balance accounts or tofinance projects. There are several established mechanisms and procedures for these transactions. The London Interbank Offering Rate (LIBOR) is an overnight lending rate by which multinationalcorporations electronically borrow or lend money to balance their accounts. The LIBOR is set bythe largest banks, and the transactions are usually made with "Eurodollars." (25) These transactions occuron a daily basis and range in the trillions of dollars. There is no indication that any U.S. institutionsusing the LIBOR to settle accounts have aided or abetted terrorist activities. Still, these transactionscould fall under the USA PATRIOT Act. If U.S. law enforcement officials begin to examineaccounts, or even seize funds, under the Act, how might multinational corporations react-- may theyeven attempt to avoid compliance to the Act? Will foreign banks and governments acquiesce to U.S.actions? Still, it is important to note that, to date, most (if not all) of the concerns raised by critics,other than those of costs of compliance, have been hypothetical. There have been no reported widespread law enforcement intrusions into financial institutions' databases, nor have there been anyreported e-commerce or electronic fund transfers disruptions linked to the war on terror since theAct was signed into law. The events of September 11 resulted in a fundamental change in the waythe United States views its defense and security. Over time, Title III of the USA PATRIOT Act mayaffect e-commerce broadly, and electronic transfers specifically. How this Act will affect lawenforcement and security efforts in the Internet Age and its actual impact on privacy rights and dataintegrity remains to be seen. A significant component of many of the initiatives regarding the USA PATRIOT Actspecifically, and homeland security generally, involves the use of information technology to enhanceexisting government processes or create new ones. Some of these initiatives may contribute to thegrowing effort to implement e-government projects by both Congress and the Bush Administrationthrough enhanced data sharing and greater confidence in the security and reliability of the networks. Other initiatives may inadvertently create obstacles by restricting access to information flows andreducing privacy protections. There are a number of provisions in the USA PATRIOT Act that are relevant toe-government interests. E-government involves using information technology, and especially theInternet, to improve the delivery of government services to citizens, business, and other governmentagencies. (27) Most ofthese provisions are independent of one another, reflecting the often disparate and disconnectednature of e-government initiatives. Many of the provisions in the USA PATRIOT Act related toe-government focus on government-to-government (G2G) relationships, both within the federalgovernment, and between federal, state, local, and foreign governments. Fewer of the provisionsfocus on government-to-business (G2B) or government-to-customer (G2C) interactions. Therelevant provisions can be found in titles III, IV, VII, IX, and X, and are briefly discussed in turn. Section 361 supercedes Treasury Order Number 105-08, establishes theFinancial Crimes Enforcement Network (FinCEN) in statute, and charges the bureau with, amongother things, establishing a financial crimes communication center to facilitate the sharing ofinformation with law enforcement authorities. This section also requires FinCEN to maintain agovernment-wide data access service for information collected under anti-money launderingreporting laws, information regarding national and international currency flows, as well asinformation from federal, state, local, and foreign agencies and other public and privatesources. Section 362 seeks to enhance cooperation between the federal government andthe banking industry by directing the Security of Treasury to establish a "highly secure network" inFinCEN to enable financial institutions to file reports required by the Bank Secrecy Act and receivealerts regarding suspicious activities electronically. Section 403 emphasizes interagency data sharing and technology standardsdevelopment. It authorizes appropriations to enable the State Department and the Immigration andNaturalization Service (INS) to access the Federal Bureau of Investigation's (FBI) National CrimeInformation Center's Interstate Identification Index (NCIC-III) database. It also directs the NationalInstitute of Standards and Technology (NIST) to "develop and certify a technology standard that canbe used to verify the identity of persons applying for a United States visa or such persons seekingto enter the United States pursuant to a visa for the purpose of conducting background checks,confirming identity, and ensuring that a person has not received a visa under a different name or suchperson seeking to enter the United States pursuant to a visa." Section 405 directs the Attorney General to carry out a study on enhancing theFBI's Integrated Automated Fingerprint Identification System (IAFIS) to improve screening offoreign nationals applying to enter the country. Section 413 authorizes the State Department to share, with other countries,information from its visa outlook database for the purpose of investigating or preventing crimes andto "deny visas to persons who would be inadmissable to the United States." Section 414 directs the Attorney General to fully implement an "integratedentry and exit data system for airports, seaports, and land border ports of entry," with a particularfocus on the use of biometric technology and tamper-resistant documents. Section 701 authorizes the Office of Justice Programs to expand informationsharing with state and local law enforcement agencies and nonprofit organizations to fightmulti-jurisdictional criminal conspiracies. It also calls for the establishment of a secure informationsharing system. Section 906 emphasizes the potential consolidation of data collectionresponsibilities by requiring the Attorney General, the Director of Central Intelligence, and theSecretary of the Treasury to submit a report to Congress "on the feasibility and desirability ofreconfiguring the Foreign Terrorist Asset Tracking Center and the Office of Foreign Assets Controlof the Department of Treasury in order to establish a capability to provide for the effective andefficient analysis and dissemination of foreign intelligence relating to the financial capabilities andresources of international terrorist organizations." The report is also to examine "to what extent thecapabilities and resources of the Financial Crimes Enforcement Center of the Department of theTreasury may be integrated into the capability contemplated by the report." Section 1008 also focuses on the potential for data sharing between agencies. It calls for a study directed by the Attorney General in consultation with the Secretary of State andthe Secretary of Transportation "on the feasibility of utilizing a biometric identifier (fingerprint)scanning system, with access to the database of the Federal Bureau of Investigation IntegratedAutomated Fingerprint Identification System, at consular offices abroad and at points of entry intothe United States to enhance the ability of State Department and immigration officials to identifyaliens who may be wanted in connection with criminal or terrorist investigations in the United Statesor abroad prior to the issuance of visas or entry into the United States." Section 1009 focuses on potential information sharing between federalagencies and airlines. It directs the FBI to study "the feasibility of providing airlines access viacomputer to the names of passengers who are suspected of terrorist activity by federalofficials." Section 1012 focuses on enhancing the cooperation between federal and stateofficials to limit the issuance of licenses to transport hazardous materials in commerce (hazmatlicenses). It allows states to request the Attorney General to conduct a background check onapplicants using "relevant international databases through Interpol" and othermeans. Section 1015 also focuses on intergovernmental relationships by expandingthe scope and lengthening the authorization of appropriations of the Crime Identification TechnologyAct ( P.L. 105-251 ), which allows the Office of Justice Programs to issue grants to state and localentities to develop integrated information and identification systems. The e-government policy implications associated with the USA PATRIOT Act are centeredaround three primary issues; knowledge management/data sharing, information security, and privacy. Knowledge Management. Knowledgemanagement (KM) has been defined as "the process through which an enterprise uses its collectiveintelligence to accomplish its strategic objectives." (28) As the above summary of the relevant provisions suggests,enhanced data sharing and knowledge management techniques are expected to play a significant rolein homeland security efforts. Several of the provisions focus on improving access and the sharingof centralized databases by federal, state, and local law enforcement agencies. Some of theprovisions also seek to establish a more fully integrated database system for processing and trackingthe granting of visas, as well as the entry and exit of foreign nationals in the United States. In manycases these provisions are designed to rectify the problems associated with having multiple,incompatible, and sometimes overlapping databases, which have been identified as one of thecontributing factors to the difficulties law enforcement and intelligence agencies have had trackingsuspected terrorists. (29) Just as knowledge management has been recognized as an important component of improvedhomeland security, its proponents argue that knowledge management could play a significant rolein e-government initiatives generally. Knowledge management efforts involving e-government haveso far encountered a variety of obstacles. (30) Some of these obstacles include creating the appropriatetechnical and support infrastructure, achieving user "buy-in," and managing the development and useof specialized information. Some have suggested the creation of the position of chief knowledgeofficers (CKOs) at the agency, department, and/or federal level to facilitate the execution of specificknowledge-intensive projects and support larger government reform efforts. The success ofknowledge management/data sharing efforts in the homeland security area could affect the adoptionof these proposals. Ensuring Information Security. Heavy relianceon centralized databases with wider access by more actors (both governmental andnon-governmental) will require careful attention to data protection and the authentication of users. One way this may be achieved is through the use of public key infrastructure (PKI) encryptionsystems. (31) PKI systemsare generally considered the most reliable means to ensure the security of online transactions. (32) However, implementinga PKI system can be a very difficult, time consuming, and expensive process. Moreover, in the caseof federal e-government projects, the PKI systems used by different departments and agencies wouldneed to be interoperable in order to realize the efficiencies hoped for, and convenience necessary,to achieve the desired citizen usage levels. So far, no such standards have been established. The challenge of establishing a large scale PKI system raises many issues. Some of theseinclude the lack of federal interoperable standards, the feasibility of implementation, and highcosts. (33) First, the lackof federal interoperable standards raises the question of who would be responsible for developingand promulgating such standards. The National Institute of Standards and Technology (NIST) oftenworks with industry to facilitate and develop technical standards and measurements. However, itis currently unclear what role NIST would play in developing any PKI standards. Assuming theacceptance of the PKI approach, it is also unclear whether the federal government should work tocreate a standard for its own use, or if it should rely on the development of an industry standard,which may take longer to emerge. Second, large scale, full-featured PKI systems are not common,raising questions regarding the scalability of the technology and the resources needed to accomplishthe task. Implementation of such a system would require policy makers to decide if the federalgovernment has sufficient expertise and resources to create a large scale PKI system in-house, or ifit will need to be outsourced to one or more private contractors. Third, the largely uncharted natureof such an undertaking and the high costs of PKI systems generally, raises concerns for budgetplanning and oversight. Proponents of a government-wide PKI system maintain that if these issuescan be adequately addressed, the creation of a single government-wide PKI system could promotethe utilization of secure Web portals to ensure the data integrity of transactions between thegovernment and citizens and business. Privacy. In contrast to the two previouslydiscussed issues, the implications of the USA PATRIOT Act on privacy could have a negative effecton e-government initiatives. Surveys have shown that the loss of privacy as a result of e-governmentis a significant concern among citizens. (34) As mentioned in the earlier section on computer security, the Actexpands the type of information that may be collected by law enforcement officials from providersof electronic communications services or remote computing services. It also allows for the issuanceof nationwide search warrants to facilitate the tracking of computer trespassers. Concerns aboutpotential misuse of these data collection provisions could dampen citizen enthusiasm for carryingout electronic transactions with the government. Until the September 11, 2001 terrorist acts, the Internet privacy debate focused on consumerprivacy issues sparked by the collection, use, and dissemination of personally identifiableinformation by commercial Web site operators. (36) The practices of law enforcement agencies in monitoring theactivities of individuals as they use the Internet for electronic mail (e-mail) or visiting Web sites wasan important, but less visible, issue. Congress addressed it primarily in the context of ensuring thatthe Federal Bureau of Investigation (FBI) did not overstep its authority in using a software programcalled Carnivore (later renamed DCS 1000). (37) With a court order, the FBI could install Carnivore on theequipment of an Internet Service Provider (ISP) to monitor a suspect's Internet activity, which raisedconcern about whether the software was sufficiently precise to avoid monitoring the activity of otherISP customers and hence impinging on their privacy. While Congress remains interested in overseeing the FBI's use of Carnivore, the September11 terrorist attacks sharpened the debate over how to strike a balance between law enforcement'sneed to investigate criminals and protecting what most citizens believe to be their "right" toprivacy. (38) Congressincluded provisions in the USA PATRIOT Act that make it easier for law enforcement to monitorInternet activities. Also, many ISPs that opposed law enforcement monitoring of their customers'Internet activity reportedly have been quite willing to assist law enforcement in its search for e-mailand other Internet evidence relating to the attacks. (39) Title II of the Act, Enhanced Surveillance Procedures, includes provisions that affectmonitoring of Internet activities. Section 210 expands the scope of subpoenas for records of electroniccommunications to include records commonly associated with Internet usage, such as session timesand duration. Section 211 clarifies that cable companies offering Internet services are subjectto 18 U.S.C. ch. 119 (Wire and Electronics Interception and Interception of Oral Communications),18 U.S.C. ch. 121 (Stored Wire and Electronic Communications and Transactional Records Access),and 18 U.S.C. ch. 206 (Pen Registers and Trap and Trace Devices) in their provision of thoseservices. Cable companies had sought, in particular, to clarify their obligations with regard to releaseof personally identifiable information about subscribers and whether they were required to notify thesubscriber that the information had been requested by a governmental entity as required under the1992 Cable Act. Under this section, no notification is required, but disclosure specifically does notinclude a subscriber's video programming choices. Section 212 allows ISPs to divulge records or other information (but not thecontents of communications) pertaining to a subscriber if they believe there is immediate danger ofdeath or serious physical injury or as otherwise authorized, and requires them to divulge suchrecords or information (excluding contents of communications) to a governmental entity undercertain conditions. It also allows an ISP to divulge the contents of communications to a lawenforcement agency if it reasonably believes that an emergency involving immediate danger of deathor serious physical injury requires disclosure of the information without delay. (40) Section 216 adds routing and addressing information (used in Internetcommunications) to dialing information, expanding what information a government agency maycapture, as authorized by a court order, using pen registers and trap and trace devices. (41) The content of any wireor electronic communications is excluded. A court shall enter an ex parte order permittinginstallation and use of a pen register or trap and trace device if it finds that an attorney for thegovernment or a state law enforcement or investigative officer has certified that the informationlikely to be obtained is relevant to an ongoing criminal investigation. Law enforcement officials mustkeep certain records when they use their own pen registers or trap and trace devices and providethose records to the court that issued the order within 30 days of expiration of the order. To theextent that Carnivore-like systems fall with the new definition of pen registers or trap and tracedevices provided in the Act, that language would increase judicial oversight of the use of suchsystems. Section 217 allows a person acting under color of law to intercept the wire orelectronic communications of a computer trespasser transmitted to, through, or from a protectedcomputer under certain circumstances. Section 220 allows for nationwide search warrants for e-mail instead ofrequiring separate search warrants for each jurisdiction in which the e-mail may be located, such asat the ISP's location rather than where a crime was committed. Section 224 establishes a 4-year sunset period (until December 31, 2005) formany of the Title II provisions, but among the sections excluded from the sunset are Sections 210,211, and 216. As noted, the challenge for policy makers is balancing the needs of law enforcement with thedesire by the public to maintain its privacy. In the wake of the terrorist attacks, the public appearsmore willing to make sacrifices in the privacy arena to protect the country against further attacks andbring the perpetrators of the September 11 assault to justice. Criticism of the USA PATRIOT Actfrom a privacy standpoint has been relatively muted, possibly because of the perception that thepublic is willing to accept such measures at this time. An October 2001 Harris Poll found that 63%of Americans favored monitoring of Internet discussions and chat rooms, and 54% favoredmonitoring cellphones and e-mail. (42) However, privacy advocates worry that, in this emotionally charged climate, Congress ispassing legislation that it later will regret. Groups such as the American Civil Liberties Union(ACLU), Center for Democracy and Technology (CDT), Electronic Privacy Information Center(EPIC), and Electronic Frontier Foundation (EFF) urge caution, fearful that, in an attempt to trackdown and punish the terrorists who threaten American democracy, one of the fundamental tenets ofthat democracy--privacy--may itself be threatened. The ACLU issued a press release (43) on October 24 stating thatit was deeply disappointed with the House passage of H.R. 3162 , and, after the billcleared Congress, vowed to monitor its implementation. (44) CDT's Executive Director said on October 25 that "This bill hasbeen called a compromise but the only thing compromised is our civil liberties." (45) Among CDT's concernsis that Section 216, which is not subject to the sunset provision, allows law enforcement officials tocollect information about Internet usage without what CDT considers to be meaningful judicialreview. (46) There are other privacy issues, too. Peter Swire, who served as privacy counselor at theOffice of Management and Budget during the Clinton Administration, worries that the Act does notinclude sufficient provisions to deal with potential abuses by law enforcement of the new authoritiesgranted in the Act. (47) Federal Trade Commission (FTC) Commissioner Orson Swindle has suggested that ISPs relook attheir privacy policy statements in the wake of passage of the Act, particularly with regard to ISPs'new authority under Section 212 to voluntarily disclose information. (48) The FTC oversees howbusinesses, including ISPs, adhere to their privacy policies. Mr. Swindle also pointed out that it ishis understanding that the law does not cover Web sites, only ISPs. He wondered if an onlinebookseller received many requests for books on, for example, how to make bombs or fly an airplane,"and the name of the purchasers reflected one or another ethnic group, would that be alarming underconcern for terrorism? ... It would seem to me that common sense would say that would be alarmingbut they're not covered by this." (49) John Kamp, an attorney with Wiley, Rein & Fielding,commented that the definitions in the Act were murky and Web sites might be covered, but that "Itis clear that this law wasn't designed to go there." (50) The question of definitions is raised by others, including EFF. In particular, EFF cites thelack of definitions of "content" of e-mails that cannot be retrieved without a warrant, and the term"without authority" in the definition of a computer trespasser. (51) Packets of data thatcomprise e-mail messages may contain both content and non-content information (such as routinginformation). The Act allows law enforcement officials access to non-content information, but notto content. Thus this definition could be quite important. Regarding computer trespassers, Section217 defines a computer trespasser as a person who accesses a protected computer withoutauthorization, but it does not include a person with an existing contractual relationship with theowner or operator of the computer. EFF wants that term to mean only individuals who intentionallybreak into computers with which they have no relationship. Some ISPs express satisfaction that guidance issued by the Justice Department implementingthe USA PATRIOT Act clarifies that ISPs may use their own tools to obtain information requiredby law enforcement officials rather than rather than being required to allow the FBI to installsoftware such as DCS 1000. EarthLink executive David Baker called it a "silver lining in what manyotherwise describe as a cloud...." (52) Like the ACLU, most of the privacy advocate groups assert that they will closely monitorhow law enforcement officials implement the Act and try to ensure that the law is not misused.Congress may conduct oversight of the Act's implementation, both from the standpoint of the valueof providing law enforcement officials with these additional tools to combat crime and terrorism,and in terms of any detrimental consequences that could arise. | The September 11, 2001 terrorist attacks prompted congressional action on many fronts,including passage of the Uniting and Strengthening America by Providing Appropriate ToolsRequired to Intercept and Obstruct Terrorism (USA PATRIOT) Act, P.L. 107-56 . The Act isbroadly scoped, and some of its provisions may affect Internet usage, computer security, and criticalinfrastructure protection. In the area of computer security, the Act creates a definition of "computer trespasser" andmakes such activities a terrorist act in certain circumstances. The Act enables law enforcementofficials to intercept the communications of computer trespassers and improves their ability to trackcomputer trespasser activities. It also codifies some elements of U.S. critical infrastructure policyarticulated by both the Clinton and George W. Bush Administrations to ensure that any disruptionsto the nation's critical infrastructures are minimally detrimental. Although the Act does not explicitly address electronic commerce (e-commerce), many ofthe law's provisions may impact it. In particular, Title III responds to concerns that more can be doneto prevent, detect, and prosecute international money laundering and the financing of terrorism. Over time, these provisions may affect e-commerce broadly, and electronic fund transfersspecifically. Electronic government (e-government) could be affected by the Act in both positive andnegative ways. The intense focus on improving data collection and information sharing practicesand systems may contribute to the establishment of government-wide technical standards and bestpractices that could facilitate the implementation of new and existing e-government initiatives. Itcould also promote the utilization of secure Web portals to help ensure the data integrity oftransactions between the government and citizens and business. However, concern about potentialabuses of data collection provisions could dampen citizen enthusiasm for carrying out electronictransactions with the government. The Act provides law enforcement officials with greater authority to monitor Internet activitysuch as electronic mail (e-mail) and Web site visits. While law enforcement officials laud their newauthorities as enabling them to better track terrorist and other criminal activity, privacy rightsadvocates worry that, in an attempt to track down and punish the terrorists who threaten Americandemocracy, one of the fundamental tenets of that democracy--privacy--may itself be threatened. Because of the controversial aspects of some provisions in the Act, particularly regardingprivacy, Congress and other groups are expected to monitor closely how the Act is implemented. |
Israel withdrew from the Gaza Strip in 2005, but retained control of the territory's borders. Hamas emerged as the predominant force in the territory. In January 2006, Hamas won the Palestinian Authority (PA) legislative elections and established itself as a major actor in domestic politics. Some countries and organizations, including Turkey, consider Hamas a democratically elected, legitimate representative of the Palestinian people. Israel considers Hamas to be a terrorist group, and the U.S. State Department designates it as a Foreign Terrorist Organization (FTO). Hamas has criticized peace talks with Israel in line with its commitment to resistance, has perpetrated terrorist attacks against Israel, and has launched rockets from Gaza into Israel. Hamas's participation in politics heightened its rivalry with Fatah, which had led all previous Palestinian governments. It also prompted the United States to end all direct foreign aid to the Palestinians. Under pressure from Saudi Arabia, Hamas and Fatah formed a unity government in February 2007, which proved to be short-lived. In what it considered a pre-emptive act to prevent Fatah from striking it first, Hamas took control of the Gaza Strip by force in June 2007. This "coup" prompted PA President Mahmud Abbas to dissolve the Hamas-led government and replace it with the current one under Prime Minister Salam Fayyad, who administers only the West Bank. Hamas remains in control of Gaza. Israel and the United States reestablished relations with the new PA government, and Israel imposed a tight land, sea, and air blockade on the Gaza Strip, in what it describes as an act of self-defense to prevent arms from reaching Hamas. With the blockade, Israel also hoped to turn Gazans against Hamas by contrasting Hamas rule with the better life of Palestinians in the West Bank. Instead, the blockade isolated the territory and helped to strengthen Hamas's control. From December 2008 to January 2009, Israeli forces carried out a major military offensive, called Operation Cast Lead, against Hamas in order to stop rocket fire into southern Israel and to weaken or overthrow Hamas. The campaign resulted in more than 1,000 Palestinian deaths and the destruction of much of the Gaza Strip's infrastructure and many buildings. Afterwards, Israel tightened the blockade and conditioned its end on the release of Israeli Defense Forces (IDF) Sergeant Gilad Shalit, who had been captured in 2006. The blockade has severely affected the humanitarian situation in the Gaza Strip, although Israel and its critics differ about the effects. The Israeli government maintains that there is no humanitarian crisis in Gaza, and the IDF issues a detailed Weekly Summary of Humanitarian Aid Transferred into Gaza to support that position. The Ministry of Defense Coordinator of Government Activities in the Territories (COGAT) issues a similar Gaza Strip Merchandise and Humanitarian Aid Report . They provide information on the number of trucks and persons allowed to enter Gaza and list the cargos of food, medicine, and other supplies. The United Nations Office for the Coordination of Humanitarian Aid (OCHA) issues contrasting regular reports on the situation in Gaza. It summarily states that the blockade has "worsened conditions of life of Palestinians, deepened poverty and food insecurity, prevented reconstruction, and increased aid dependence by destroying livelihoods and economic activity." It refers to the blockade as "collective punishment." U.S. non-governmental humanitarian aid organizations, such as CARE and Mercy Corps, report difficulties experienced in rebuilding Gaza more than a year after Cast Lead, as well as obstacles that their workers face in trying to provide assistance because they cannot simultaneously accommodate U.S., Israeli, and Hamas rules—and Hamas is in control. Gazans have been unable to repair public infrastructure—hospitals, schools, electric systems, or sewage treatment plants—because Israel will not permit the delivery of materials such as steel, concrete, and tiles that could be used both for rebuilding and for the manufacture of weapons or other military purposes. In recent years, humanitarian aid groups have sent supply ships and activists to Gaza. However, Israel directs them to land at its port of Ashdod for inspection before delivery to Gaza. In addition to the deliveries allowed by Israel, Egypt intermittently opens the border crossing at Rafah with Gaza that it sealed in 2007. Moreover, the smuggling of goods (and weapons) via a network of tunnels under the border also relieves the blockade somewhat, but smuggled goods create economic distortions by fueling a large informal economy. Israeli planes often bomb the tunnels, but these attacks have not put a stop to the activity. On May 22, 2010, the MV Mavi Marmara , a former Istanbul passenger ferry owned by the Turkish Humanitarian Relief Foundation (more fully the Foundation for Human Rights and Freedoms and Humanitarian Relief (IHH)), left Istanbul and, after stopping in the Mediterranean port of Antalya to pick up more than 500 passengers, met up at sea with five other ships south of Cyprus. IHH also sent two cargo vessels. Several ships from the Free Gaza Movement had departed from the Greek port of Piraeus. A six-ship flotilla then set sail for the Gaza Strip with the intent to deliver 10,000 tons of humanitarian aid and to break the Israeli blockade. In all, about 700 activists from 38 countries participated in the expedition, including approximately 11 Americans, some European parliamentarians, and Swedish writer Henning Mankell. On May 30, the ships refused Israel's offer to unload at the port of Ashdod so that their cargos could be inspected before delivery accompanied by representatives of the non-governmental organizations. On May 31, when the ships were in international waters between 80 and 100 miles from the Israeli coast, Israeli navy zodiac boats intercepted them and naval commandos took over five ships, reportedly without incident. However, the Marmara resisted and commandos rappelled from helicopters onto that ship and were confronted by some passengers/activists. The IDF released videos showing that individuals attacking the commandos were armed with iron rods, knives, broken glass bottles, and sling shots, and equipped with gas masks, night vision goggles, and life vests. The IDF says that the passengers also seized a commando's side arm. IHH President Bulent Yildirim admitted that activists had used iron rods, but claimed that they threw seized Israeli weapons into the sea. It is not clear if the commandos, who had paintball guns and firearms, struck first or in response to an attack from the passengers, and each side has given a different account. Nine passengers were killed, including eight Turks and a Turkish-American; 24 were injured, including one American, and 10 commandos were injured. The dead were members of or volunteers for IHH, which hailed them as "martyrs." All of the ships were taken to Ashdod, where the passengers were detained and the cargo was unloaded, inspected, and trucked to the Kerem Shalom border crossing between Israel and Gaza. Hamas initially refused to allow the aid to be transferred into Gaza and the Israeli Defense Ministry stored it at a military base while it consulted international organizations. On June 15, it was announced that the U.N. would distribute the aid. By June 3, Israel had deported all the detainees, including all alleged perpetrators of the attacks on its military personnel, except for a few severely wounded who were repatriated a few days later. Israeli officials claim to have found Molotov cocktails, detonators, wood and metal clubs, slingshots and rocks, large hammers, and sharp metal objects on the Marmara , but no rockets. The flotilla was the idea of the Free Gaza Movement, which teamed up with the IHH. The Free Gaza Movement is a Cyprus-based coalition or alliance formed to oppose Israel's blockade of the Gaza Strip and is said to have roots in the International Solidarity Movement, a non-violent movement dedicated to ending the Israeli occupation of Palestinian territory. Its members had sailed to Gaza several times before, and Israel had let them dock there five times. After Operation Cast Lead, however, Israel began intercepting Free Gaza Movement ships before they reached Gaza. This year, Free Gaza decided to cooperate with other groups, including the IHH, in a "freedom" flotilla. Free Gaza Movement founder Greta Berlin said that former Malaysian Prime Minister Mahathir Mohammed had raised €300,000 (approximately $367,000) to enable the Movement's participation in the convoy. She said that it will continue to send ships to Gaza, and Israel peacefully intercepted another one, the MV R achel Corrie , on June 5. IHH is a humanitarian aid organization founded in 1995 that is said to have ties to the International Red Cross; holds special consultative status with the U.N. Economic, Social, and Cultural Organization (UNESCO); and operates in more than 100 countries. It has provided humanitarian aid to Bosnia and Chechnya as well as to victims of Hurricane Katrina and the earthquake in Haiti, among other activities. IHH's involvement with the aid flotilla is in line with its previous aid to Gaza, where it has an office. In addition to the Mavi Marmara , IHH contributed two cargo ships to the May convoy. Days before the raid, an Israeli think tank released a report linking IHH to radical Islamist networks, including Hamas and the Muslim Brotherhood, and to "global jihad elements" in the 1990s. It cited a French intelligence report claim that IHH President Bulent Yildirim had recruited Muslims for jihad in Bosnia, Chechnya, and Afghanistan in the 1990s, but also stated that IHH engages in "legitimate humanitarian activities." Since the incident, the think tank has released additional reports, including one alleging that IHH employed violence on the Mavi Marmara with premeditation. IHH openly supports Hamas, which led Israel to outlaw it in 2008. It is not a U.S. State Department-designated terrorist group, although it is part of a Saudi-based, Hamas-created umbrella group of Muslim charities called Union of Good that the U.S. Treasury has designated as a terrorist organization. IHH has influential connections in Turkey. In his remarks at the Marmara 's departure from Istanbul, Yildirim thanked the ruling Justice and Development Party (AKP) and two small Islamist parties for their support. IHH is believed to be close to the conservative Islamist Felicity Party (SP). While there was no direct Turkish government involvement in the aid mission, government administrators facilitated IHH's purchase of the ferry from the Istanbul municipality, which AKP controls, and its departure from Turkish ports. Yildirim also mentioned recent instances of IHH aid workers' "martyrdom" in Afghanistan and imprisonment in Israel, and IHH leaders have referred to those killed on the Marmara as "martyrs." IHH is said to have had about 40 to 50 members aboard the Marmara . While there is a multiplicity of views in Israel concerning the blockade of Gaza and the raid on the Marmara , most Israelis equate security with survival and peace. Israel's leaders appear to believe that the blockade of the Gaza Strip, the security barrier that Israel has constructed in the West Bank, the successes of the Palestinian security forces and economy in the West Bank, and what it views as enhanced deterrence in the aftermath of military campaigns against Hezbollah in Lebanon in 2006 and Hamas in the Gaza Strip from December 2008 to January 2009 have brought about a kind of quiet, if not peace. As of the date of the incident, no Israeli had been killed in a terrorist attack or a cross-border rocket attack in Israel in more than a year. Therefore, the government is unwilling to abandon a tactic (i.e., the blockade) that has worked—and is still working from its perspective. Prime Minister Benjamin Netanyahu insists that the blockade is necessary to prevent weapons from reaching Gaza. He maintains, "(I)t's our obligation—as well as our right in accordance to international law and to common sense—to prevent these weapons from entering by air, sea, and land." He cites two earlier examples of Israel's seizure of ships that were discovered to be carrying arms. The prime minister claimed that the flotilla intercepted in May intended to break the naval blockade, not to bring goods, and said Israel allows goods and cargo to enter Gaza. He added, "Had the blockade been breached, this flotilla would have been followed by dozens, by hundreds of ships. The amount of weapons that can be transported aboard a ship is totally different from what we saw get through the tunnels (beneath the Gaza-Egypt border). Hundreds of missiles and rockets, and an innumerable number of weapons can be smuggled aboard a ship." Netanyahu argued that the consequences of Israel's failure to maintain the blockade would be "an Iranian port in Gaza, only a few dozen kilometers from Tel Aviv and Jerusalem." Israeli officials refer to those killed on the Marmara as "terrorists" and, as noted above, Israel banned the IHH in 2008. As noted, several Turkish political parties, including the ruling AKP, supported the IHH effort to aid the Palestinians. However, the Turkish government claims it was not directly involved. Foreign Minister Ahmet Davutoglu said afterwards that the government had tried to convince the non-governmental organizations in charge of the flotilla to take the aid to Israeli ports, but it was not successful. The government also urged Israel to let the ships land in Gaza. The Turkish government, all political parties, and people were outraged by the Israeli attack. After the raid, mass demonstrations occurred in Ankara and Istanbul, and officials made repeated, dramatic, if not hyperbolic, statements about Israel's actions. The Turkish Foreign Ministry first protested Israel's use of force "in the strongest terms," charging that "Israel has once again clearly demonstrated that it does not value human lives and peaceful initiatives through targeting innocent civilians." Turkey called for an emergency meeting of the U.N. Security Council—on which it holds a non-permanent seat—that Foreign Minister Davutoglu attended on May 31. Turkey also called for NATO permanent representatives in Brussels and the Organization of the Islamic Conference (OIC), which it chairs, to meet on the issue. At the Security Council session, Davutoglu called Israel's actions "banditry and piracy ... murder conducted by a state ... and barbarism." He stated that the use of force was "inappropriate" and "disproportionate" and that international law dictates that "even in wartime, civilians are not to be attacked or harmed." He argued that the doctrine of self-defense could not justify the actions of Israeli forces. Finally, he called on the council to condemn Israel's "act of aggression," demand an urgent inquiry, and call for the punishment of all responsible authorities and persons. Prime Minister Recep Tayyip Erdogan described Israel's actions as a "bloody massacre" deserving "every kind of curse." He said, "This insolent, irresponsible, reckless, and unfair attack by the Israeli government which trampled on every kind of human value must be punished by all means." These quotes are characteristic of his many unsparing, trenchant remarks. The most offensive and inflammatory may have been his blaming Israel for increasingly common global comparisons of the "Zionist star" (i.e., Star of David) with the Nazi swastika. For some time, Turkish officials' anti-Israeli rhetoric have gained them considerable regional influence. Erdogan is very popular with Arab publics and his fervor and rage also benefit him with voters. While the heat of the first days after the raid may dissipate, the anger will remain. The prime minister may be feeding or exploiting it for domestic political purposes in the run-up to national elections next year, or earlier, as he cannot afford to lose votes to either more Islamist parties or the reviving secular opposition. There has been near-universal condemnation of Israel's actions. Nicaragua broke off relations with Israel, while Ecuador and South Africa recalled their ambassadors and many other governments called in Israeli ambassadors to protest. The European Union reiterated its demand for an immediate opening of Gaza's border crossings. China urged Israel to end the blockade and condemned the Israeli raid on the ship. Russia called on Israel to lift the blockade and for an impartial investigation. U.N. Secretary General Ban Ki-moon condemned the violence and called for a full investigation. The U.N. Human Rights Council voted to launch an independent, international inquiry into the events, although the United States voted against it. On June 1, a compromise Statement by the President of the Security Council at the U.N. regretted "the loss of life and injuries resulting from the use of force during the Israeli military operation in international waters against the convoy sailing to Gaza.... The Council ... condemns those acts which resulted in the loss of at least ten civilians and many wounded." It called for a "prompt, impartial, credible, and transparent investigation conforming to international standards." In addition, the council reiterated its "grave concern at the humanitarian situation in Gaza" and stressed "the need for sustained regular flow of goods and people to Gaza as well as unimpeded provision and distribution of humanitarian assistance throughout Gaza." It again called for a two-state solution to the Israeli-Palestinian conflict and expressed support for the ongoing proximity talks (that are being mediated by U.S. Special Envoy for Middle East Peace George Mitchell). British Prime Minister David Cameron called Israel's actions "unacceptable." He said that Britain remained committed to Israel's security and urged Netanyahu to respond constructively to "legitimate" international criticism and to lift the blockade. German Chancellor Angela Merkel expressed her "deep concern" to both Netanyahu and Erdogan, and her spokesman said, "Every German government has always recognized and supported the right of Israel to defend itself, but this right must of course be within the bounds of proportionality." French President Nicolas Sarkozy condemned "the disproportionate use of force" and said, "All possible light must be shed on the circumstances surrounding this tragedy, which highlights the urgent need for the peace process to be relaunched." On June 14, the Council of the European Union adopted conclusions regretting the loss of life during Israel's military operation in international waters against the flotilla sailing to Gaza and condemned the use of violence. It called of an immediate, full, and impartial inquiry with credible international participation. It called for "the immediate, sustained, and unconditional opening of crossings for the flow of humanitarian aid, commercial goods, and person to and from Gaza" and "for a solution that addresses Israel's legitimate security concerns." In response to international calls for an investigation of the incident, Israel has launched several probes. On June 7, Israel Defense Forces (IDF) Chief of Staff Lt. Gen. Gabi Ashkenazi appointed former head of the National Security Council Maj. Gen. Giora Eiland (Ret.) to head an external military probe that will report by July 4. Three other retired senior officers are on the panel that is tasked with drawing operational conclusions. It reportedly will delve into the choice of unit to carry out the operation, possible alternative tactics that might have been used to stop the flotilla, military decision-making leading up to the operation, and intelligence matters. Eiland has already defended the commandos' right to self-defense and said, "(T)here was a mistake, but not on the soldiers' part. The mistake lay in underestimating who the Turkish ship's passengers were." On June 13, Prime Minister Netanyahu announced the establishment of a special, independent public commission to inquire into the events of May 31. It will be chaired by retired Supreme Court Justice Jacob Turkel, who still sits on a military appeals court panel, and, as members, Shabtai Rosen, a professor of international law and former diplomat, and Maj. Gen. Amos Horen (Ret.), a former president of Technion (Israel Institute of Technology). The panel includes two foreign observers: Lord David Trimble, the former first minister of Northern Ireland, and Brig. Gen. Ken Watkin, former judge advocate general of the Canadian Forces. The commission has a limited mandate. It will investigate whether Israel's blockade of the Gaza Strip and the enforcement of it conform to international law. It also will consider the actions and identities of those who organized and participated in the flotilla. Military personnel will not be required to testify. Instead, the IDF will provide it with summaries of the Eiland investigation. Israel had coordinated its approach to the investigation with the Obama Administration, which had urged the inclusion of an "international component" to enhance the inquiry's credibility. Hence, the White House reaction to the Israeli announcement was positive: We believe that Israel, like any other nation, should be allowed to undertake an investigation into events that involve its national security. Israel has a military justice system that meets international standards and is capable of conducting a serious and credible investigation, and the structure and terms of reference of Israel's proposed independent public commission can meet the standard of a prompt, impartial, credible, and transparent investigation. But we will not prejudge the process or its outcome, and will await the conduct and findings of the investigation before drawing further conclusions. However, Turkish Foreign Minister Davutoglu was not satisfied. He declared, The crime was committed in international waters, not in Israel's territorial waters. A commission which will conduct an inquiry into an attack staged in international waters should be international. We demand that an international commission should be formed under the supervision of the U.N. with participation of Turkey and Israel…. We believe that Israel, as a country which attacked on a civil convoy in international waters, will not conduct an impartial inquiry. He also said that "international participation in a commission established by Israel does not give it an international quality." Finally, Davutoglu stated that if an international commission were not set up, then Turkey would unilaterally review its ties with Israel and implement sanctions against it. Israel's State Comptroller Micha Lindenstrauss will carry out yet another investigation into the legality of the government's decision-making as well as intelligence and public relations issues. The probe will not duplicate that of the IDF or the Turkel group. Meanwhile, U.N. Secretary General Ban Ki-moon took note of the Israeli announcement, but added that his own proposal for an international inquiry remains on the table and he hoped for a positive Israeli response. Turkey accepted Ban's proposal and called on Israel to do so. However, Israeli Defense Minister Ehud Barak said, after meeting the Secretary General and providing details concerning new steps to ease the blockade (see " The Blockade ," below) "we consider an [international probe] while organizations that support terror are trying to send more ships to Gaza to be an irresponsible act." On June 17, the Turkish Foreign Ministry announced that a panel headed by the foreign and justice ministers "will assess the national and international dimensions" of the raid and prepare the ground for a possible international investigation. The United States is caught between two long-time allies—Israel and Turkey—and the Obama Administration seems interested in finding a path between them that will not antagonize either party. It is a challenging task. State Department spokesman P.J. Crowley reported that, before the raid, the Administration had urged caution and restraint on Israel given the anticipated presence of civilians, including American civilians. Afterwards, the Administration's first reaction was circumspect, if not muted. The White House issued a statement saying, "The President expressed deep regret at the loss of life in today's incident and concern for the wounded.... The President also expressed the importance of learning all the facts and circumstances surrounding this morning's tragic events as soon as possible." The Administration negotiated with Turkey concerning the Security Council President's statement that condemned "acts" resulting in the loss of life, but not Israel per se. The statement also did not call for an international investigation because of recent experience with what Israel and the Administration considered to be the one-sided U.N. Goldstone Commission investigation of Operation Cast Lead. The State Department's Crowley indicated that the United States believes "Israel is in the best position to conduct an investigation." U.S. Deputy Permanent Representative at the U.N. Alejandro D. Wolff also criticized the attempt to break the blockade, saying, "Direct delivery by sea is neither appropriate nor responsible, and certainly not effective, under the circumstances." Yet, he further said that the situation in Gaza was "unsustainable." Secretary of State Hillary Rodham Clinton made the same observation. The White House said that President Obama "affirmed the importance of finding better ways to provide humanitarian assistance to the people of Gaza without undermining Israel's security." Vice President Biden maintained that because Israel is at war with Hamas, it "has a right to know whether or not arms are being smuggled in." He also stated that the Administration had been "cajoling" Israel to allow building materials into Gaza. The Administration likely does not want its reaction to the flotilla incident to further disrupt what has become an uneasy bilateral relationship with Israel. It needs a better relationship with the Netanyahu government in order to make progress in the Israeli-Palestinian peace talks, which U.S. officials believe to be in America's national security interests. Strains had developed due to President Obama's and Netanyahu's differing views regarding West Bank settlement activity and, especially, Jerusalem. The Administration does not want Israel to take any actions that could prejudge a final settlement with the Palestinians, who seek a state in the West Bank and Gaza with east Jerusalem as its capital. The incident at sea led Prime Minister Netanyahu to cancel a June 1 meeting with President Obama at the White House, but it has been rescheduled for July 6. At the same time, the Administration needed to consider the strength of its desire for Turkey's support in the Security Council for sanctions on Iran. It is usually believed that unanimity or a large number of votes in the council lends greater weight on such issues. It is possible, however, that the Administration had decided to proceed without Turkey's support, given the announcement in Tehran on May 17 of an agreement with Iran and Brazil on an exchange in Turkey of some of Iran's low enriched uranium for medical grade uranium—a deal that the Administration found deficient. Turkey voted against sanctions, which its officials maintain was because of the Tehran deal and not related to the events of May 31 and their aftermath. On June 9, at a meeting with Palestinian Authority (PA) President Abbas, President Obama promised $400 million in aid for the West Bank and Gaza Strip. None of the aid requires new congressional action as all was appropriated in FY2009 and FY2010 legislation. Most is not for Gaza. That slated in some way for Gaza includes $40 million to support the United Nations Relief and Works Agency's (UNRWA) Emergency Appeal for Gaza and the West Bank to help improve educational and health services, increase job creation, and repair shelters in Gaza, while also addressing core humanitarian needs in the West Bank; $14.5 million for school rehabilitation, small-scale agriculture, the repair of a hospital and other community infrastructure in Gaza; $10 million for the construction of five new UNRWA schools in Gaza; and $5 million to complete five USAID-funded projects to repair water distribution and wastewater collection systems in Gaza. There is an international consensus that something must be done to lift or ease Israel's blockade of Gaza and to reestablish a fully functioning economy there for its residents. Yet, there was a dearth of ideas from those who called on Israel to end the blockade concerning creative ways for Israel to do that and to continue to prevent the arming of Hamas and its development as a more deadly threat to Israel. Hamas is exploiting the flotilla incident as a propaganda victory. It is not in the group's interest to not attempt to rearm or to help lessen Israel's international isolation. It is in the United States' and international community's interest to find a solution to this problem. President Obama described the situation in Gaza as "unsustainable." He stated "we agree that Israelis have the right to prevent arms from entering into Gaza that can be used to launch attacks into Israeli territory. But … it is important for us to explore new mechanisms so that we can have goods and services, and economic development, and the ability of people to start their own businesses, and to grow the economy and provide opportunity within Gaza." He added, "there should be ways of focusing narrowly on arms shipments, rather than focusing in a blanket way on stopping everything and then in a piecemeal way allowing things into Gaza." The Israeli government discussed ways to ease procedures at land crossings. Prime Minister Netanyahu insisted that the sea blockade is essential. Foreign Minister Avigdor Lieberman suggested that Israel offer to ease the crossings in exchange for monthly International Red Cross visits to Sergeant Gilad Shalit. However, Hamas restated its position that any movement on Shalit depends solely on Israel's release of more than 1,000 Palestinian prisoners, as it has long demanded, and is not related to any other issue. One suggestion was for Israel to publish a limited list of goods prohibited for security reasons and let all other goods enter the Gaza Strip. Former British Prime Minister Tony Blair, the Quartet Representative, and the European Union urged Israel to adopt the practice and it did "in principle." On June 17, Prime Minister Netanyahu's office announced that the Israeli security cabinet had agreed to "liberalize the system by which civilian goods enter Gaza; expand the inflow of materials for civilian projects that are under international supervision; continue existing security procedures to prevent the inflow of weapons and war materiel; and to decide in the coming days on additional steps to implement this policy." However, the naval blockade would not be lifted. The White House welcomed the move as "a step in the right direction. On June 20, the Prime Minister's Office announced the following steps to be implemented "as quickly as possible": Publish a list of items not permitted into Gaza that is limited to weapons and war materiel, including problematic dual-use items. All items not on the list will be permitted. Enable and expand the inflow of dual-use construction materials for Palestinian Authority-approved projects (schools, health facilities, water, sanitation, etc.) that are under international supervision and for U.N. housing projects. Expand operations at the existing operating land crossings, thereby enabling the processing of a significantly greater volume of goods and the expansion of economic activity. Add substantial capacity at the existing operating land crossings and, as necessary, add additional land crossings. Streamline the policy of permitting the entry and exit of people for humanitarian and medical reasons and that of employees of international aid organizations recognized by the government of Israel. Continue the inspection and delivery of goods bound for Gaza through the port of Ashdod. The White House responded, "Once implemented, we believe these arrangements should significantly improve conditions for Palestinians in Gaza, while preventing the entry of weapons." It also wanted to "explore additional ways to improve the situation in Gaza, including freedom of movement and commerce between Gaza and the West Bank." The measures have not put an end to calls for a complete lifting of the blockade. The Turkish Foreign Ministry said that they were "a positive step but not enough." Meanwhile, Sergeant Shalit's father charged that the Israeli government had surrendered an important tool to gain his son's release. Shortly after the Marmara incident Egypt announced the opening of the Rafah crossing "indefinitely," although it only allowed travelers with special permits and continued to restrict potentially dual use goods. Some PA officials are concerned that efforts to lift the blockade will lead to a more autonomous Gaza Strip that is permanently separate from the West Bank. Such concerns may have animated Prime Minister Fayyad's suggestion, also proposed by Tony Blair and others, to reinstate the 2005 Agreement on Movement and Access, which called, inter alia , for the Rafah border crossing to operate with EU monitors and Israeli surveillance as well as for a link between Gaza and the West Bank. PA forces also were situated at the border. The EU Border Assistance Mission (EU-BAM) operated until suspended when Hamas took over the Gaza Strip in 2007. Its revival would be a way for the PA to reestablish its forces at the border. However, a Hamas spokesman quickly declared, "any international intervention, especially by the Europeans, must come through the government of Gaza," which would be problematic for both the PA and the Europeans. New attempts to break the blockade are expected. The Iranian Red Crescent announced plans to send three ships and one airplane bearing supplies for Gaza, but delivery may be made via the Egyptian Red Crescent. The European Campaign to End the Siege on Gaza says that it is organizing another aid flotilla. A ship with women activists carrying food and medicine already has set sail from Lebanon and others from Reporters without Borders and the Free Palestine Movement plan to leave from there as well. The IHH announced that it has assembled six ships for another flotilla due to sail in the second half if July that it invited others to join. The Israeli Foreign Ministry spokesman said that ships from Iran and Lebanon are from "enemy states" and would get different treatment. The U.S. State Department has tried to discourage these efforts, stating, "everyone who wants to help the people of Gaza should work through established channels." Many observers believe that the best response to the current crisis and the way to prevent future ones is Israeli-Palestinian peace and the creation of an independent Palestinian state that would deprive Hamas of its resistance rationale and lead to better lives for the Palestinians. U.S. Special Envoy for Middle East Peace George Mitchell says that the proximity talks that have been underway for several weeks between Prime Minister Netanyahu and President Abbas will continue. Abbas also has stated that the talks will not be broken off. However, few are optimistic about the prospects for peace given the uncompromising territorial ambitions of right-wing nationalists in the Netanyahu government and the divided Palestinian rule between Gaza and the West Bank. Even if an accord can be achieved, many wonder how successfully it can be implemented. The current crisis is undoubtedly a turning point in Turkish-Israeli relations. President Abdullah Gul declared, "Turkish-Israeli relations can never be as before from now on." Yet, this change is not dramatic; it has been coming for some time. The picture of Turkish-Israeli friendship was drawn in the 1990s when their bilateral relations improved in tandem with Israeli-Palestinian peace talks and when both governments viewed Syria, then their common neighbor, as an adversary. Cordiality was aided by the Turkish military's appreciation of Israeli arms for use in the fight with Kurdistan Workers Party (PKK) insurgents. Joint military exercises became routine. Surprising to some, relations did not deteriorate when the Justice and Development Party (AKP), which has Islamist roots, came to power in 2002. Prime Minister Erdogan visited Israel and Israeli President Shimon Peres addressed the Turkish parliament. Israel trusted Ankara enough to allow it to mediate indirect peace talks with Syria in 2008. However, Israel's suspicions of the AKP may have been sparked when the party hosted Hamas Politburo Chief Khalid Mish'al in 2006, after the Palestinian Authority legislative elections. Turkish officials repeatedly refer to Hamas as a democratically elected group that was denied the chance to govern, and call on the international community to engage Hamas. Moreover, Israel is aware of Turkey's close relations with Iran, its defense of that country's right to develop nuclear energy, and its charge that the international community uses a double standard when it fails to castigate Israel for its nuclear weapons. Erdogan and other Turkish officials almost always refer to Israel's nuclear weapons when countering international concern about the possibility that Iran seeks such weapons; Erdogan has described that notion as "gossip." Turkish officials do not, as Israeli officials do, refer to Iranian President Mahmud Ahmadinejad's vow to "wipe Israel off the map" or to Iran's support for anti-Israel terrorists. In other words, a gap has been widening between the two erstwhile friends. Bilateral relations have been deteriorating rapidly since Israel's military campaign against Hamas from December 2008 to January 2009. Prime Minister Erdogan has said that he was insulted that then Israeli Prime Minister Ehud Olmert had failed to inform him of the anticipated offensive while in Turkey for consultations regarding the Turkish-mediated Israeli-Syrian peace talks just days before launching the offensive. In January 2009, Erdogan took offense at President Peres's defense of Operation Cast Lead at the World Economic Forum and stormed off the stage. Erdogan's action gained him popularity throughout the Arab world. Shortly thereafter, a Turkish television series depicted Israeli soldiers as barbarians. Erdogan has repeatedly criticized Prime Minister Netanyahu's government. In October 2009, Turkey cancelled Israel's participation in a multilateral military exercise—some suggested that this was due to concerns that Israel would use it to prepare for an attack on Iran. In January 2010, Israeli Deputy Prime Minister Dani Ayalon insulted Turkey's ambassador to Israel while complaining about the television series. Turkey demanded and received an apology. Erdogan is unrelenting in his repeated references to what he refers to as Israel's inhumane conduct of the Gaza campaign and of its continuing ill treatment of the Palestinians in Gaza, which he calls an "open air prison." He also has warned Israel not to try to change the character of Jerusalem and questioned the Jews' ties to certain religious sites. After Israel's raid on the flotilla, Erdogan said "Today is a turning point in history. Nothing will be the same again," speaking of relations with Israel. Turkey recalled its ambassador from Israel and cancelled three joint military drills, cooperation in the fields of energy and water, and soccer matches. It also is demanding that Israel apologize and compensate the victims. Foreign Minister Davutoglu says that relations will not improve until the results of an international probe of the Israeli raid are implemented and Israel lifts the siege of Gaza. Defense Minister Vecdi Gonul said that Turkey did not plan to cancel military contracts for the purchase of Israeli arms, including Heron drones, radars, and avionic systems, and joint production of mine-resistant ambush-protected (MRAP) vehicles. Most of the Herons have been delivered and Israel has been compensated for them. However, after the flotilla incident, Israeli defense industries withdrew engineers and flight officers who were training Turkish forces for the Heron. The companies also claimed that the deal had not been cancelled and, on June 22, a Turkish military delegation arrived in Israel to test the last four drones scheduled for delivery. Much of the Turkish-Israeli bilateral trade—worth $2.5 billion in 2009—has been Turkey's purchase of military equipment from Israel and it was anticipated to increase before the incident. The two countries signed a free trade agreement in 1996. Observers do not believe that any new deals should be expected. Aside from criticizing Israel's plans for its own inquiry into the incident, Foreign Minister Davutoglu declared that Turkey would work to isolate Israel in every international platform if an international investigation were not established. The flotilla crisis may have added to a developing rift in the foreign policies of Turkey and the United States. The Administration does not want to harm relations with Turkey, which is important to U.S. geostrategic interests, particularly in Iraq and Afghanistan. President Obama called Prime Minister Erdogan to convey his condolences for the tragedy at sea. However, some in Turkey want the Administration to choose between Israel and Turkey, and believe that the United States must choose Turkey. As that is unlikely, some Turks may remain unsatisfied. Despite its NATO membership and European Union candidacy, Turkey is an increasingly independent actor on the international stage, reflective of its growing economic and regional power and ambition to be a world power. It is conforming less automatically than in the past to the views of the United States and other Western allies, and developing what Foreign Minister Davutoglu has described as a "multidirectional" foreign policy. Ankara also is less reluctant to criticize its American ally publicly. With regard to the flotilla incident, Davutoglu expressed disappointment with Washington's "cautious reaction to the events." He stated, "We expect full solidarity with us. It should not seem like a choice between Turkey and Israel. It should be a choice between right and wrong, between legal and illegal." He also complained that the United States had delayed and watered down the U.N. Security Council President's statement. This crisis came on the heels of a disagreement between Washington and Ankara over Turkey's agreement with Brazil and Iran concerning Iran's uranium. Davutoglu insists that Turkey followed guidance in an October 2009 letter from President Obama to Prime Minister Erdogan in formulating the deal, but the U.S. State Department had observed several weeks before the agreement was announced in Tehran that those parameters needed updating. The Foreign Minister also sought to place the agreement with Iran in the context of President Obama's policies of engagement and multilateralism in order to deprive United States of room to maneuver in its effort to get harsher sanctions imposed on Iran. As noted above, Turkey voted against sanctions. Recent events suggest U.S. policy makers should expect additional and increasing examples of Turkey's developing autonomous foreign policy. It may be a challenge for U.S. officials to accommodate their views to Turkey's "multidirectionalism" or to address it constructively. S.Res. 548 , introduced and referred to the Committee on Foreign Relations on June 9, 2010. To express the sense of the Senate that Israel has an undeniable right to self-defense, and to condemn the recent destabilizing actions by extremists aboard the Mavi Marmara . H.R. 5501 , American Stands with Israel Act, introduced and referred to the Committee on Foreign Affairs on June 10, 2010. To prohibit the United States participation on the U.N. Human Rights Council and prohibit contributions to the U.N. for the purpose of paying for any U.N. investigation into the flotilla incident. | Israel unilaterally withdrew from the Gaza Strip in 2005, but retained control of its borders. Hamas, a U.S. State Department-designated Foreign Terrorist Organization (FTO), won the 2006 Palestinian legislative elections and forcibly seized control of the territory in 2007. Israel imposed a tighter blockade of Gaza in response to Hamas's takeover and tightened the flow of goods and materials into Gaza after its military offensive against Hamas from December 2008 to January 2009. That offensive destroyed much of Gaza's infrastructure, but Israel has obstructed the delivery of rebuilding materials that it said could also be used to manufacture weapons and for other military purposes. Israel, the U.N., and international non-governmental organizations differ about the severity of the blockade's effects on the humanitarian situation of Palestinian residents of Gaza. Nonetheless, it is clear that the territory's economy and people are suffering. In recent years, humanitarian aid groups have sent supply ships and activists to Gaza. However, Israel directs them to its port of Ashdod for inspection before delivery to Gaza. In May 2010, the pro-Palestinian Free Gaza Movement and the pro-Hamas Turkish Humanitarian Relief Fund organized a six-ship flotilla to deliver humanitarian aid to Gaza and to break Israel's blockade of the territory. The ships refused an Israeli offer to deliver the goods to Ashdod. On May 31, Israeli naval special forces intercepted the convoy in international waters. They took control of five of the ships without resistance. However, some activists on a large Turkish passenger vessel challenged the commandos. The confrontation resulted in eight Turks and one Turkish-American killed, more than 20 passengers injured, and 10 commandos injured. Israel considered its actions to be legitimate self-defense. Turkey, whose nationals comprised the largest contingent in the flotilla and among the casualties, considered them to be unjustifiable and in contravention of international law. There was near-universal international condemnation of Israel's actions. The U.N. Security Council in a U.S.-Turkish compromise condemned "the acts" that resulted in lost lives and called for an impartial inquiry. Several inquiries are underway in Israel, but Turkey will not be satisfied unless there is an international one under U.N. auspices. The Obama Administration tried to walk a fine line between two allies, Israel and Turkey, and not allow the incident to derail efforts to ameliorate relations with Israel in order to protect Israeli-Palestinian talks now underway. It urged Israel to include international participants in its probe of the incident, and announced an aid package for the Palestinians that does not require new appropriations. However, the Administration's reaction displeased Turkey, and may contribute to that country's ongoing pursuit of a more independent foreign policy course. Turkish-Israeli relations, which had been deteriorating for some time, have reached a low point. In the aftermath of the incident, Israel has eased restrictions on the passage of goods and people into Gaza, while continuing to prevent shipments of weapons and dual-use items to Hamas. |
The Department of Veterans Affairs (VA) provides an array of benefits to veterans and to certain members of their families. These benefits include, but are not limited to, disability compensation, education and training benefits, dependent and survivor benefits, medical treatment, life insurance and burial benefits, and home loan guaranty. In order to apply for these benefits, in most circumstances, the claimant will send an application to his or her local VA office. The local VA Regional Office (RO) will review the application and make an initial determination as to whether the claimant is entitled to the benefit. If, after the local VA makes a determination on the claim, the claimant is not satisfied with the results, he or she has the right to appeal that decision. This report provides an overview of the VA appeal process from the first stages of the appeal through review by the Supreme Court of the United States. The introduction to this report will discuss the types of decisions that can be appealed, introduce the various actors in the appeal process, briefly describe the two avenues for appeal within the VA, and address the rights of a claimant to be represented during the appeal process. The report will then provide a step-by-step breakdown of the appeal process within the Department of Veterans Affairs followed by a description of further judicial review from the Court of Appeals for Veterans Claims, the U.S. Court of Appeals for the Federal Circuit, and the Supreme Court of the United States. In order to apply for VA benefits, an applicant must file a claim at the local VA office, VA medical facility, or online at the VA's eBenefits website (www.ebenefits.va.gov). Veterans Service Organizations (VSO) are available to provide assistance with applying for benefits. Once the VA has received a completed application for benefits, the VA will review the claim and determine whether to allow or deny the claim. The VA will mail the determination to the claimant. If the claimant is not satisfied with the VA's determination, he or she may appeal the decision. After the VA Regional Office mails the claimant an initial determination, the claimant may initiate the appeal process. The claimant will be notified of the right to appeal when the initial determination is issued. The claimant is permitted to appeal any decision reached on a claim for benefits. The BVA's regulations, at 38 C.F.R. §20.101(a), provide a long, but not exhaustive, list of the types of decisions that can be appealed to the BVA, including decisions related to service-connected disability benefits, benefits for survivors, education assistance benefits, and burial benefits. A claimant can appeal a partial or complete denial of a claim. Furthermore, if a claimant successfully receives a benefit from the RO, the claimant may still appeal the amount awarded. For example, if an RO determines that a veteran is entitled to a 30% disability rating, but the claimant believes that percentage should be higher, the determination may also be appealed. Although a claimant may appeal determinations related to eligibility for hospitalization, outpatient treatment, and access to medical devices, a claimant is not permitted to appeal certain medical determinations made by medical providers. For example, a veteran is not permitted to appeal a physician's decision to prescribe or not to prescribe certain drugs or specific treatments. The Board does not have jurisdiction over these types of claims. When making an appeal on an initial determination, the claimant may choose to proceed with the traditional method of review or may choose to have a Decision Review Officer (DRO) review the case. Both forms of review are discussed in detail in this report. Briefly stated, under the traditional review process, the local VA office will review the claim folder to ensure that there are no obvious errors in the claim, prepare the case for review, and send the case to the Board of Veterans' Appeals (BVA). The BVA will then provide a de novo review of the case and reach a determination. Under DRO review, a Decision Review Officer, at the local VA office making the initial determination, will review the claim folder de novo . After reviewing the claim, the DRO will make a supplemental determination. Seeking DRO review does not preclude the claimant from pursuing the traditional review process. If the claimant is not satisfied with the DRO's decision, the claimant may proceed with the traditional review process and have the appeal heard by the BVA. During the appeal process for veterans' claims, various different officials will handle the claim. This section provides a brief introduction to the decision makers who will potentially review an appeal. Each VA Regional Office has at least one Decision Review Officer on staff. The DRO is a "senior technical expert who is responsible for holding post-decisional hearings and processing appeals." A DRO may hear any appeal that may be heard by the Board of Veterans' Appeals. During DRO review, a DRO will review the claim de novo —that is, a new and complete review of the appealed issue with no deference given to the decision being appealed. The DRO may not revise the initial decision "in a manner that is less advantageous to the claimant" unless the DRO finds an instance of "clear and unmistakable error." In order to have an appeal reviewed by a DRO, the claimant must ask to take DRO review. Otherwise, the traditional form of review, directly through the Board of Veterans' Appeals, will proceed. If a claimant opts for DRO review, the claimant may still have the BVA review the claim if the DRO's decision is not favorable to the claimant. When a claimant is not satisfied with the initial determination on the application for benefits, an appeal can be made to the Board of Veterans' Appeals (BVA or Board). The BVA is part of the Department of Veterans Affairs, located in Washington, DC, and makes the final determination on an appeal within the VA. The Board consists of experienced attorneys in the field of veterans law. Board members are appointed by the Secretary of the VA, with the approval of the President. As of 2015, the Board consisted of 63 members. These Board members make the ultimate conclusion on appeals within the VA. The BVA also employs staff attorneys that assist the Board members while preparing a decision for a claim, much like a clerk for a judge. The BVA has a significant work load—in the 2015 fiscal year (FY), the BVA received and docketed 69,957 appeals. The BVA expects that number to climb to 88,183 for FY2016. If a claimant is not satisfied with the decision from the BVA, the claimant has the option of appealing to the Court of Appeals for Veterans Claims (CAVC). The CAVC is an Article I court, established by Congress, which has exclusive jurisdiction over appeals from the BVA. The Court is authorized seven permanent judges and two additional judges as part of a temporary expansion provision. The VA's General Counsel will defend the BVA decision before the court. In FY2015 the CAVC received 4,506 appeals. If the claimant is dissatisfied with the determination reached by the CAVC, the claimant may appeal the decision to the Court of Appeals for the Federal Circuit (Federal Circuit). The scope of review on veterans' appeals provided by the Federal Circuit is limited by statute. The Federal Circuit can set aside regulations that are arbitrary or capricious, unconstitutional, in excess of statutory jurisdiction, or procedurally deficient. Generally, the Federal Circuit is not permitted to review any challenge to a factual determination, or a "challenge to a law or regulation as applied to the facts of a particular case." The Federal Circuit provides the last appeal of right for claimants appealing decisions made by the BVA. Finally, if the claimant is still not satisfied by the decision reached by the Court of Appeals for the Federal Circuit, the claimant may petition the Supreme Court for certiorari. The Supreme Court may or may not decide to hear the case—the claimant is not guaranteed to have the Supreme Court hear the appeal. If the Supreme Court grants certiorari (hears the case), any decision provided by the Supreme Court is final. The VA has established that a claimant "will be accorded full right to representation in all stages of an appeal by a recognized organization, attorney, agent, or other authorized person." The VA sets out certain requirements that a representative must meet in order to assist a claimant during the appeal process. The VA strongly encourages claimants to seek representation and a vast majority of claimants are represented. Claimants, however, are not required to have representation in the appeal process and may represent themselves. Veterans Service Organizations (VSO) may provide trained representatives to the claimant free of charge. The vast majority of claimants are represented by VSO representatives—in 2000, the BVA noted that approximately 85% of claimants were represented by a VSO. Other claimants elect to hire an attorney or a recognized "agent" to represent them during the appeal. Attorneys and recognized agents, however, may charge for their services rendered. Regulations provide that fees "may be based on a fixed fee, hourly rate, a percentage of benefits recovered, or a combination of such bases." Fees must be reasonable, and fee agreements must be filed with the VA Office of the General Counsel. Veterans must fill out VA Form 21-22 if they wish to be represented by a VSO or fill out VA Form 21–22a if they wish to have an attorney or authorized agent provide representation. The VA has various legal obligations to assist the claimant and to ensure that a proper claim for benefits is filed. These obligations include assisting the claimant to obtain evidence, ensuring the claimant has the necessary forms and instructions, and notifying the claimant if additional information is needed. Federal regulations further require the VA to render a "decision which grants every benefit that can be supported in law while protecting the interests of the Government." Therefore, the VA is obligated to consider every legal theory that could support a claim for benefits. Finally, the VA is obligated to weigh evidence in favor of the claimant when reaching its determination. Under 38 U.S.C. §5107(b), "[w]hen there is an approximate balance of positive and negative evidence regarding any issue material to the determination of a matter, the Secretary shall give the benefit of the doubt to the claimant." Therefore, in order to deny a claim for benefits, the preponderance of the evidence must show that the claimant should not be entitled to the benefits sought. Whenever the VA reaches a determination, both on the initial application and on appeal, the VA must provide notice of the decision and "an explanation of the procedure for obtaining review of the decision." After a claimant has received an initial determination from the local RO, an unsatisfied claimant may initiate the appeal process. In order to begin the appeal, the claimant must first submit a Notice of Disagreement (NOD). The NOD is the first step in notifying the VA that a claimant wishes to appeal a decision. Claimants must file an NOD on a standardized form, when that form is provided to the claimant by the VA. However, if the VA does not provide an NOD form to a claimant, then the VA would accept a traditional NOD. The claimant should be specific about whether the entire decision is being appealed or only part of the decision is being appealed. Also, at this stage of the appeal process, a claimant may make a request to undergo DRO review, instead of taking the traditional review straight to the BVA. In most circumstances, the NOD must be sent to the local office that made the initial determination. However, if the claimant's records have been moved to a different VA office, the NOD should be submitted to the new local VA office handling the claim. The NOD must be submitted within one year from when the local VA office mails the initial determination. After one year has passed, the decision is deemed to be final, except in rare circumstances. If the claimant decides to pursue the traditional review process, either a Rating Veterans Service Representative (RSVR) or a DRO will reexamine the claim file and determine whether additional review or development is warranted. If the claimant requests DRO review, the DRO will begin to look over the claim again from scratch. Under DRO review, the DRO will review the claim de novo —that is, they will provide no deference to the initial decision reached by the VA. In this form of review, there does not need to be any new evidence nor any clear and unmistakable error for the DRO to overturn the initial decision. The DRO may not revise the initial decision "in a manner that is less advantageous to the claimant" unless the DRO finds an instance of "clear and unmistakable error." The DRO may hold informal conferences as well as formal hearings with the claimant regarding the claim. After reviewing the claim, the DRO will send a new decision to the claimant along with "a summary of the evidence, a citation to pertinent laws, a discussion of how those laws affect the decision, and a summary of the reasons for the decision." Regardless of whether the claimant elects DRO review or the traditional review, the reviewer will make a decision to allow or deny the claim. If the reviewer allows the claim, then the claimant has won his appeal and the appeal process ends. If the reviewer decides not to grant the claimant's request for benefits, then he will send a notice to the claimant and the claimant may continue with the appeal process. When the VA provides the claimant with notice stating that the claim will be denied, it will also provide the claimant with a Statement of the Case (SOC). The SOC is a document that summarizes the evidence, laws, and regulations that were used to make a determination in the claim and explains why the VA reached the decision. The local VA office will also send a blank VA Form 9—Appeal to Board of Veterans' Appeals—which must be filled out and returned to continue the appeal process. The VA will send the claimant a blank VA Form 9 along with the SOC. The VA Form 9 must be filled out to continue the appeal process. The claimant has 60 days from when the SOC was mailed or one year from when the initial determination was mailed, whichever period ends later, to submit the VA Form 9 to the local VA office. The claimant may seek a deadline extension for submitting the VA Form 9, but must show good cause by providing an explanation for why the additional time is needed. When filling out the form, the claimant will have the opportunity to state whether he/she wishes to have a hearing with the BVA, to point out any mistakes that were made on the SOC, and to establish why the claimant believes the VA made an incorrect decision when determining the claim. The form provides detailed instructions for properly completing the substantive appeal. The claimant may add new evidence when the VA Form 9 is submitted to the VA office. If the VA office receives any new evidence from the claimant, the VA office will prepare a Supplemental Statement of the Case (SSOC) and mail it to the claimant. The claimant will then have 30 days to notify the VA office of any mistakes found in the SSOC. Once the VA Form 9 has been completed and submitted, the claimant has fulfilled his obligations for filing the appeal. The local VA office will certify the case to the BVA after it receives the completed VA Form 9. Once the case has been certified to the BVA, the BVA will then give the claim a docket number. The claim will be heard in the order in which it was received, as the BVA is obligated by law to hear claims on a first come, first served bases. A claimant may file "a motion to advance on the docket" in order to have their case heard more quickly. However, these motions are only granted under rare circumstances—the claimant will have to provide the BVA, in writing, a strong reason for moving the claim up on the docket, such as an imminent foreclosure, bankruptcy, or terminal illness. The claimant should also provide any evidence of such a situation to the BVA at the time the motion is filed. When the claimant submits VA Form 9, the claimant will indicate whether he wishes to have a hearing with a Board member from the BVA. There are three kinds of hearings: (1) an in-person hearing at the local RO; (2) an in-person hearing in Washington, DC; or (3) a teleconference hearing. The teleconference hearing takes place at a local VA office, while the Board member is in Washington, DC. The BVA notes that teleconference hearings are typically the fastest to arrange, as they do not require any travel. Unlike court proceedings, hearings are informal and nonadversarial. The Board member generally will explain how the hearing will take place, ask the claimant to take an oath, and provide the claimant with the opportunity to present any information or evidence that the claimant believes is relevant and material. The presiding Board member "may set reasonable time limits" for the argument and may exclude evidence that is "not relevant or material to the issue." The claimant can be represented at a BVA hearing. The hearing may be documented in a transcript, which is also added to the file for review by the Board. A veteran is permitted to submit additional evidence prior to the BVA reviewing the claim file. The claimant may even submit additional evidence at the hearing, if the claimant has elected to have a hearing with a Board member. Therefore, the claimant should submit any new medical evidence from recent treatments, additional statements, and anything else the claimant believes is material to the claim as soon as the claimant receives it. If the claimant's file is still located at the local VA office, any additional evidence should be submitted to that office. At this point, as stated earlier, the local VA office will provide the claimant with a Supplemental Statement of the Case. As the claim gets close to being considered by the BVA, the local VA office will forward the claim file to the BVA. The local office will send the claimant a notice, informing him/her that the claim file has been transferred to the BVA. The claimant must submit any additional evidence, or a request for a hearing (if the claimant had not already requested one), within 90 days after the BVA has received the claim file, or up until the BVA actually decides the case (whichever comes first). If the claimant wishes to submit information or evidence after the 90 days have passed, he or she must submit a motion to the BVA asking for the evidence to be accepted and must show good cause for missing the deadline. However, the claimant may present additional evidence during the hearing, even if the hearing is held following the expiration of the 90-day period. After the hearing, a Board member and a staff attorney will be assigned to review the claim file. The Board member will ensure the file is complete and evaluate all the evidence, forms, written arguments, and hearing transcripts. The staff attorney will function similarly to a clerk for a judge and perform any additional research that is necessary. The staff attorney may also make recommendations for the Board member to review. At this point, the Board member will make a decision on the appeal. It is uncertain how long it may take the BVA to reach a decision on an appeal. According to the 2015 BVA's Report of the Chairman, the "average length of time between the filing of an appeal ... and the Board's disposition of the appeal was 1,029 days." The BVA will notify the claimant of its decision by mailing a notice to the claimant's address as listed in the claim file. The notice will state the decision and explain the legal basis for reaching that conclusion. The BVA will reach one of three decisions. First, the Board may approve the claim and grant the claimant the benefit sought. If the BVA approves the claim, the claimant wins and the appeal is over. Second, the Board may remand the claim. If the Board remands the claim, the Board member has determined that additional information is needed in order to make the proper decision on the appeal. Upon remand, the claim folder will be returned to the local VA office to perform the additional work needed on the claim. The local VA office, after obtaining the necessary information, will then make another decision on the claim. If the local VA office still believes that the claim cannot be approved, the local VA office will send the claim folder back to the BVA. The claim will maintain its initial place on the BVA docket, so it will be heard by the Board more quickly upon its return. The BVA will then review the claim file again and reach a decision. Third, the BVA may deny the claim. If the BVA denies the claim, the Board member has determined that the claimant is not entitled to the compensation or benefit sought. The BVA will provide a statement outlining the claimant's rights and explaining what further steps may be taken to review the decision. The claimant may continue with the appeal, as discussed below, or accept the BVA's decision. If a claimant wishes to appeal the BVA's decision, the claimant may make an appeal to the United States Court of Appeals for Veterans Claims (CAVC), discussed below. However, there are also additional motions the claimant may file directly with the BVA in order to have the decision reconsidered. If the claimant is able to demonstrate that the BVA made an obvious error of fact or law in its decision, the claimant may file a "motion to reconsider" with the BVA. A motion for reconsideration "may be filed at any time." This motion should be sent directly to the BVA and not to the local VA office. If the motion is allowed by the BVA, the claimant may request an additional hearing before the Board. In order to be successful, the claimant must show that the BVA made an obvious error of law or fact, and that the BVA's decision would have been different if the error had not occurred. The Code of Federal Regulations sets forth the information that must be included with the motion in order for the motion to be considered. The claimant may request to have the case reopened only if the claimant has obtained "new and material" evidence relating to the claim. Evidence will only be considered "new and material" if it relates to the original case and was not included in the claims folder at the time the BVA reviewed the case. In order to reopen a case, the claimant should submit the new evidence to the local VA office, not to the BVA. If the appellant believes that the BVA made a crucial error in reaching the decision, the appellant may file a motion with the BVA to revise the determination for "clear and unmistakable error" (CUE). In order to succeed, the BVA must determine that, but for the error, the BVA would have reached a different decision. A mere difference in opinion is not sufficient. Regulations promulgated by the VA provide a few examples of what does not constitute a clear and unmistakable error, including a changed medical diagnosis, a changed interpretation of a statute or regulation, or the failure to fulfill the VA's duty to assist the claimant. This list illustrates the difficulty of establishing a clear and unmistakable error. If a CUE motion is denied, the appellant cannot request another CUE review on the same issue. The claimant may file a CUE motion at any time by sending the motion directly to the BVA. However, if the appellant files a motion for CUE after filing an appeal to the Court of Appeals for Veterans Claims, or if the appellant files an appeal to the Court of Appeals for Veterans Claims prior to the BVA reaching a determination on the motion, the BVA will stay the CUE proceeding until the CAVC appeal has been concluded. The Court of Appeals for Veterans Claims, an Article I court, has exclusive jurisdiction over appeals from the Board of Veterans Appeals. In order to have the CAVC hear an appeal from the BVA, the appellant must submit a notice of appeal to the court within 120 days of the date that the BVA mailed its decision. Only the claimant may file an appeal to the CAVC; the VA does not have the right to have a decision of the BVA reviewed. The CAVC will reach its determination by reviewing the record from the BVA and the written arguments provided by the appellant and the VA. Although the CAVC is authorized to hear oral arguments, a vast majority of cases are decided without such argument. The CAVC is not permitted to review de novo a determination of fact made by the BVA. Depending on the nature and complexity of the case, either one judge, a panel of three judges or the entire court will render a decision on the case. In a vast majority of cases, one judge will make a decision on the case. If the CAVC rules in favor of the appellant, the case can be remanded to the BVA in order to implement the CAVC's ruling. If the CAVC denies the appellant's claim, the appellant may seek further review at the United States Court of Appeals for Federal Claims. The VA may also appeal a CAVC decision. For years, the 120-day deadline was viewed as a procedural requirement, and thus subject to equitable tolling—that is, missing the deadline did not automatically preclude review by the CAVC. After the Supreme Court decision in Bowles v. Russell , the CAVC and U.S. Court of Appeals for Federal Claims determined that the deadline was actually a jurisdictional requirement—that is, an appeal made after the deadline could not be heard by the CAVC for any reason. However, in 2011, the Supreme Court clarified that the CAVC deadline was not jurisdictional and, therefore, an appeal will not necessarily be precluded if the deadline is missed. In 2001, David Henderson filed a claim with the VA for compensation based on his need for in-home care. His claim was denied by the VA Regional Office and was subsequently denied by the BVA. After the BVA denied his claim, Henderson appealed the decision to the CAVC. However, his notice of appeal was filed 15 days after the 120-day filing deadline had expired. The CAVC, in a 2-1 decision, relied on the Supreme Court's Bowles v. Russell decision and dismissed his appeal for lack of jurisdiction due to the missed deadline. The Court of Appeals for Federal Claims concurred with the CAVC, noting that the 120-day deadline was jurisdictional, and thus mandatory. The Supreme Court granted certiorari. The Court reviewed whether "a veteran's failure to file a notice of appeal within the 120-day period should be regarded as having 'jurisdictional' consequences." The Court unanimously determined that the deadline was not jurisdictional and that missing the deadline does not necessarily preclude the CAVC from hearing an appeal. The Court noted that Congress had taken great care to ensure that the system for awarding veterans benefits greatly favors veterans. Thus, the Court determined that Congress did not intend the 120-day deadline to be a jurisdictional rule. However, the Court did state that the deadline is an "important procedural rule" and remanded the case to the Federal Circuit to determine whether the appellant's "case falls within any exception to the rule." Therefore, although the Court established that the deadline was not mandatory, it provided no guidance for when a case could still be heard even after the deadline was missed. The CAVC, in Bove v. Shinseki , issued a ruling that provides context to when the court would still hear an appeal even after the deadline is missed. The CAVC, prior to its decision in Henderson v. Shinseki , already had a test for determining when equitable tolling would be permissible. Therefore, it returned to its previous jurisprudence on the issue. It stated, The doctrine of equitable tolling has generally established parameters, and over time decisions of the Federal Circuit and this Court have addressed those parameters in the context of appeals to this Court. Thus, for example, equitable tolling was not applied when failure to file was due to general negligence or procrastination. Rather, it was applied only when circumstances precluded a timely filing despite the exercise of due diligence, such as (1) a mental illness rendering one incapable of handling one's own affairs or other extraordinary circumstances beyond one's control, (2) reliance on the incorrect statement of a VA official, or (3) a misfiling at the regional office or the Board. The CAVC held that if an appellant accidentally files the notice of appeal at the wrong location—for example, at the BVA instead of with the CAVC—but the notice of appeal is otherwise timely, equitable tolling is appropriate. It also held that, although mental illness can be a reason to find equitable tolling to be appropriate, the appellant must demonstrate that he is actually " incapable of functioning or making decisions due to mental illness, that his mental illness prevented him from filing his appeal or seeking the assistance of counsel, or that his mental disabilities were related directly to his untimely filing." Therefore, although the 120-day deadline is not "jurisdictional," it still precludes review from the CAVC in many circumstances. However, it should be noted, the Federal Circuit overruled Bove in Dixon v. McDonald . In Bove , the CAVC had held that it had the authority to address untimely filings and equitable tolling sua sponte —that is, on its own accord without prompting from either party—and that the 120-day time period in which to file an appeal is not subject to waiver or forfeiture by the Secretary. The Federal Circuit overruled the CAVC with respect to its sua sponte authority "to resolve timeliness in the face of the Secretary's waiver by granting him relief that he explicitly declined to seek." The Federal Circuit determined that the CAVC's conclusion was wrong for three reasons: (1) it failed to account for statutory limits to its jurisdiction; (2) it misread Supreme Court precedent; and (3) it misconstrued the relevant policy considerations. Thus, the Federal Circuit held that the CAVC does not have the sua sponte authority to grant relief on a non-jurisdictional timeliness defense when the Secretary has waived the defense. However, the first holding in Bove , that the 120-day period in which to file an appeal is subject to equitable tolling, was not overruled and remains valid. The U.S. Court of Appeals for the Federal Circuit (Federal Circuit) has exclusive jurisdiction to hear appeals from a CAVC decision. The Federal Circuit provides the last appeal of right during the appeal process. By statute, the review provided by the Federal Circuit is rather limited. The Federal Circuit is not permitted to review "(A) a challenge to a factual determination, or (B) a challenge to a law or regulation as applied to the facts of a particular case." The Federal Circuit can only review actions to see if they are arbitrary or capricious, unconstitutional, in excess of statutory jurisdiction, or procedurally deficient. The Federal Circuit may modify, reverse, or remand decisions by the CAVC, as appropriate. If either party is dissatisfied with the ruling from the Federal Circuit, an appeal may be made to the Supreme Court of the United States. The Supreme Court does not have to hear the case and may deny certiorari. If the Supreme Court decides to hear the case, any decision reached by the Court is final. | Congress, through the U.S. Department of Veterans Affairs (VA), provides a variety of benefits and services to veterans and to certain members of their families. These benefits include disability compensation and pensions, education benefits, survivor benefits, medical treatment, life insurance, vocational rehabilitation, and burial and memorial benefits. In order to receive these benefits, a veteran (or an eligible family member) must apply for them by submitting the necessary information to a local VA office. The local VA office will make an initial determination on the application for benefits. Any veteran who is not satisfied with the local VA's determination is permitted to appeal the decision. This report provides a step-by-step breakdown of the appeal process for veterans' claims. When making an appeal on an initial determination, the claimant may choose to proceed with the traditional review process or may choose to have a Decision Review Officer (DRO) at the local VA office review the case. In the event the veteran opts for a DRO review and is not satisfied with the result, the claimant may still avail himself/herself of the traditional process and appeal to the Board of Veterans' Appeals (BVA). The local VA office will prepare the claim file for the appeal and provide the claimant with a blank VA Form 9—a form that must be completed to make an appeal to the BVA. Claimants must follow specific procedures to request the appeal and must meet certain deadlines for submitting the proper information. The claimant may choose to have a hearing with the BVA during the appeal process. There are three different types of hearings that the claimant may choose (1) an in-person hearing with a BVA member, held in Washington, DC; (2) an in-person hearing with a BVA member, held at a local VA office; or (3) a teleconference hearing. The hearings with the BVA are informal and nonadversarial in nature. The claimant will be given the opportunity to explain the reasons for the appeal and to submit additional evidence during the hearing. The claimant may be represented during the appeal process. After the BVA reaches a decision on the appeal, there are further options the claimant may pursue if he or she is still not satisfied with the BVA decision. A claimant may file a notice of appeal with the Court of Appeals for Veterans Claims (CAVC). The CAVC, an Article I court, has exclusive jurisdiction to review decisions of the BVA. A claimant must submit a notice of appeal within 120 days of receiving the decision from the BVA. However, the Supreme Court in Henderson v. Shinseki clarified that the 120-day deadline is not a "jurisdictional" deadline. Therefore, an appeal to the CAVC will not necessarily be dismissed for missing the deadline. However, the claimant must have a good reason for filing late, such as an inability to meet the deadline due to mental incapacity. The U.S. Court of Appeals for the Federal Circuit (Federal Circuit) has exclusive jurisdiction to hear appeals from a CAVC decision. The Federal Circuit provides the last appeal of right during the appeal process. If either party is dissatisfied with the ruling from the Federal Circuit, an appeal may be made to the Supreme Court of the United States. The Supreme Court does not have to hear the case and may deny certiorari. If the Supreme Court decides to hear the case, any decision reached by the Court is final. |
RS21237 -- Indian and Pakistani Nuclear Weapons Updated February 17, 2005 Almost 50 years of nuclear ambiguity were swept away by the May 1998 nuclear tests of India and Pakistan. Optimists hoped that overt nuclear weapons capabilities could help providemore conventional stability and that limited nuclear arsenals might dampen competition in missile development. (1) The 1999 conflict in Kargil and 2002 crisis in Kashmirchallengedthis viewpoint. (2) South Asia remains a nuclearflashpoint, and, potentially, a source for terrorists of access to weapons of mass destruction. India began its nuclear program shortly after independence in 1947. After a humiliating defeat in a border war with China in 1962, followed by China's first nuclear test in 1964, thedrive for nuclear weapons intensified. The 1974 test of a "peaceful nuclear device" was an important milestone,but it took several more years to develop a nuclear weapons capability. Simultaneously, India developed a nuclear infrastructure that supported both civilian and military purposes. Forexample, India's development of reprocessing capabilities supportedboth its use of mixed oxide fuel (plutonium and uranium) for its nuclear power plants and its plutonium-basedweapons. The size of India's nuclear stockpile has been a topic of considerable debate within scientific and defense communities. (3) Estimates vary from a few to 100,but several converge onaround 30-35 weapons, probably stored in component form. The U.S. Department of Defense believes that Indiais capable of manufacturing complete sets of components forplutonium-based weapons and has a small stockpile of such components. India "probably can deploy a few nuclearweapons within a few days to a week...and can deliver these weaponswith fighter aircraft." (4) Most agree that India isexpanding its stockpile, and that if India uses unsafeguarded reactor-grade plutonium, the potential to expand itsstockpile is verysignificant. India's delivery capability has long reflected two very different contingencies -- China and Pakistan. Because of the distances involved and India's lack of long-range bombers,capability against China inevitably required ballistic missiles. Against Pakistan, however, Indian officialsrecognized early on that aircraft would be more valuable, particularly in aretaliatory strike; the Indian air force is significantly more sophisticated and capable than Pakistan's. (5) India has some 35 Mirage 2000 fighters that arenuclear-capable, although otheraircraft could also be used. Ballistic missiles add considerable instability into the security equation because they are high priority targets; the pressure to use them quickly and, for the other side, to strike thempreemptively, is great. Indian officials have said short-range Prithvi ballistic missiles (150km and250km ranges) are conventionally armed. While nuclear-capable and able to reachalmost all of Pakistan, the use of nuclear-armed Prithvi s could pose major risks of fallout to India. (6) India has deployed Agni-II missiles witha 1500 km range and tested an 800 kmrange version of the Agni earlier this year. These solid-fueled missiles, which reportedly can belaunched within minutes, considerably enhance India's ability to respond rapidly in acrisis situation. In January 2003, the Ministry of External Affairs released to the public a short document on India's nuclear doctrine. The doctrine reiterated some of the points in the 1999 draftdocument on nuclear doctrine produced by the National Security Advisory Board. and refined others. In summary,the document committed India to a credible minimum deterrent,defined as: 1. a posture of "No First Use" and no use against non-nuclear weapon states, with the exception of theright to retaliate with nuclear weapons against a "major attack againstIndia, or Indian forces anywhere, by biological or chemical weapons;" 2. Civil control in the form of the PrimeMinister as head of the Nuclear Command Authority; 3. Nuclearretaliation against a first strike as massive and designed to inflict unacceptable damage. (7) The document described the Nuclear Command Authority as being composedof a PoliticalCouncil (chaired by the Prime Minister and authorize the use of nuclear weapons) and an Executive Council (chairedby the National Security Advisor). Pakistan's nuclear program dates back to the 1950s, but it was the humiliating loss of East Pakistan (now Bangladesh) that reportedly triggered a political decision in January 1972 (justone month later) to begin a crash nuclear weapons program. Unlike India, Pakistan focused on the uranium routeto weapons. Pakistan sought technology from many sources, includingChina and North Korea. (8) This extensive assistanceis reported to have included, among other things, uranium enrichment technology from Europe, blueprints for asmall nuclearweapon from China and missile technology from China. Most observers estimate that Pakistan has enough nuclear material (highly enriched uranium and a small amount of plutonium) for 30 to 50 nuclear weapons. (9) LikeIndia, Pakistan isthought to have "a small stockpile of nuclear weapons components and can probably assemble some weapons fairlyquickly." (10) Pakistan could deliver its nuclear weapons using F-16s it purchased from the United States (28 F-16 and 12 trainer aircraft; 8 are no longer in service), provided the appropriate "wiring"has been added to make them nuclear-capable. In the 1980s, Pakistan moved assiduously to acquire ballistic missilecapabilities and now deploys short-range ballistic missiles and asmall number of medium-range missiles. AQ Khan, former head of Khan Research Laboratories, maintained thatonly the medium-range Ghauri missiles would be usable in a nuclearexchange (given fall-out effects for Pakistan of shorter-range missiles). Other observers view the 30 to 50 Hatf2 short-range (300km) missiles (modified Chinese M-11s) as potentialdelivery vehicles for nuclear weapons. Ghauri missiles (1350 and 2300km), which reportedly are basedon the North Korean No-Dong and Taepo-Dong-1 , are capable of reaching NewDelhi with large payloads. (11) Pakistan has not yet enunciated a nuclear doctrine, but it is clear that Pakistan's nuclear arsenal is seen as the key to military parity with India. Because of its fears of being overrun bylarger Indian forces, Pakistan has rejected the doctrine of no-first-use. In May 2002, Pakistan's ambassador to theUN, Munir Akram, stated that "We have not said we will use nuclearweapons. We have not said we will not use nuclear weapons. We possess nuclear weapons. So does India ...Wewill not neutralize the deterrence by any doctrine of no first use." (12) On June 4, 2002, President Musharraf went further: "The possession of nuclear weapons by any state obviouslyimplies they will be used under some circumstances." (13) In recent years, Pakistan apparently has taken steps toward refining command and control of nuclear weapons. In April 1999, General Musharraf announced that the Joint StaffHeadquarters would have a command and control arrangement and a secretariat, and a strategic force commandwould be established. (14) The connection to civilianleadership wasunclear, given a recent account of the 1999 Kargil incursion which suggested that Prime Minister Sharif wasunaware that his own nuclear missile forces were being prepared foraction. (15) Pakistan established a NationalCommand Authority (NCA) in February 2000, but little is publicly known about it. Pakistani officials haverepeatedly said that their nuclearcapabilities are safe. The new NCA is believed to be responsible for nuclear doctrine, as well as nuclear researchand development, wartime command and control, and advice toPresident Musharraf about the development and employment of nuclear weapons. (16) Kashmir has been a flashpoint since Indian and Pakistani independence in 1947. Many analysts have feared that nuclear weapons could be used if conventional hostilities over Kashmirwere to spiral out of control, especially if, as in 1965 Indo-Pakistan conflict, India opened a new front on the Punjabplains to break a stalemate in Pakistan or attempt to settle the issuedecisively by confronting Pakistan with a mortal threat to its territorial integrity. (17) Under these circumstances, some have suggested Pakistan might be temptedto detonate a smallnuclear weapon on its own territory to halt forward Indian movement. Other observers, however, believe such astrategy would be akin to a state acting as a suicide bomber. (18) Somemedia reports have suggested that paradoxically, "the fact that both countries have very small nuclear arsenalsincreases the pressure on both sides to use their weapons againsthigh-value targets." (19) Regardless of whethernuclear weapons might be used to stop war or to gain a military advantage, many observers agree that uncertaintyabout intentions couldworsen stability. Since 1998, both India and Pakistan appear to be integrating nuclear weapons into security strategy and planning. With the ominous logic of nuclear deterrence, each side's desire tomake its nuclear forces more credible may make those nuclear forces more usable. Ballistic missiles offer both sidesadvantages over using aircraft as delivery vehicles, but the shortranges create a hair-trigger situation. From launch to impact, missile flight times may be as short as 5 minutes. Inthe past, both sides appeared to use the separation of warheadcomponents as a form of command and control (in the sense of lowering the risk of unauthorized or accidental use). Some observers have noted that this approach becomes risky whenthe other side can launch short-range ballistic missiles against which there is no defense. These observers havecalled for improving command and control of nuclear forces, whilenoting, ironically, that reduced ambiguity could conversely increase the likelihood of war. (20) The Defense Intelligence Agency reportedly has estimated that a nuclear exchange could kill between 9 and 12 million persons on both sides, with 2 to 6 million injured. Theseestimates are likely predicated on nuclear exchanges aimed at cities; e.g., Indian Defense Secretary Yogendra Narainsuggested in 2002 that "India would retaliate against Pakistaniaggression and that both sides should be prepared for mutual destruction." President Musharraf's interview in June2002 with CNN offered respite from the nuclear rhetoric when hestated, "I don't think either side is that irresponsible to go to that limit [i.e., nuclear conflict]. ... One shouldn't evenbe discussing these things, because any sane individual cannot eventhink of going into this unconventional mode, whatever the pressures." (21) India and Pakistan have a 30-year history of confidence-building measures. These include hotlines between army commanders and prime ministers, a joint India-Pakistan MilitaryCommission (created in 1990), and agreements to provide prior notification of troop movements and ballistic missiletests. In 1991, both sides agreed not to attack nuclear facilities. (22) Implementation, however, has been sporadic. (23) In February 1999, the two parties concluded the Lahore Agreement. That agreement envisioned a plan for futurework, to includemeasures to reduce the risk of unauthorized or accidental use of nuclear weapons, reviews of confidence-buildingmeasures and communications links, prior notification of ballisticmissile tests, continuation of unilateral moratoria on nuclear testing, and dialogue on nuclear and security issues. The Lahore process was undermined by the summer 2001 militaryincursion by Pakistan in the vicinity of Kargil, but the two sides began a dialogue in 2004. In September 2004, Indiaand Pakistan announced 13 confidence-building measures. Threesecurity-related ones included: Experts' meetings on conventional and nuclear CBMs, including discussions on a draft agreement on advance notification of missile tests; Biannual meeting between Indian Border Security Force (BSF) and Pakistan Rangers; Implementation of the agreement reached between the defense secretaries in their talks in August todiscuss "modalities for disengagement and redeployment" onthe Siachen glacier. (24) Foreign secretaries reported progress in their discussions on missile notifications in December 2004. (25) Since the passage of the 1978 Nuclear Nonproliferation Act, Congress has been closely involved in efforts to prevent or slow the development of nuclear arsenals by India and Pakistan. In the light of the global war on terrorism, and limited Pakistani cooperation in nonproliferation, Congress mightconsider the following questions: What sources of leverage does the U.S. now have toward India and Pakistan? Are new sources of leverage vis-a-vis Indian and Pakistani proliferation needed? Should new leveragebe focused on averting nuclear use rather than on limitingnuclear proliferation? Should India and Pakistan be priority recipients of cooperative threat reduction assistance? Whatoptions exist in this regard that do not undermine U.S. obligationsas a party to the Nuclear Nonproliferation Treaty? How effective are economic or other sanctions, and which might work best? | Until 2005, India and Pakistan were the only states outside the NuclearNonproliferation Treaty to declare, openly, their nuclear weaponscapability. In 1998, they tested nuclear weapons and since then, deployed ballistic missiles, enunciated nucleardoctrine, and made organizational changes to their nuclearestablishments. In 2002, they teetered on the brink of war in Kashmir. This paper summarizes Indian and Pakistaninuclear weapon capabilities and thinking, and discusses someconfidence-building measures in place intended to help avert nuclear war. It will be updated as events warrant. |
An array of budget process reform proposals are put forth each year seeking to refine or improve the existing constitutional requirements, laws, and rules that make up the federal budget process. Some proposals are designed not only to modify the budget process, but also to produce specific budgetary outcomes. Particularly popular when there is dissatisfaction with debt or deficit levels, such proposals seek to establish a legal mandate for a budgetary policy or fiscal objective, such as a specific limit on the deficit level, or the requirement for a balanced federal budget. This report focuses specifically on one such budget process reform: the concept of creating a statutory limit on total spending. A total spending limit, often referred to as an overall spending cap or an omnicap, consists of statutory long-term or permanent limits on federal spending, encompassing both discretionary and direct spending (also referred to as mandatory or entitlement spending). Further, the analysis in this report concerns measures that propose a total spending limit that also include an automatic statutory mechanism to enforce the spending limit in the event that compliance is not achieved through legislative action. This form of cap should be distinguished from other mechanisms that may limit spending, but do not include an automatic means to enforce the specified levels. For example, this report excludes proposals to create total spending limits that are enforced only by points of order, or proposals to institute a constitutional amendment requiring a balanced budget, which generally lack any automatic enforcement mechanism. Generally, total spending limits would operate by first establishing in statute a specific total spending limit for each year. At some point during each year, Congress would be informed of a projected overall spending total and the amount, if any, by which the statutory spending limit is projected to be breached. After a period of time, during which Congress would presumably attempt to achieve compliance with the spending limits through legislative action, a final determination would be made as to whether the spending limit had been breached. In the event of a breach, an automatic enforcement mechanism would impose reductions in spending. As with many features of the proposals, the proposed enforcement mechanisms could vary significantly. They may include exemptions for specific programs, as well as provide for suspension of enforcement under specific circumstances, such as war. The recent growth in spending, both in dollar terms and relative to the economy as a whole, has garnered support for total limits on spending. Several groups and organizations have recommended a total spending cap, though few provide detail on what such a legislative proposal might include. Some legislative proposals have been introduced in the 112 th Congress, however, such as S. 245 , introduced by Senator Bob Corker, and a companion measure, H.R. 1605 introduced by Representative John J. Duncan Jr.; H.R. 1848 , introduced by Representative Connie Mack; H.R. 2041 , introduced by Representative Jack Kingston; and H.R. 2560 , introduced by Representative Jason Chaffetz. In addition, the House-passed budget resolution for FY2012, H.Con.Res. 34 , includes a policy statement on budget enforcement that calls for Congress to enact total spending limits, and on July 19, 2011, the House passed H.R. 2560 , which includes total spending limits for FY2013-FY2021. The following sections provide a general discussion of the objectives, challenges, and criticisms of total spending limits. The next section of the report discusses typical features of total spending limits and provides information on how they may vary. The final section of the report includes observations on compliance with the spending limits, based on historical experiences with statutory budget controls. The main objective of total spending limits appears to be to acknowledge and address a recent growth in federal spending. In FY2000, total federal outlays equaled 18.2% of gross domestic product (GDP). By FY2010, total federal outlays reached 23.8% of GDP. Under the CBO baseline, totals outlays are projected to reach 24.0% of GDP in FY2021 under current policy. Further, overall spending limits apparently intend to address the growing deficit and debt levels. Concern has grown over an increasing deficit and its potential effect on the nation's fiscal and economic health. The budget deficit each year from 2009 to 2011 has been the highest ever in dollar terms and significantly higher as a share of GDP than in any other year since World War II. The budget is not projected to be on a sustainable path under current policy, in the sense that the federal debt will continue to grow more quickly than GDP. Although there has been no difficulty financing the deficit to date, at some point, investors could refuse to continue to finance deficits that they believed were unsustainable. Although some lawmakers advocate a combination of spending decreases and revenue increases to address the deficit, proponents of total spending limit proposals have often been associated with the belief that all or much of deficit reduction policy should take place through decreases in spending. Although a spending limit could theoretically be combined with revenue increases, current proponents of spending limits typically seek to assure that reductions in spending be primarily used to confront the growing deficit. There are additional objectives underlying the concept of statutory spending limits, which is particularly noticeable because the congressional budget resolution already exists as a method of setting and enforcing desired spending levels. Statutory limits on total spending address at least two perceived limitations of the congressional budget resolution. First, the levels in the congressional budget resolution are generally enforced by raising points of order on the House and Senate floor against provisions in budgetary legislation. Such an enforcement mechanism relies on Members affirmatively raising points of order against the legislation, and most of these points of order can be waived by a majority or super-majority of each chamber. Further, points of order can limit spending only in new legislation being considered by Congress; they cannot limit spending that results from previously enacted legislation, from which more than half of current spending arises. Total spending limits would establish a more stringent enforcement mechanism, one that would be automatically triggered to make cuts to already enacted spending, and could only be waived though the enactment of further legislation. This could possibly overcome what some perceive as institutional barriers to cutting spending. For example, although many lawmakers may favor decreases in spending, reaching legislative agreement on which programs specifically should be cut is difficult, both procedurally and politically. An automatic reduction mechanism would tend to ensure the occurrence of spending cuts, even without legislative agreement. Second, although the congressional budget resolution sets a desired level of overall spending for a specific year, the budget resolution is not required to adherence to any specific budgetary policy. Further, Congress is not required to maintain any specific spending levels from one annual budget resolution to the next. The same is true for the President's annual budget submission. Further, no alignment is required between the spending levels proposed in the President's budget submission and those established by the congressional budget resolution. Statutory limits on total spending would establish a federal budgetary policy which would likely require that the spending levels in the President's budget proposal and the congressional budget resolution align. Alleviating future controversy over appropriate levels of overall annual spending may facilitate the development and agreement on substantive policy changes to achieve the spending limits. Furthermore, setting total spending caps would establish a federal budgetary policy that remains consistent year after year, despite changes in the presidency or Congress. The implementation of any overall spending limit may raise difficulties stemming from several causes. First, as mentioned above, the levels of spending stipulated under any cap would presumably have to be established on the basis of economic and fiscal projections that inherently involve some uncertainty. The level of spending may also be affected by unforeseen events that budgetary projections cannot take into account even through estimates. Finally, levels of direct spending are especially subject to unpredictable variations. Using projections as a basis for budgetary decisions can be problematic because they are highly sensitive to small changes in underlying assumptions and economic factors and are subject to substantial margins of error, even over short periods of time. Based on history, actual outcomes can be much better or worse than projections. The Office of Management and Budget (OMB) estimates that the absolute average errors for its budget deficit projections are 1.5% of GDP for the next budget year and 3.5% of GDP for five years in the future. Making programmatic changes to achieve fiscal goals based on these projections, therefore, must be expected to result in changes that ultimately over- or under-shoot what is intended. Furthermore, as described below, under certain circumstances, the need to base estimates on projections may make it possible to generate projections that conform to stipulated targets by appropriate adjustment of the assumptions underlying the projections. Unforeseen events present a dimension of uncertainty that goes beyond what is inherent to trends in current fiscal and economic activity. Many of the legislative spending increases that occurred in the past decade were due to events that could reasonably regarded as extraordinary or unforeseen, including the terrorist attacks of September 11, 2001, ongoing military operations in Afghanistan and Iraq, Hurricane Katrina and other natural disasters, and the 2008 financial crisis. Creating statutory spending caps may limit Congress's flexibility in responding to future unforeseen events, whether they be natural disasters or situations that Members conclude require increased domestic, defense, or international spending. As described below, some proposals include mechanisms such as waivers or emergency exemptions to deal with such unanticipated events as they occur, although it could be argued that creating such an exemption mechanism risks compromising the overall goals of statutory spending caps. One of the most intricate complications that overall spending targets must address would arise from their inclusion of direct as well as discretionary spending. Total spending for direct spending programs, which currently makes up over half of total federal spending and is forecast to grow rapidly in the future, is difficult to control or limit for several reasons. First, unlike discretionary spending programs, which are funded through annual appropriations, direct spending programs generally are not controlled through annual appropriations actions, but are instead controlled through other permanent or multi-year laws, meaning that most will automatically continue to operate each year, barring congressional action to the contrary. Second, direct spending legislation typically results from the establishment of a program that includes eligibility or benefit criteria and a payment formula that together dictate the overall amount the program will spend. The levels of spending resulting from these over any future period can be ascertained only as a projection; in addition, however, the effect on future spending of any policy changes in the program can be estimated in advance only on the basis of assumptions about the effects of the changes themselves. If levels of direct spending are projected to be higher than desired, eligibility criteria or payment formulas must be altered to attempt to achieve the desired funding level. This means that under current circumstances, to affect direct spending, Congress has to choose to develop, consider, and adopt a measure that would adjust eligibility criteria or payment formulas with the hope that the changes would cause direct spending to fall to a desired level. Accurately predicting the budgetary effect of a policy change on direct spending levels is also difficult. A survey and report by the Government Accountability Office (GAO), titled Issues in Capping Mandatory Spending , discusses some of the complicating characteristics of direct spending programs that make achieving a specific spending level very difficult. For example, changing eligibility criteria to eliminate a group of individuals may result in large savings or no savings, depending on how many services those individuals typically use. Also, the use of non-cash benefits makes it difficult to predict costs and savings because eliminating some services, such as nursing home care, could shift demand to other high-cost services, like impatient hospitalization. All these uncertainties create challenges for Congress in trying to enact legislation that would achieve a desired level of funding. They can also complicate how an enforcement mechanism, such as sequestration, would work. If a direct spending program required an automatic reduction, for example, of 4%, how that might be implemented is not clear. Determining what policy changes to direct spending programs would be necessary to save a specified amount of money could prove very difficult. Criticisms that have been raised of spending limit proposals have rested on several grounds. Some criticisms apply specifically to limits on total spending, and some apply to any proposal to amend the current budget process in a way that seeks to force future action. For example, some have argued that past budgetary limits enforced by automatic reductions led Congress to accept "second- or even third-best solutions" to problems in an effort to stay within its short-term budget constraints. It has also been suggested that such processes have heightened conflict within Congress, as well as between Congress and the President. Lastly, it can be argued that relying on automatic reductions to fulfill budgetary levels cedes Congress's control over levels and details of spending. Spending limit proposals may be subject to the criticism that they may not automatically translate into reductions in the debt or the deficit. While the controls on spending that are associated with spending limits may be viewed as having an inherent tendency also to reduce the deficit or debt, it could be argued that they may not necessarily have this effect, to the extent that they fail to take into account revenue levels as well. For example, even if Congress adheres to specific spending limits that would be projected to bring the budget into balance, if it simultaneously reduces revenue, or if revenue falls due to economic conditions, a deficit may still exist, or even increase. Deficits may be particularly sensitive to this latter concern because the economic conditions that would tend to produce an upsurge in spending for programs such as Medicaid and the Supplemental Nutrition Program (SNAP) would also tend to reduce revenues. Further, capping spending would not reduce the debt currently held by the public unless spending levels were lower than revenue levels, resulting in a surplus that could be used to pay down such debt. In addition, some argue that to address a deficit or debt problem, both spending decreases and revenue increases must occur, and this means including revenue increases as part of an enforcement mechanism. This argument may reflect an implicit presumption that, whether addressed in policy or in an enforcement mechanism, the spending cuts that would be required to bring the deficit down to sustainable levels would be too severe to be palatable and therefore, a combination of changes to spending and revenue would be required. It has been argued that placing a cap on total spending with no parallel limits on revenue decreases would encourage "the conversion of spending programs into tax expenditures, which would not count against the cap," favoring subsidies provided through the tax code. Some further assert that this approach would encourage tax expenditures that would tend to favor high-income households and corporations over types of government assistance that benefit primarily low- and middle-income populations because the former have greater tax liability on average than the latter. As a result, in addition, such a shift in emphasis of policy mechanisms may result in the deficit either staying the same, or potentially growing. Another criticism of spending limit proposals is that they seek to achieve a budgetary goal through procedure, rather than directly through proposing policy that would achieve the stated spending goal. When discussing such budget process reforms, a sentiment exists among some that is reflected in the often repeated saying "the process is not the problem; the problem is the problem." According to this argument, process reform is being suggested as a substitute for, or distraction from, the tough policy decisions that are needed to actually address the budgetary problem. From this perspective, the major obstacle to reducing spending could be viewed as a lack of consensus and political will, and the creation of statutory spending targets could be considered as not, in itself, addressing either of these elements. It has been argued that budget process reforms, such as spending limits, are best implemented when accompanied by a policy package that achieves a corresponding purpose. For example, the Balanced Budget and Emergency Deficit Control Act of 1985, referred to as the Gramm-Rudman-Hollings Act, created statutory annual deficit targets. Many question the act's success and some attribute a lack of success to the fact that no spending reductions or revenue increases were included because agreement on such changes could not be reached. Conversely, the Budget Enforcement Act of 1990, which created statutory discretionary spending limits and PAYGO, is considered by many to have been successful, in part because these mechanisms were included as part of a reconciliation bill that itself significantly reduced the deficit. The procedures were used to enforce the savings achieved through changes in spending and revenue policy, instead of acting as a substitute for them. As a former CBO director concluded, budget process mechanisms are better at enforcing agreements than forcing agreements. Proposals for a total cap on spending specify an actual spending limit or amount, which may appear in different forms, some seeking to cap or freeze spending at a specific rate, others trying to reduce spending annually. Although such limits could be represented as a static dollar amount, most proposals include spending limits that are linked to some other economic or demographic factors such as GDP, inflation, or population growth. For example, S. 245 stipulates that outlays for FY2014 through FY2022, be 25% of GDP minus 0.1711% in each successive fiscal year (i.e., 24.8289 % in FY2014 and 23.4601 % in FY2022). H.R. 2560 specifies that outlays may not exceed 21.7% of GDP in FY2013, with decreasing GDP limits for each year until FY2021. H.R. 4529 (111 th Congress) also would have limited spending to a percentage of GDP, though the percentage fluctuates between 21.6% and 24.1% from FY2011 to FY2037 before steadily decreasing through FY2083 to 13.0%. Recommendations have been made by some outside Congress to cap total spending at a rate that allows increases at the inflation rate plus population growth or to establish a limit that allows spending to grow at the inflation rate minus 1%. H.R. 5323 (111 th Congress) would have prohibited spending from increasing at a rate greater than the percentage change in the Consumer Price Index plus the percentage change in annual population growth. Although these measures may appear to allow spending to increase, because spending rises in dollar terms, they likely represent a decrease compared with current policy, as measured by the CBO baseline. Spending limits vary not just by type, but also by severity and pace of reduction. The spending limits in the proposals described above range from 24.8289% to 13% of GDP. To put that into perspective, total spending as a percentage of GDP was 23.8% in FY2010 and 25.0% in FY2009. As a share of GDP, these were the highest levels of spending since 1946. From 1946 to 2008, spending averaged 19.6% of GDP. The proposed level of 13% in FY2083 provided in H.R. 4529 (111 th Congress) would have been the lowest level of federal spending since 1941. Proposals for spending limits also differ in whether they define their standards for compliance in terms of projected or actual levels of annual spending or any other quantities referenced in the proposals, such as GDP or population growth. The choice of standards is especially important in relation to a cap that covers total spending because it will encompass direct spending which is more challenging to project than discretionary spending. If a proposal relies on spending projections (rather than actual levels), then at some point, typically near the beginning of the calendar year, a projection of total spending must be made. In this situation, Congress might then pass legislation making adjustments sufficient to eliminate the difference between projected spending and the statutory limit. In this situation, the success of Congress in adhering to the spending limits will be determined solely on the basis of whether Congress enacts spending reductions that are projected to be adequate to meet the spending limits. As a result, however, if the projections later prove inaccurate Congress will not have technically adhered to the spending limits, but appropriate amounts of actual spending reduction may not have taken place. On the other hand, if a proposal plans to rely on actual levels of spending to enforce the limits, and Congress makes legislative adjustments to spending law based on projections of spending levels made at the beginning of the year, but actual spending later turns out to be higher than was projected, Congress will not have met the levels through no fault of its own and the enforcement mechanism may be implemented. This situation also presents a challenge to implementing the enforcement mechanism, because the spending will already have taken place. In this case, therefore, success in meeting the targets relies not just on congressional action but also on the accuracy of the projections. Some have suggested incorporating a mechanism, referred to as a "look back" provision, that might rely on both projected and actual levels when measuring compliance with the spending limit. In such a scenario, success in meeting the spending limit would be based initially on the ability to meet projected spending levels. If subsequently, however, the actual level of spending for that period is shown to be significantly higher than was projected, it may require some type of automatic reduction to occur. Exemptions and waivers appear in many proposals to create total spending caps as a way to grant Congress flexibility in making budgetary decisions. Exemptions provide certain programs with protection, and waivers allow Congress flexibility for dealing with future circumstances. As described in the following section, proposals may specify that certain programs are exempt from the automatic enforcement mechanism in the event that it is triggered. Some proposals exempt certain spending from counting against the prescribed limit. For instance, some proposals exempt from the overall cap funds being used to pay interest or principal on the national debt. Others, such as S. 245 , and H.R. 5323 (111 th Congress), would direct that spending identified as "emergency" not count against the limits. Especially in the latter case, exemptions create the potential for significant spending to occur that is not subject to the limits, particularly because Congress decides what constitutes emergency spending. In addition to exemptions, proposals may provide for waivers that have the effect of setting aside the spending limits and any related enforcement mechanism under specified circumstances. In the case of points of order on the House or Senate floor, most proposals set forth a mechanism for either chamber to waive those points of order if it wishes to do so, sometimes requiring a super-majority of the chamber. For example, S. 245 states that points of order can be waived in the Senate by an affirmative vote of two-thirds of the Senators, present and voting, and in the House by adoption of a special rule requiring an affirmative vote of two-thirds of the Members, present and voting. Proposals often provide for a method of waiving or suspending the overall spending limits in specific situations. For instance, proposals have permitted waivers if the United States is engaged in war or if the United States is experiencing difficult economic conditions, such as low economic growth. Past use of sequestration allowed such flexibility. For instance, suspension in the event of a recession was provided in past statutory budget controls, such as the Balanced Budget and Emergency Deficit Control Act of 1985, often referred to as the Gramm-Rudman-Hollings Act. This act created statutory deficit targets that were enforced by an automatic reduction mechanism, referred to as sequestration. Under the Gramm-Rudman-Hollings Act, if a recession occurred, Congress could consider a joint resolution, under expedited procedures, that once enacted would suspend the deficit reduction provisions for the current fiscal year or for all fiscal years. Proposals could also explicitly allow for the Congress to suspend the limits and any resulting automatic reduction at its discretion. For example, the Balanced Budget and Emergency Deficit Control Reaffirmation Act of 1987 ( P.L. 100-119 ) provided for the consideration of a joint resolution suspending sequestration, to be considered under expedited procedures if introduced by the House or Senate majority leader within 10 days of receipt of OMB's sequestration report. Similarly, H.R. 4529 (111 th Congress) included a section providing for the consideration of a joint resolution directing the President to modify the sequestration order, to be considered under expedited procedures if introduced by either the House or Senate majority leader after the sequester order but before the end of the relevant session of Congress. As mentioned above, total spending limits, as discussed in this report, include only those that establish an automatic mechanism to enforce the spending limit in the event that it is not achieved through legislation. Automatic enforcement would occur after the fact, if congressional action failed to achieve the target levels of spending, typically through a process of automatic reduction. Some proposals may also establish means by which spending limits can be enforced in advance of the enactment of spending legislation, typically through points of order raised during consideration of such legislation in each house. This section discusses both types of enforcement mechanism. The chief form of enforcement mechanism operating in advance of the enactment of spending legislation is points of order that can be raised on the House and Senate floor against legislation that would violate the statutory spending limits. For example, a proposal may include language providing that it is not in order to consider in the House or Senate any measure that would cause applicable spending limits to be exceeded. Because such rules are not self enforcing, such an enforcement mechanism relies on Members affirmatively raising points of order on the House or Senate floor against the legislation. It should be noted that, unless specified in the proposal, in most cases, points of order can be waived. When the House chooses to waive points of order, it typically does so through a special rule reported from the House Rules Committee and adopted by the House, although it may also do so through the suspension of the rules procedure or by unanimous consent. Many rules related to the budget process allow three-fifths of all Senators (60 if there is no more than one vacancy) to agree to a motion to waive the point of order. Similarly, spending limit proposals may seek to make it more difficult to waive points of order by requiring a super majority, such as two-thirds or three-fifths of the chamber to agree. Both the reliance of points of order on elective action by Members and their potential for being waived has often led to their being criticized as a weak form of enforcement mechanism. Their most significant limitation in this context, however, is that they can only apply to new spending legislation when it is being considered by Congress. Points of order can never limit spending resulting from previously enacted legislation, which includes most direct spending and makes up about 55% of total spending. With the exception of Statutory PAYGO, all mechanisms currently used in the congressional budget process to enforce spending levels rely solely on points of order. For example, spending levels in the budget resolution are generally enforced through points of order, again meaning that they can only affect new legislation. In part, the automatic enforcement mechanisms that are a component of proposals to create total spending limits represent a response to the limitations of point of order as an enforcement mechanism. The purpose of including automatic enforcement mechanisms in proposals to create total spending limits is to enforce spending limits on spending that results from already enacted legislation. These mechanisms are designed to make automatic cuts to spending programs when total spending limits are breached. Although this would need to be specified in statute, in a general sense, the automatic reductions would be achieved by the President issuing an order that would automatically implement programmatic spending cuts to compensate for the level by which the spending caps have been breached. These cuts are often referred to as across-the-board cuts, although as explained below, they often include exemptions that protect specified programs. Such automatic spending reductions have existed as an enforcement mechanism in several forms in connection with budget and budget process reform, each time referred to as sequestration. Sequestration is currently used to enforce Statutory PAYGO. Before that, it was included in the Gramm-Rudman-Hollings Act and the Balanced Budget and Emergency Deficit Control Reaffirmation Act of 1987 to enforce annually declining deficit targets. It was also used in the Budget Enforcement Act of 1990 and the Budget Enforcement Act of 1997 to enforce discretionary spending limits and PAYGO. Sequestration is included as an enforcement mechanism in many proposals, such as S. 245 and H.R. 2560 (112 th Congress) and H.R. 4529 and H.R. 5323 (111 th Congress). For example, S. 245 states that not later than 45 calendar days after the beginning of a fiscal year, the OMB shall conduct a sequestration to eliminate any excess outlay amount. Automatic reduction mechanisms can be tailored to shield specified programs, meaning certain programs might be completely exempt from across the board cuts, or they might be protected by a limit on the percentage of cut to which a program can be subject. For example, under Statutory PAYGO, some direct spending programs and activities are exempt from sequestration, such as Social Security and Tier I Railroad Retirement benefits, federal employee retirement and disability programs, Supplemental Security Income (SSI), Supplemental Nutrition Assistance Program (SNAP), Children's Health Insurance Program (CHIP), Temporary Assistance for Needy Families (TANF), veterans' programs, net interest, refundable income tax credits, Medicaid, and unemployment compensation. In 2010, these exemptions amounted to roughly half of total federal spending. Some spending limit proposals create similar protections. For example, H.R. 4529 (111 th Congress) would have exempted from reduction payments for net interest, Social Security benefits in certain circumstances, certain veterans benefits, obligated balances of budget authority carried over from prior years, any obligation of the federal government required to be paid under the U.S. Constitution, any program whose growth in the budget year is equal to or less than the consumer price index, and intergovernmental transfers. Similarly, sequestration can be tailored to provide a more limited shield for non-exempt programs. For example, under Gramm-Rudman-Hollings, sequestration could reduce spending for certain programs only by 1% in 1986 and 2% in subsequent years. These programs were Medicare, veterans' medical care, community health centers, migrant health centers, and Indian health facilities and services. For other programs, such as guaranteed student loans and child support enforcement, specific rules governed the calculation of sequestration reductions. Exempting certain programs means that non-exempt programs would need to be cut by larger amounts to achieve the desired reduction in overall spending. Senate Finance Committee Chairman Senator Max Baucus asserted, in a statement on automatic enforcement mechanisms, "If Medicare, Medicaid and Social Security were exempted from an across-the-board-cut, the cuts to other programs would be far too large to bear." Many proposals direct that the amount by which spending is reduced through the automatic reduction mechanism must be the amount by which the spending limit is breached. Proposals, however, could include limits to the amount that could be cut by the reduction mechanism. For example, H.R. 4529 (111 th Congress) stated that if spending limits are not met, a sequestration will occur making cuts to all non-exempt spending programs. The proposal, however, included a provision stating that "No program shall be subject to a spending reduction of more than one percent of its budgetary resources." Similarly, S. 245 provides that if spending limits are not met, an across the board cut would apply to all programs within each of three specified categories in proportion to the growth in outlays in such category over the previous year. Under such an arrangement, spending can be cut only to an amount tied to the actual growth in the category to which it belongs. As a result, the maximum reduction that could be achieved through a sequester would reduce overall spending to the level of the previous year. Some proposals may allow for cuts under sequestration to apply differently to different categories of spending. For example, Gramm-Rudman-Hollings included general deficit targets that were enforced by sequestration with spending reductions equally divided between defense and non-defense programs, but with most direct spending programs either exempt from cuts or protected from receiving a reduction of more than 1% or 2%. In some cases, however, Congress acted to reduce discretionary spending, but deficit targets were still not achieved, because of the impact of revenues and direct spending. As a result, automatic reductions that would further cut discretionary spending remained a possibility. Considerations of these circumstances led to the Budget Enforcement Act of 1990 (BEA), which created a "firewall" between discretionary spending and direct spending. Caps were set for discretionary spending and were enforced by sequestration that would make cuts solely to non-exempt discretionary spending programs. In addition, PAYGO was established to require that the net effect of new direct spending and revenue legislation did not increase the deficit (or reduce a surplus). PAYGO was enforced by a sequestration process that would make cuts solely to non-exempt direct spending programs. S. 245 proposes to divide spending into three categories for the purpose of sequestration: direct spending, discretionary security spending, and discretionary non-security spending. S. 245 directs that each category receive a reduction "in proportion to the growth in outlays in such category from the previous fiscal year." Programs within each category would receive a uniform reduction commensurate with that category's overall growth. The prospect that programs may remain vulnerable to automatic reductions in addition to those cuts that have already been made through legislative action might remove any incentive for Congress to enact reductions in spending for those programs in the first place. One proposal to address this potential difficulty could be to provide protection against sequestration for programs that have already been reduced through legislative action in the same year, either by exempting them from automatic cuts or limiting the amount of cuts. Proposals may include procedures for a congressional response to an automatic reduction order. Specifically, they may include expedited parliamentary procedures that would allow Congress to consider and pass legislation achieving the spending target in order to avoid an imminent automatic reduction. Expedited procedures, also referred to as "fast-track" procedures, are often included to ensure that specific legislation can be considered and voted on in a timely way and to protect it from procedural obstacles faced by most legislation. Under the Gramm-Rudman-Hollings Act, the President's initial sequestration order was due September 1, but would not take effect until the President's final sequestration order on October 15. This left Congress time to pass deficit reduction legislation of their choice to avoid sequestration. The act also provided expedited procedures for Senate consideration of such legislation. Specifically, it stated that such a measure "shall be considered in the Senate to be reconciliation bills or resolutions for the purposes of the Congressional Budget Act of 1974." S. 245 includes a section titled "Congressional Action," which provides that if an August 20 report from OMB projects a sequestration, the House and Senate Budget Committees "may report a resolution directing their committees to change the existing law to achieve the goals outlined in the August 20 report." It does not, however, include expedited procedures for the consideration of such spending reduction legislation. H.R. 4529 (111 th Congress) included a section titled "Alternate Spending Reduction Legislation in the House of Representatives," providing that after the OMB director issues a final sequestration order, but before the end of the session, the House or Senate majority leader may introduce a joint resolution that either directs the President to modify the most recent order or provides an alternative to eliminate the spending excess. H.R. 4529 went on to describe the expedited procedures under which this joint resolution can be considered. Some of these expedited procedures include discharging a House committee that has been referred the joint resolution, but has not yet reported it; placing the measure directly on the calendar in the Senate, as opposed to referring it to committee; limiting debate in the Senate to 10 hours; requiring amendments in the Senate to be germane; and limiting debate on each amendment to 30 minutes. The purpose of overall limits on spending is to restrain, and in most cases, to reduce total spending. The inclusion in these proposals of both a spending limit and an automatic enforcement mechanism can be perceived as attempting to ensure that reductions in spending will actually occur. Examination of historical experience with mechanisms of this kind, however, may raise questions about the validity of the assumptions underlying this expectation. A closer examination of this experience may assist in determining how effective these mechanisms are likely to be. An accurate assessment of the implications of current proposals, however, requires attention to the specific means by which the various plans propose to bring about spending reductions. One assumption that may lie behind some proposals for spending limits is that target levels of spending will ultimately be made, not through the application of the automatic enforcement mechanism, but through legislative action. This result would presumably require Congress and the President to negotiate an agreement on the spending reductions that are to be implemented through legislation. Proponents might expect that if a limit on total spending is in place, an agreement to reduce spending sufficiently to meet the statutory targets might result if any of three general conditions are met. First, Congress and the President may come to an agreement based solely on a shared desire to reduce spending. If such a desire is present, however, then Congress and the President may be able to achieve the result without having to impose a prior statutory limit on themselves for the purpose. Second, Congress and the President may come to an agreement because they wish, perhaps for political reasons, to adhere to the budgetary policy articulated in the spending limits. Although spending reductions would, under these circumstances, be related to the statutory spending limit, it is open to debate whether the existence of the limits would ensure such an agreement would be reached. Under present conditions, even in the absence of statutory limits, budgetary policies are already set out in the congressional budget resolution and the President's budget request, yet these are not always adhered to, often because of shifting priorities or unforeseen circumstances, such as a natural disaster or higher than projected direct spending levels. Lastly, Congress and the President may reach agreement because the impact of the enforcement mechanism is so unattractive that it acts as a threat to force a negotiated compromise. Such a result seemed to be the intent behind the enforcement mechanism included in the Gramm-Rudman-Hollings Act, which threatened across-the-board spending cuts through sequestration if deficit targets were not met. Senator Phil Gramm, one of the chief sponsors of the act, stated that, "It was never the objective of Gramm-Rudman to trigger the sequester; the objective of Gramm-Rudman was to have the threat of the sequester force compromise and action." In practice, however, it does not appear that in all cases this threat led to the anticipated result. Because legislation had not yet been enacted to reduce the deficit to required levels, sequestration was used for FY1986 and FY1990. This led many to believe that the sequester was not enough of a threat to force action. As a former staff member of the Senate Budget Committee stated at the time, "They thought they were creating something too awful to use. And it wound up being even easier." Another former staffer stated, "I think the notion of sequester has lost its frightening characteristics. Sequestration was originally put in to push the nonsequester outcome. And if we've now gone through a few budget years where it's ho-hum, then there is no deterrence." On the other hand, situations also occurred in which, before the point arrived at which a sequestration would occur, the President and Congress successfully reached an agreement that cold be attributed to the desire to avoid sequestration. For example, in September of 1990, President George H.W. Bush and Congress reached a significant deficit reduction agreement that was subsequently implemented through annual appropriations bills and the Omnibus Budget Reconciliation Act of 1990 ( P.L. 101-508 ). It could be argued that the willingness of President Bush to accept some revenue increases as part of this agreement, after having pledged in his campaign to reject tax increases, represented a response to the alternative of a sequester that would have reduced spending for non-exempt defense programs by 34.7% and non-exempt non-defense programs by 31.6%. Nonetheless, these observations suggest that in some cases, Congress and the President may find it easier to allow an automatic budget enforcement mechanism to take effect rather than to negotiate an agreement. For one thing, Congress may find legislative inaction easier than action. In some cases, as well, allowing an automatic reduction may be politically easier than negotiating an agreement. In these respects, much may depend on how an automatic reduction is designed to work and which programs, if any, would be exempt. If proponents hope to promote a negotiated solution, they might wish to design the enforcement mechanism to be as unattractive as possible, so as to constitute a more severe threat. Yet it might be difficult to gather support for a proposal with a highly unattractive enforcement mechanism, because lawmakers, appreciating the difficulty of reaching a negotiated agreement, may fear that the enforcement mechanism will be used despite their best intention to reach such an agreement. It can be argued that even if the threat of an automatic reduction does not force negotiation that reduces current spending, it may discourage spending on new programs. Some have said that the chief impact of Gramm-Rudman-Hollings was that it "acted as a brake on new initiatives," blocking, delaying, or reducing spending for new programs. Another assumption that may be made by proponents of statutory spending limits may be that compliance with statutory spending limits, either through legislative action or an automatic enforcement mechanism, will in fact result in spending reductions. Experience, however, shows that at least under some conditions, it may be possible to comply with the statutory requirements while still not achieving the intended reductions in actual spending. If the statutory scheme provides exemptions from its requirements for "emergency spending," or for other specified programs, significant spending can occur that is not subject to the limits. For example, an exemption for spending labeled "emergency" was included in the Budget Enforcement Act of 1990. As displayed in Figure 1 , levels of emergency spending increased in many years during the life of the act, growing to $47 billion in FY2002 ($18 billion in emergency defense spending and $29 billion in emergency non-defense spending). Furthermore, it may be possible to achieve compliance with statutory requirements through the use of various accounting devices that can discount the actual effects of spending. For example, the use of advance appropriations or directives to delay the incurring of obligations and the making of payments can permit spending to occur in ways that do not count against the established limits for a given fiscal year. If statutory spending limits are couched in terms of compliance with projections, it may become possible for enacted spending legislation to comply with the statutory limits even while actual spending turns out to exceed the target levels. This situation can arise because, as noted above, projections are highly sensitive to small changes in underlying assumptions and economic conditions. In addition, it may be possible, through the use of sufficiently optimistic assumptions, to adjust the applicable projected levels in ways that facilitate compliance with budgetary limits. Under Gramm-Rudman-Hollings, enacted spending legislation remained in technical compliance with the act, even though the deficit did not actually decline to the levels specified in the act. Former CBO Director, Robert D. Reischauer (1989-1995) stated that Gramm-Rudman-Hollings "encouraged reliance on overly optimistic economic and technical assumptions and transparent budget gimmickry." Similarly, in a report to Congress and the President on compliance with the act, the comptroller general stated We report again, as we did last year, that compliance with the act does not necessarily result in meaningful deficit reduction. Over the last 4 years of technical compliance with the act, budgetary gimmicks have proliferated, adding billions of dollars in budget costs over the long run. There is also an aura of unreality about the budget projections made under provisions of the act. Over the years, OMB'S projections have sometimes been too optimistic. Additionally, the act limits OMB'S flexibility to correct its inaccurate estimates and technical mistakes. Such restrictions mean that the deficit estimate in this year's OMB reports cannot be taken as a meaningful projection of the deficit that will actually occur in fiscal year 1990. Advocacy of spending limits may rest on an assumption that as long as a future Congress does not repeal the limits enacted, it will adhere to them. History suggests, however, that may not always be the case. Under both Gramm-Rudman-Hollings and the Budget Enforcement Act, Congress intervened several times to alter the existing process. In particular, when deficit targets were not being met under Gramm-Rudman-Hollings, Congress passed the Balanced Budget and Emergency Deficit Control Reaffirmation Act of 1987 ( P.L. 100-119 ), which significantly revised the deficit targets upward and extended the period required to achieve a balanced budget. For example, the deficit target for FY1990, which had been $36 billion, was increased to $100 billion under the 1987 act. Similarly, in several years in which deficit limits were expected to be breached, Congress passed legislation barring a sequester. For example, the Military Construction Appropriations Act for FY2001 ( P.L. 106-246 ) was projected to breach the "other" category of the discretionary spending limits. To avoid sequestration, Congress included in the bill a provision barring a sequester. In some years, moreover, Congress exempted new spending and revenue legislation from being counted against applicable limits. The Consolidated Appropriations Act for FY2000 ( P.L. 106-113 ) included direct spending and revenue provisions that were projected to add $1.552 billion to the deficit for FY2000 and $15.193 billion for FY2000-FY2004. These budgetary effects, however, were exempted from being scored for purposes of PAYGO by a provision in the Appropriations Act. Similarly, the Consolidated Appropriations Act for FY2001 ( P.L. 106-554 ) included significant direct spending and revenue provisions by cross-reference. According to OMB's final sequestration report, this measure, together with other measures, showed a net deficit increase of $10.52 billion for FY2001. A sequester was avoided, however, by a provision in the Consolidated Appropriations Act for FY2001 instructing the OMB director to reset the PAYGO balance for FY2001 to zero. This happened once again in the Defense Appropriations Act for FY2002 ( P.L. 107-117 ), which instructed the OMB director to reset the balances of the PAYGO scorecard for FY2001 and FY2002 to zero. This removed $130.27 billion from counting under the budgetary enforcement mechanism, thereby preventing a PAYGO sequester. It can be argued, nonetheless, that despite the potential for complications and for the use of budgetary devices that could be criticized as "gimmickry," overall spending limits have the capacity to do much to reduce spending. For example, setting a national budgetary policy can focus considerable political and public attention on reducing spending. Further, regardless of the characteristics of a particular automatic reduction mechanism, if allowed to operate as prescribed, it will reduce spending, at least compared with current projected levels. As remarked by the former CBO director when discussing the success of a similar enforcement mechanism, Gramm-Rudman-Hollings, it "may not have brought the deficit cows back into the barn, but it has kept them from stampeding over the cliff." | Often when there is dissatisfaction with budgetary levels, budget process reforms are proposed to mandate a specific budgetary policy or fiscal objective. This report focuses specifically on one such budget process reform—the concept of creating a statutory limit on total spending. As discussed in this report, a total spending limit consists of statutory long-term or permanent limits on federal spending coupled with a statutory enforcement mechanism that would make automatic reductions in spending in the event that compliance with the limits is not achieved through legislative action. Such spending limits would comprise any new spending as well as spending that results from previously enacted law. By encompassing all types of spending, and by including a statutory enforcement mechanism, a total spending limit attempts to remedy a perceived limitation of the congressional budget resolution, under which Congress establishes limits on spending in various categories that can be enforced or waived by Congress at its own discretion. The recent growth in spending, both in dollar terms and relative to the economy, has generated support for total limits on spending. Several groups and organizations have recommended a total spending cap, and on July 19, 2011, the House passed H.R. 2560, the Cut, Cap and Balance Act of 2011, which includes total spending limits for FY2013 through FY2021. In addition, the House-passed budget resolution for FY2012, H.Con.Res. 34, includes a policy statement calling for Congress to enact total spending limits. Other legislative proposals introduced in the 112th Congress include total spending limits, such as S. 245, H.R. 1605, H.R. 1848, and H.R. 2041. The potential effectiveness of a statutory limit on total spending is complicated by projection uncertainty, unforeseen events, and especially the complex nature of direct spending. Statutory limits have been subject to criticism for ceding Congress's "power of the purse," targeting spending rather than the deficit or debt, attempting to address a budgetary problem through procedure instead of policy changes that would themselves reduce spending, and for other reasons. This report provides information on the concept of a statutory limit on total spending, including objectives, complications, and criticisms. The report also includes information on the many features of spending limit proposals, which can vary considerably. Lastly, the report provides observations on budgetary controls, similar to statutory spending limits, from an historical perspective. |
As Congress investigates the issues surrounding the September 11, 2012, attacks on U.S. facilities in Benghazi, Libya, some Members have questioned whether security funding was adequate or was a factor that may have contributed to inadequate security at that facility. The State Department Basic Authorities Act of 1956 authorizes the Department of State to "use appropriated and other funds to provide the maximum security of U.S. government-owned or leased properties and vehicles abroad." After several attacks occurred on U.S. facilities and other American interests in Beirut, Lebanon and Kuwait in the early 1980s, Congress passed the Diplomatic Security Act of 1986, further emphasizing the role the Secretary of State plays in providing funding for the security of U.S. diplomatic facilities and personnel worldwide (hereinafter referred to in this report as diplomatic/embassy security). Following the August 1998 bombings of U.S. Embassies in Kenya and Tanzania, an independent panel, chaired by Admiral William Crowe, reported that it was "most disturbed by two inter-connected issues: First, the inadequacy of resources to provide protective measures against terrorist attacks; and second, the relative low priority accorded security concerns throughout the US Government by the Congress, the Department, other agencies in general, and the part of many employees—both in Washington and in the field." Responding to that panel, Congress, within the Secure Embassy Construction and Counterterrorism Act of 1999 (SECCA), established more stringent security requirements and mandated additional training, authorized $900 million to be spent annually for Embassy Security, Construction, and Maintenance (ESCM) for the next five years (FY2000-FY2004), and mandated the Secretary of State to convene an Accountability Review Board (ARB) whenever serious injury, loss of life, or significant destruction of property occurs. It required co-location of virtually all agency personnel in a country and 100-foot perimeters around diplomatic facilities, but also provided waiver authority for those measures. After the September 11, 2012, attacks on the U.S. facilities in Benghazi, a new ARB was convened. Its report, referring to the State Department's need for risk mitigation at U.S. facilities around the world, states: For many years the State Department has been engaged in a struggle to obtain the resources necessary to carry out its work, with varying degrees of success. This has brought about a deep sense of the importance of husbanding resources to meet the highest priorities, laudable in the extreme in any government department. But it has also had the effect of conditioning a few State Department managers to favor restricting the use of resources as a general orientation. Experienced leadership, close coordination and agility, timely informed decision making, and adequate funding and personnel resources are essential.... One overall conclusion in this [ARB] report is that Congress must do its part to meet this challenge and provide necessary resources to the State Department to address security risks and meet mission imperatives. Congress annually appropriates funds for the security of diplomatic personnel and facilities within the Department of State, Foreign Operations and Related Programs appropriation, which is about 1% of the total federal budget. Security funding amounts to about 9% of that appropriation. (See Figure 1 below.) Congress has not enacted a stand-alone State Department appropriation prior to the start of the fiscal year since 1995 and has not passed a stand-alone Foreign Relations Authorization law since 2002. Both could have been legislative vehicles for debate regarding Administration of Foreign Affairs, including diplomatic/embassy security funding and priorities. Instead, Congress has provided ongoing security funding within Continuing Resolutions (CRs) that have delayed by several months the full-year appropriation eventually provided. Funding within a CR is usually based on the previous year's funding levels. Furthermore, if spending was not in the previous-year's appropriation (as was the case with Benghazi in 2012), it would not be funded by a CR. Only after the final appropriation is passed by Congress and signed into law by the President would State Department officials know what level of funding they can allocate on a daily/weekly/monthly basis over the 275 worldwide diplomatic posts (or 1,600 work facilities) and over the remainder of the fiscal year. Congress provides funding for diplomatic/embassy security within the Department of State, Foreign Operations, and Related Programs appropriations. The bulk (typically more than 90%) of the funding is provided by two subaccounts: Worldwide Security Protection (WSP), within the Diplomatic and Consular Programs (D&CP) account, and Worldwide Security Upgrades (WSU) within the Embassy Security, Construction, and Maintenance (ESCM) account. Funds within both of these accounts are typically available until expended. Other appropriations are within the subaccounts Diplomatic Security (DS) and Counterterrorism (both within D&CP), and Diplomatic Security (DS) within the Border Security Program (BSP). A brief description of each follows: WSP, the largest component of security-related funding within Department of State appropriations, supports numerous security programs addressing the security of life, property, and information, including a worldwide guard force protecting overseas diplomatic missions and residences, as well as domestic facilities. In FY2015, for the first time, many DS-related salaries and related costs from DS and other bureaus have been requested under WSP rather than in Diplomatic and Consular Programs as part of what the Department calls a Security Realignment Initiative. WSU, within ESCM, provides funding for bricks and mortar-type of security. It funds the Department of State's portion of the Capital Security Cost Sharing program that combines with funds from other agencies represented overseas for planning, design and construction of secure new embassy compounds. It also funds ongoing security activities and security-related maintenance. The Bureau of Diplomatic Security (DS), funded under D&CP, is the law enforcement and security arm of the Department of State. DS protects people, property, and information. It conducts international investigations, provides threat analysis, and focuses on cyber security, counterterrorism, personnel security, and security technology. The Bureau manages much of the WSP funding. The Bureau of Counterterrorism (CT), funded within D&CP, leads the U.S. government in counterterrorism diplomacy and provides an on-call capability to respond to terrorist incidents worldwide. Funding within the Border Security Program (BSP) is allocated to DS to fund the protection of consular affairs facilities in the United States. The subaccount also funds the coordination and investigation of security issues related to U.S. visas and passports. The Appendix presents annual diplomatic/embassy security requests and actual funding levels from FY2008 to the FY2015 request. Base funding (also referred to as regular or enduring appropriations) is available to U.S. facilities worldwide. Total security funding includes the base funding plus supplemental and/or Overseas Contingency Operations (OCO) funding for diplomatic/embassy security that has been available primarily for Iraq, but also for Afghanistan and Pakistan. Supplemental security funds (excluding those available only for Iraq) were requested and enacted for FY2008 and FY2009. OCO funds were requested and enacted for FY2012, FY2013, FY2014, and have been requested for FY2015. Following are some observations derived from the data shown in the Appendix and in the related Figures 2-5 : The peak years since FY2008 for requests for security funding and funds that Congress made available were in FY2013-FY2015 request, the fiscal years following the Benghazi attacks. (See Figure 2 .) The FY2015 request represents the largest request for total security funding at $4.7 billion, following recent-year increases in base funding. OCO had been nearly half of the request in FY2013, but in FY2015, requests for OCO are about one-third of the total. (See Figure 3 .) FY2013 and FY2014 were peak years for total security funding made available by Congress. In FY2013, of the total $4.5 billion, nearly 50% was OCO funding, largely because Congress provided transfer authority of OCO funds previously identified for Iraq to be used for broader security needs following the Benghazi attacks. In FY2014, of the total $4.68 billion, 19% was OCO. (See Figure 3 .) For total security funding, Congress provided less than was requested every year except FY2009 and FY2014. The FY2013 total security request was $4.6 billion, including the request for transfer authority of OCO funds. That year, Congress provided a total of $4.5 billion, including transfer authority. (See Figure 4 .) Total security funding as a portion of Administration of Foreign Affairs expenditures was highest (40%) in FY2014 and also was the highest (32%) as a portion of total State Department funding that same year. (See Figure 5 .) Figure 2 illustrates the trend line for State Department total diplomatic/embassy security expenditures using data from the Appendix . After trending upward between FY2008 and FY2009, the funding declined to the recent-year low in FY2011and was virtually flat in FY2012. In 2009, the United States was transitioning control of the "green zone" to the Iraqi government. Also that year, President Obama announced his intention of ending military operations in 2010. With the diminishing role of the U.S. military in Iraq and increasing security needs in Iraq, Afghanistan, and Pakistan, Congress supported more funds for DS, WSP, and WSU than were sought. Congress provided increased security funding in FY2013, the fiscal year following the Benghazi attacks and the first full fiscal year after the troops left Iraq in December 2011, when security efforts became the responsibility of the Department of State. Figure 3 illustrates diplomatic/embassy security funding data from the Appendix broken out by base and supplemental/OCO funding. FY2010 and FY2011 were the only years without broadly available security supplemental or OCO funds. (There may have been some, not shown below, that were exclusively for Iraq, however.) The FY2012 budget provided OCO funds for WSP, but not WSU. FY2013, starting about three weeks after the Benghazi attacks, was the peak year for supplemental/OCO and total security funding. The FY2014 estimates show an increase in enduring funds while OCO declines. The FY2015 request includes more OCO funds than were available in the FY2014 estimate, while the total funding is slightly more. Some observers question the increased use of OCO, in the absence of newly identified needs, as possibly a way to avoid exceeding the International Affairs spending caps established by the Budget Control Act of 2011. Figure 4 shows Administration requests for diplomatic/embassy security were greater than actual funding levels (including OCO and transfer authority) every year except FY2009 and FY2014. For the other years, the smallest funding gap compared with the request was $11.0 million in FY2008. The largest gaps between the request and actual funding occurred in FY2011 ($185.4 million) and FY2012 ($236.9 million). While Congress appropriated other OCO funds for security in Iraq, they were not broadly available for security in other facilities. In FY2013, the Administration sought transfer authority to use $1.419 billion of Iraq OCO funds for WSP and WSU expenses as part of what it termed an Increased Security Proposal. In FY2014, the funds made available that exceeded those requested were mostly WSP OCO funds for "extraordinary costs of operations in Afghanistan, Pakistan, Iraq, and other areas of unrest." Figure 5 illustrates the trends regarding the proportion of expenditures that were allocated toward diplomatic/embassy security out of the Administration of Foreign Affairs (State operations) budget and the State Department total budget. These trends mirror those of actual dollars spent over the same years, with the proportions decreasing in FY2011and FY2012, but expanding in FY2009 with the transition in Iraq, and FY2013-FY2014, the years following the Benghazi attack. Some budget analysts regard enacted rather than actual funding as more closely reflecting the intent of Congress, since actual funding levels include transfers that occurred at the agency. Worldwide Security Protection (WSP) and Worldwide Security Upgrades (WSU) make up the bulk of the diplomatic/embassy security budget and are the only diplomatic/embassy security line-items that appear in the Administration's budget request, the Department of State, Foreign Operations and Related Programs House and Senate appropriations legislation, and the enacted appropriations laws. Table 1 provides the Administration's requests, as well as House-proposed, Senate-proposed, and enacted levels for WSP and WSU from FY2008-FY2014, in reverse order. In contrast to actuals in the Appendix , FY2014 was the only year that WSP and WSU enacted funding levels were greater than those requested. For FY2013 which began October 1, 2012, less than a month after the Benghazi attacks, Secretary of State Hillary Clinton requested transfer authority from Congress for $1.4 billion of OCO funds previously appropriated for Iraq as part of what was termed an Increased Security Proposal. Congress agreed to much of that increase, but sequestration mandated by the Budget Control Act of 2011 was applied to the funds, which caused the enacted levels to be about 3% below what would have been appropriated. The grand total of WSP and WSU funds requested from FY2008-FY2014 is $220.4 million more than what Congress enacted. Congress appropriated 6% less funding than was requested in the years leading up to Benghazi, but appropriated 6% more in the years following the attacks. The Senate-proposed security funds exceeded House-proposed levels every year except FY2008. The Senate levels, however, were not always as much as was requested by the Administration, nor as much as appropriated, in some years. FY2008 was the only year that the House-proposed diplomatic/embassy security funding levels were greater than the Administration request, the Senate-proposed, or enacted levels. (In FY2014, the House-proposed levels matched the Administration request.) Also noteworthy is the delay in the passage of every appropriation from FY2008-FY2014. When a new fiscal year starts and appropriations have not been passed and signed into law, Congress typically passes continuing resolutions (CRs) to keep the government funded until a budget is passed. Typically, CRs base funding levels for budget accounts on the past-year spending levels, perhaps increasing or decreasing by a certain percentage. Congress has consistently enacted international affairs appropriations long after the start of the fiscal year. Delayed appropriations, some have argued, make planning to meet security and other needs challenging. In recent years, for example, Congress approved and sent its final FY2011 and FY2013 budgets to the President in April and March, respectively, six to seven months into the fiscal year. Another concern expressed by foreign affairs budget experts is the combining of several or all appropriations into an omnibus, consolidated, or full-year continuing resolution that occurred every year from FY2008-FY2014. Passage of stand-alone State-Foreign Operations appropriations legislation, analysts suggest, provides a greater opportunity for congressional oversight and deliberation on sensitive issues, such as security spending. (See Table 1 below.) Complexities surrounding the security funds available for Benghazi include whether the facility was designated as temporary, the date its lease would be up, and the timing of available funding, among other things. Officials at the Department of State may disagree as to what qualifies as a temporary facility and what funds are available to those facilities. For example, Overseas Building Operations (OBO) uses temporary to mean those facilities that can be moved, such as trailers and modular structures. Other State Department officials may use temporary to mean short-term. A Senate committee report on the Benghazi attack found that because the Benghazi facility was designated as temporary, no security standards applied to it. Furthermore, additional physical barriers to enter the facility were not in place due to time and money constraints. The lack of dedicated security resources for Benghazi contributed to those constraints, according to the report. Compounding the definitional issue is that the State Department lacks a process to re-evaluate security at temporary facilities that are being used longer than first anticipated. The Benghazi facility was first opened in 2011 and was to close later that year. In December 2011, the State Department decided to extend the Benghazi mission until December 2012. The Department did make note of needed corrective security measures for the mission and made a number of security enhancements [using WSP funds]. (See Table 2 below.) According to the Benghazi ARB report, "OBO does not fund security upgrades [ESCM/WSU] for 'temporary' facilities." Appearing to support that statement, the Senate Select Committee on Intelligence said in its January 15, 2014 report: "... the uncertain future of the [Benghazi] Mission facility, due to its one-year expiration in December 2012, contributed to a lack of continuity for security staff, and constrained decision-makers in Washington regarding the allocation of security enhancements to that facility." Differing views on the definition of "temporary" and the related eligibility for security funding has led to confusion about whether or not the Benghazi facility qualified for WSU funding. According to State Department officials, the facilities in Benghazi would have been eligible for the Compound Security Program under WSU funding. Although ESCM/WSU does not fund security upgrades for temporary facilities, it does fund security upgrades for permanent facilities. For the purposes of funding, the Department defines temporary facilities as those that are not permanent structures, such as modular units or structures that can be relocated. The facilities in Benghazi were permanent structures. Based on that definition, lease terms or length of mission would not determine the qualification to use WSU funding. According to State Department officials, OBO received no requests to execute or fund a compound security upgrade in Benghazi with WSU funding. With regard to the available funding in FY2012, according to the Department of State, the Benghazi facilities were short-term leased residential villas that were used for housing and office space. The leases for the three villas in Benghazi ($336,000/year, $168,000/year, and $336,000/year) were funded from FY2012 ESCM appropriations. WSP funds were available and were used for security enhancements prior to the attack. Delayed enactment of appropriations also may have had consequences for the implementation of security upgrades. According to one Senate Committee report, a State Department Regional Security Officer (RSO) stated that Continuing Resolutions had two detrimental effects on efforts to improve security in Benghazi. First, the Department of State would only allow funds to be expended at a rate of 80 percent of the previous year's appropriations level, so as not to risk a violation of the Anti-Deficiency Act [not obligating more than may eventually be appropriated by Congress]. Second, in the absence of a supplemental appropriation or reprogramming request, security funds for Benghazi had to be taken 'out of hide' from funding levels for Libya because Benghazi was not included in the previous budget. | Congressional investigations into the September 11, 2012, attacks on U.S. facilities in Benghazi, Libya, have focused on a number of issues, including the extent to which overall funding levels may have played a role in the security measures in place at that U.S. facility. While several factors may have been involved in the Benghazi situation, this report focuses only on funding for security of U.S. diplomatic personnel and facilities abroad, hereinafter referred to in this report as diplomatic/embassy security. (For other CRS reports on the Benghazi attacks and a list of CRS experts, go to CRS.gov and search "Benghazi.") The report of the Accountability Review Board for Benghazi (ARB) report highlighted the funding complexities at the Department of State: For many years the State Department has been engaged in a struggle to obtain the resources necessary to carry out its work, with varying degrees of success. This has brought about a deep sense of the importance of husbanding resources to meet the highest priorities, laudable in the extreme in any government department. But it has also had the effect of conditioning a few State Department managers to favor restricting the use of resources as a general orientation. Experienced leadership, close coordination and agility, timely informed decision making, and adequate funding and personnel resources are essential.... One overall conclusion in this [ARB] report is that Congress must do its part to meet this challenge and provide necessary resources to the State Department to address security risks and meet mission imperatives. (Department of State, Accountability Review Board for Benghazi Attack of September 2012, December 19, 2012, p. 3. Available at http://www.state.gov/documents/organization.202446.pdf.) Other post-Benghazi reports have pointed out how security funding for overseas staff and posts depends on the designation of the facility as office space, warehouse, or residence, and whether a facility is considered by State Department officials as permanent, temporary, or interim. Even the definition of each of those designations may differ within the Department of State. Further, some reports suggest that the inability to get more funds to improve security—whether because Congress does not appropriate enough, delays passing budgets, or because the Department of State is unwilling or unable to fully fund resource requests from its overseas posts—may contribute to an attitude by officials in the field that a combination of elevated threat and restricted resources to meet that threat should not be questioned. In that case, security officers requesting more funds simply may give up. This report presents a history and analysis of the requested and actual funding for diplomatic/embassy security since FY2008—what actually became available for the Department of State to spend after rescissions, sequestration, and transfers. It also provides funding data that was requested by the Administration, passed by the House of Representatives, passed by the Senate, and enacted by Congress for the two accounts that provide the bulk of the funding: the Worldwide Security Protection (WSP) and Worldwide Security Upgrades (WSU). Combined, these two subaccounts in most years comprise more than 90% of the funding available for diplomatic/embassy security. This report will continue to track diplomatic/embassy security appropriations and will be updated as changes occur. |
Nearly half a million miles of oil and gas transmission pipeline crisscross the United States. (1) These pipelines are integral to U.S. energy supply and have vital links to other critical infrastructure,like power plants, airports, and military bases. While an efficient and fundamentally safe means oftransport, many pipelines carry volatile or flammable materials with the potential to cause publicinjury and environmental damage. The nation's pipeline networks are also widespread, runningalternately through remote and densely populated regions; consequently, these systems are inherentlyvulnerable to terrorist attack. Pipeline operators have had security and emergency response programsin place for decades, but they have recently been taking steps to enhance those programs in responseto new terrorist threats. Congress passed legislation to further encourage the pipeline industry toadopt better security practices, and to provide federal oversight of operator security programs ( P.L.107-71 , P.L. 107-296 , P.L. 107-355 ). Policy makers are now examining the progress and adequacyof these efforts. This report provides an overview of recent federal activities related to pipeline security, including safety activities with links to security. The report describes the U.S. gas and oil pipelinenetworks, the industry's safety record and security risks, and the industry's security activities sinceSeptember 11, 2001. It summarizes recent changes in federal pipeline security law and relatedchanges in the security roles of federal agencies. The report discusses several policy concerns relatedto federal pipeline security efforts: 1) federal threat information for pipelines, 2) criteria foridentifying "critical"assets, 3) TSA funding for pipeline security, and 4) federal agency cooperationin pipeline security. While this report addresses many safety issues related to security, it does not cover the full range of safety issues of potential interest to policy makers (e.g., inspection technology). Becausethe focus of this report is on activities and policies of federal agencies, it does not examine statepipeline agency activities in depth. The report also focuses on TSA and the OPS as the lead pipelinesecurity and safety agencies. The activities of federal agencies with more limited roles in pipelinesecurity and safety are reviewed in the Appendix. Some 470,000 miles of oil and gas transmission pipeline crisscross the United States, with linksto Mexico and Canada. These pipelines run throughout the country, but the greatest concentrationconnects the major energy-producing regions in the South with the major energy-consuming regionsin the Northeast ( Figure 1 ). Source: Energy Information Administration There are roughly 180,000 miles of oil pipeline in the United States carrying over 75% of the nation's crude oil and around 60% of its refined petroleum products. (2) Some 180 companies operatethe inter state lines, which account for roughly 80 % of total pipeline mileage and transportedvolume. (3) The largest U.S. pipeline is the TransAlaska Pipeline System (TAPS), which transportscrude oil from Alaska's North Slope oil fields to the marine terminal in Valdez. TAPS runs some800 miles and delivers roughly 17% of United States domestic oil production. (4) Like TAPS, majoroil pipelines generally terminate at logistics hubs which typically link multiple pipelines, maintainsubstantial storage facilities and serve as gateways for regional distribution by truck, tanker, barge,or other means. The U.S. natural gas pipeline network consists of around 210,000 miles of inter state transmission, plus approximately 75,000 miles of intra state transmission. (5) Around 80 systems makeup the inter state network. Another 60 or so systems operate strictly within individual states. (6) These inter state and intra state transmission pipelines feed around 1.1 million miles of regionallines insome 1,300 local distribution networks. (7) Collectively, these gas pipelines transport nearly all of thenatural gas in the United States. Gas pipelines serve electric generation and industrial customersdirectly, and link through "city gates" to regional distribution mains which, in turn, feed the localservice lines of retail gas consumers. Some pipelines are also connected to liquefied natural gas(LNG) storage tanks which augment pipeline gas supplies during peak demand periods. Accordingto the Department of Energy, there are 113 active LNG facilities in the U.S., mostly in the Northeast, many located near populated areas. (8) Taken as a whole, releases from pipelines cause relatively few annual fatalities. Oil pipelines reported an average of 1.4 deaths per year from 1997-2001. Gas pipelines reported an average of18.6 deaths per year during the same period. (9) It isdifficult to make direct safety comparisonsbetween pipelines and other transportation modes due to data limitations. Nonetheless, DOTstatistics suggest that pipelines have much lower fatalities per ton-mile of general freight moved thantruck, rail or waterborne transport. In general, the environmental safety record of oil pipelines iscomparable to other transportation modes. According to the oil industry's own estimates, from1995-2000 oil pipelines spilled an average of 0.9 gallons/million barrel-miles of oil, compared to 1.5for trucks, 0.7 for rail and 0.7 for barges. (10) Similar direct comparisons for gas pipelines are notavailable. Accidental pipeline releases result from a variety of causes, including outside force (e.g., third-party excavation), corrosion, mechanical failure, control system failure and operator error. Natural forces, such as floods and earthquakes, can also damage pipelines. According to the DOT,of 183 gas pipeline accidents reported in 2002, outside forces were by far the leading cause,accounting for 46% of reported failures. Outside forces was also the leading cause of the 140 oilpipeline accidents in 2002, responsible for 32% of failures. (11) These accident figures are significantin the context of security for two reasons: such releases happen much more frequently than is likelyto occur from limited terrorist activity in the United States; and the pipeline industry has extensiveexperience responding to releases and generally does so relatively quickly. Although pipeline releases have caused relatively few fatalities in absolute numbers, a single pipeline accident can be catastrophic. For example, a 1999 gasoline pipeline explosion inBellingham, Washington killed two children and an 18-year-old man, and caused $45 million indamage to a city water plant and other property. In 2000, a natural gas pipeline explosion nearCarlsbad, New Mexico killed 12 campers, including 4 children. (12) These accidents generatedsubstantial scrutiny of pipeline regulation and increased state and community activism related topipeline safety. (13) The accidents also highlightedthe danger of pipelines as possible terror weaponsbecause of their potential to harm people and damage property in their vicinity. Like any physical system, pipelines are vulnerable to vandalism and terrorist attack. The physical plant of these facilities may be damaged with explosives or by other mechanical means,disrupting flows and causing a release of pipeline contents. Alternatively, computer control systemsmay be "cyber-attacked," or both physical and cyber attack may happen at the same time. Somepipelines may also be indirectly disrupted by other types of terror strikes, such as attacks on regionalelectricity grids or telecommunications networks, which could in turn affect dependent pipelinecontrol and safety systems. (14) Since pipelinessupply fuel for vehicles, power plants, aircraft, heating,military bases and other uses, serious disruption of a pipeline network poses additional"downstream" risks. Oil and gas pipelines have been a favored target of terrorists outside the United States. In Colombia, for example, rebels have bombed Occidental Petroleum's Caño Limón pipeline some 950times since 1986, shutting it for months at a time and costing Colombia's government some $2.5billion in lost revenues. (15) One of these attacksin 1998 caused a fire that killed or injured over 100people. (16) In 1996, London police foiled a plotby the Irish Republican Army to bomb gas pipelinesand other utilities across the city with 36 explosive devices. (17) In the last 2 years, oil and gaspipelines have also been attacked in Nigeria, Pakistan, Sudan, Myanmar and Iraq. In Saudi Arabia,a planned pipeline attack by al-Qaeda sympathizers at the country's main oil terminal was thwartedin 2002. Although it was unclear whether the planners had the capability to fully execute the Saudiattack, had they been successful, they could have disrupted the movement of over 6% of the world'sdaily oil consumption. (18) Attacks and threats against pipelines and related infrastructure have also occurred in the UnitedStates. In 1997, Texas police prevented the bombing of natural gas storage tanks at a processingplant by Ku Klux Klan members seeking to create a diversion for a robbery (to finance other terroristactions). (19) In 1999, Vancouver police arresteda man planning to blow up the trans-Alaska pipelinefor personal profit in oil futures. He was found with high explosives and timers for 14 bombs. (20) In2001, a vandal's attack with a high-powered rifle, also on the trans-Alaska pipeline, forced a two-dayshutdown and caused extensive economic and ecological damage. (21) Federal warnings about Al Qaeda threats since September 11, 2001 have repeatedly mentioned energy infrastructure broadly, and pipelines specifically, as potential terror targets in the UnitedStates. (22) These warnings included the discoveryin late 2001 that computer hackers in the MiddleEast had infiltrated San Francisco area sites detailing information about local electricity systems,along with other critical infrastructure. (23) In Juneof 2003, U.S. intelligence agencies warned abouta possible al-Qaeda attack on energy facilities, including pipelines, in Houston. (24) To date, there havebeen no actual attacks on these sites, but operators remain alert. Despite substantial private and public efforts to promote security, it is widely recognized that pipelines are inherently vulnerable. The fact that pipelines run largely underground reduces theirexposure to external threats, but required markings tell emergency responders, homeowners -- andterrorists -- where pipelines are located. Rather than trying to uniformly protect their entire systems,operators emphasize the security of especially vulnerable areas, such as river crossings, controlcenters, junctions, and storage tanks. They try to "harden" (i.e., to enhance the security of ) thesefacilities and ensure adequate surveillance and monitoring. Operators also modify emergency plansto incorporate new elements of terror response, such as managing a federal crime scene. The Natural Gas Pipeline Safety Act of 1968 (P.L. 90-481) and the Hazardous Liquid PipelineAct of 1979 ( P.L. 96-129 ) are two of the key early acts that specify the federal role in pipeline safety. Under both statutes, the Transportation Secretary is given primary authority to regulate key aspectsof interstate pipeline safety: design, construction, operation and maintenance, and spill responseplanning. Pipeline safety regulations, some with security implications, are covered in Title 49 of theCode of Federal Regulations. (25) This title: Authorizes DOT to inspect pipelines and enforce its regulations with fines, injunctions, and criminal penalties Requires operators to report incidents, safety-related conditions and annualsummary data Prescribes minimum pipeline safety requirements, including operatorqualifications for regulated functions Imposes oil spill response plan requirements to reduce environmental impactof accidental discharges Provides grants-in-aid to state pipeline safety compliance agencies that adoptdamage prevention programs Requires operators to establish drug and alcohol programs. DOT administers pipeline regulations through the Office of Pipeline Safety (OPS) within the Research and Special Programs Administration (RSPA). The OPS has approximately 150 staff,including 100 inspectors generally located outside of Washington, D.C. (26) The OPS safety programis funded primarily by user fees assessed on a per-mile basis on each regulated pipeline operator(49USC60107). Among other security-related provisions of P.L. 96-129 and subsequent laws, the OPS requires general protection of "exposed" oil pipeline facilities from vandalism and unauthorized entry. (27) TheOPS also requires specified pipeline operators to establish written procedures for communicatingwith governmental response agencies and other public officials during emergencies. (28) Certainreleases from oil or gas pipelines must be reported to DOT's National Response Center. (29) The OPSpractices emergency response to oil spills with federal, state, and industry representatives. Thelessons learned from these exercises, as well as the formal and informal relationships establishedduring these drills, help prepare for releases in deliberate attacks. Since 1997, the OPS has increasingly encouraged industry's implementation of "integrity management" programs on pipeline segments near "high consequence" areas. Integrity managementprovides for continual evaluation of pipeline condition; assessment of risks to the pipeline;inspection or testing; data analysis; and followup repair, as well as preventive or mitigative actions. High consequence areas include population centers, commercially navigable waters, andenvironmentally sensitive areas, such as drinking water supplies or ecological reserves. The integritymanagement approach directs priority resources to locations subject to the greatest consequencesrather than applying uniform treatment to the entire pipeline network. (30) Integrity management riskassessments could be interpreted to include security, but the regulation does not explicitly addressterrorism, and the OPS has provided "minimal" guidance to operators regarding terrorism risksexpected in their plans. (31) The OPS made integritymanagement programs mandatory for mostoperators with 500 or more miles of regulated oil pipeline as of March 31, 2001 (49CFR195). On December 12, 2002, President Bush signed into law the Pipeline Safety Improvement Actof 2002 ( P.L. 107-355 ). The act reauthorizes funding for the OPS through fiscal year 2006. It alsostrengthens federal pipeline safety programs, state oversight of pipeline operators, and publiceducation regarding pipeline safety. (32) Among other safety provisions, P.L. 107-355 requires operators of regulated gas pipelines in high consequence areas to conduct risk analysis and implement integrity management programssimilar to those required for oil pipelines under 49CFR195. Integrity management, as a whole, isintended to focus primarily on safety, but certain elements may also have links to security, dependingupon interpretation and application. For example, the integrity management rule for oil pipelinesstates that "identifying the need for additional preventive and mitigative measures, an operator mustevaluate the likelihood of a pipeline release occurring and how a release could affect the highconsequence area. This determination must consider all relevant risk factors..." (49CFR195.452). Guidance for this rule also cites "security of throughput (effects on customers if there is failurerequiring shutdown)" as a risk factor for establishing assessment frequency. (33) As is the case for oilpipelines, the rule does not explicitly discuss risks from terror attacks. Nonetheless, assessment ofaccident risks near population centers could provide important data for related terror riskassessments. Likewise, system safety inspections could provide data useful for related securityinspections. P.L. 107-355 also: requires development of integrity management analysis and program standards by DOT within 12 months of enactment, and gas pipeline operator implementation within 24 monthsof enactment (Sec. 14), requires baseline integrity assessments of all high consequence area gaspipelines within 10 years, with reinspections every 7 years thereafter (Sec.14), authorizes DOT to order safety actions for pipelines with potential safetyproblems (Sec. 7) and increases violation penalties (Sec. 8). The criminal provisions under 49USC60123 amended by P.L. 107-355 state that "a person knowingly and willfully damaging or destroying, or attempting to damage or destroy, an interstategas pipeline facility or interstate hazardous liquid pipeline facility shall be fined..., imprisoned fornot more than 15 years, or both." These provisions, originally intended to deter unsafe excavatorsand vandals from damaging pipes, could just as well apply to terrorists. Pipeline operators have long been concerned about permitting and administrative barriers to emergency pipeline restoration efforts. (34) The actattempts to streamline this process by establishingan interagency committee, including the Department of Transportation, Environmental ProtectionAgency, Bureau of Land Management, Federal Energy Regulatory Commission, and other agencies,to ensure coordinated review and permitting of pipeline repairs (Sec. 16). In the event of a terrorattack, expedited review and permitting could speed restoration by allowing operators to begin workquickly and to bypass damaged facilities by rebuilding through adjacent property or other alternateroutes. P.L. 107-355 authorizes $100 million for research and development in pipeline integrity, safety, and reliability (Sec. 12) including "the real-time surveillance of pipeline rights-of-way, developingtools for evaluating and enhancing pipeline security and infrastructure, reducing natural,technological, and terrorist threats, and protecting first response units and persons near an incident"(Sec. 12c5). The act requires DOT to study ways to limit pipeline safety risks from population encroachment and ways to preserve environmental resources in pipeline rights-of-way (Sec. 11). P.L. 107-355 alsoincludes provisions for public education, grants for community pipeline safety studies, "whistleblower" and other employee protection, employee qualification programs, mapping data submissionand other provisions. The provisions of P.L. 107-355 place significant new demands on the OPS. The act requires gas pipeline operators with facilities in "high consequence" areas to adopt new integrity managementprogram plans by 2005, and to begin pipeline integrity assessments by mid-2006 (Sec 14.2). Thesegas pipeline plans will be in addition to oil pipeline integrity management plans required by49CFR195. The act states that OPS "shall review a risk analysis and integrity managementplan...and record the results of that review for use in the next review of an operator's program" (Sec14.9A). According to the General Accounting Office (GAO), a comprehensive review of an integritymanagement plan by the OPS took about 2 weeks per plan in 2002. (35) Reviewing new integritymanagement plans in a timely manner, while sustaining its traditional pipeline safety oversight, willstretch the OPS' resources. GAO notes that "inspectors will face difficulties in judging the adequacyof complex integrity management processes that will vary from company to company." (36) The OPS' enabling legislation allows the agency to delegate authority to intra state pipeline safety offices, and allows state offices to act as "agents"administering inter state pipeline safetyprograms (excluding enforcement) for those sections of inter state pipelines within their boundaries. (37) When effectively utilized, state inspectors are valuable resources for the OPS because they arefamiliar with local pipeline operations and can increase inspection thoroughness and frequency overwhat the OPS could do alone. In 2002, around 400 state pipeline safety inspectors (in 48 states, theDistrict of Columbia and Puerto Rico) were available. (38) The OPS plans to rely heavily on its statepartners to inspect the integrity management programs of the intra state oil and gas pipelines. Butthe OPS must still administer a state's written assessments and related safety proposals (Sec 14.10).The agency faces additional challenges ensuring that state resources will be sufficient, training stateinspectors in integrity management, and ensuring consistency among numerous state offices. (39) The OPS intends to hire more federal inspectors to help meet the regulatory obligations of the integrity management rules. The President's FY2005 budget request for the OPS seeks $13 millionfor 168 full-time equivalent (FTE) employees, compared to an estimated $13 million for 156 FTE'sin FY2004, and $10 million for 111 FTE's in FY2002. The budget also seeks $15 million inFY2005 for contract services, the same as in FY2004, but up from $5 million in FY2003. (40) Pipeline operators have always sought to secure their systems. While their security programstraditionally tended to focus on personnel safety and preventing vandalism, some have been morecomprehensive. For example, security at the trans-Alaska pipeline during the Gulf War includedmeasures such as armed guards, controlled access, intrusion detection and dedicated communicationsat key facilities, as well as aerial and ground surveillance of the pipeline corridor. (41) However, theevents of September 11, 2001 focused attention on the vulnerability of pipelines to different terroristthreats. In particular, the terrorist attacks raised the possibility of systematic attacks on pipelines bysophisticated terror groups in a manner that had not been widely anticipated before. After the September 11 attacks, natural gas pipeline operators immediately increased security and began identifying additional ways to deal with terrorist threats. Gas pipeline operators, forexample, through the Interstate Natural Gas Association of America (INGAA), formed a securitytask force to coordinate and oversee the industry's security efforts. The INGAA states that it ensuredthat every member company designated a senior manager to be responsible for security. Workingwith DOT, the Department of Energy (DOE), and non-member pipeline operators, the INGAA states that it assessed industry security programs and began developing common risk-based practices forincident deterrence, preparation, detection and recovery. These assessments addressed issues suchas spare parts exchange, critical parts inventory systems, and security communications withemergency agencies, among other matters. The INGAA also worked with federal agencies,including the OPS and Homeland Security, to develop a common government threat notificationsystem. (42) The natural gas companies reported significant commitments to bolster security at their critical facilities. According to the American Gas Association (AGA), companies strengthened emergency,contingency and business continuity plans; increased liaison with law enforcement; increasedmonitoring of visitors and vehicles on pipeline property; monitored pipeline flows and pressure ona continuous basis; increased employee awareness to security concerns; and deployed additionalsecurity personnel. (43) The industry also begandeveloping encryption protocol standards to protectgas systems from cyber attack. (44) Operators alsosought redundancy in the delivery system to providegreater flexibility to redirect or shut down product flows. The oil pipeline industry responded to the September 11 attacks in a manner similar to that of the gas pipeline industry. Pipeline operators reviewed procedures, tightened security, reroutedtransportation patterns, closely monitored visitors and made capital improvements to harden keyfacilities. (45) Operators also increased surveillanceof pipelines, conducted more thorough employeebackground checks, and further restricted Internet mapping systems. (46) The Association of Oil PipeLines (AOPL) and the American Petroleum Institute (API), working together, provided guidance tomember companies on how to develop a recommended pipeline security protocol analogous to anexisting protocol on managing pipeline integrity. Along with the gas pipeline industry, the oilpipeline industry reconciled its levels of security threat and associated measures with the nationalthreat advisory system of the Office of Homeland Security. According to the AOPL, 95 percent ofoil pipeline operators had developed new security plans and had instituted the appropriate securityprocedures by February, 2003. The remaining 5 percent are primarily small operators in otherbusinesses but with oil pipelines between plant facilities. (47) In conjunction with the Office of Homeland Security, pipeline operators joined with other gas and oil companies to establish an Information Sharing and Analysis Center (ISAC) in November2001. The ISAC is a cooperative, industry-directed database and software applications center forinformation related to security, including real-time threat alerts, cyber alerts and solutions. TheISAC allows authorized individuals to submit reports about information and physical securitythreats, vulnerabilities, incidents, and mitigation. The ISAC also provides access to information fromother members, U.S. government and law enforcement agencies, technology providers, and other security associations. (48) In 2003, the ISAC had limited participationby operators since members were required to pay fees and similar information was available directlyfrom other sources. The energy industry has taken steps, such as hiring a new administrationcontractor, to increase the usefulness of the ISAC and increase its membership. (49) Presidential Decision Directive 63 (PDD-63) issued during the Clinton administration assignedlead responsibility for pipeline infrastructure protection to the DOT. (50) At the time, theseresponsibilities fell to the OPS, since the agency was already addressing some elements of pipelinesecurity in its role as safety regulator. Immediately after September 11, 2001, the OPS issued severalemergency bulletins to oil and gas pipeline companies communicating the need for a heightenedstate of alert in the industry. According to a DOT official, OPS personnel made immediate and individual telephone contact with all major pipeline operators to ensure that communication was open andviable between our offices and that they understood and adhered to the security issues. Additionally,OPS personnel contacted all of the state pipeline safety programs to provide them with securityinformation. (51) Soon thereafter, because of national security concerns, the OPS removed from its web site detailed maps of the country's pipeline infrastructure. The OPS also conducted a vulnerability assessment used to identify which pipeline facilities were "most critical" because of their importance to meeting national energy demands or proximityto highly populated or environmentally sensitive areas. The OPS worked with industry groups andstate pipeline safety organizations "... to assess the industry's readiness to prepare for, withstand andrespond to a terrorist attack..." (52) The OPS warnedthat critical pipeline facilities, such as controlcenters, pump and compressor stations, and storage facilities, might be targets -- and that many ofthese facilities needed to be better protected. (53) Through 2002, The OPS was the federal agency most active in encouraging industry activities intended to better secure the nation's pipelines. In general, The OPS' approach was to encourageoperators to voluntarily improve their security practices rather than to develop new securityregulations. In adopting this approach, The OPS sought to speed adoption of security measures byindustry and avoid the publication of sensitive security information (e.g., critical facility lists) thatwould normally be required in public rulemaking. (54) The OPS worked with several industry security task groups to define different levels of "criticality," to identify actions to strengthen protection based on this criticality, and to develop plansfor improved response preparedness. The OPS surveyed many pipeline companies to assess securitymeasures taken since 9/11. Together with DOE and state pipeline agencies, the OPS promoted thedevelopment of consensus standards for security measures tiered to correspond with the five levelsof threat warnings issued by the Office of Homeland Security. (55) The OPS also developed protocolsfor inspections of critical facilities to ensure that operators implemented appropriate securitypractices. To convey emergency information and warnings, the OPS established a variety ofcommunication links to key staff at the most critical pipeline facilities throughout the country. TheOPS also began identifying near-term technology to enhance deterrence, detection, response andrecovery, and began seeking to advance public and private sector planning for response andrecovery. (56) On September 5, 2002, The OPS circulated formal guidance defining the agency's security program recommendations and implementation expectations. This guidance recommended thatoperators identify critical facilities, develop security plans consistent with prior trade associationsecurity guidance, implement security plans and review those plans annually. (57) The guidance definedasset "criticality" in terms of threats, risks to people, and economic impacts from the loss of energysupply. It also suggested specific security measures to be taken at the 5 different homeland securitythreat levels, with over 50 cumulative measures at the highest threat level. While the guidance wasvoluntary, the OPS expected compliance from operators of critical facilities. The agency believedit had the authority to enforce the requirements if voluntary compliance was not effective. The OPSasked operators for a written statement certifying their compliance within 6 months. The OPS alsoinformed operators of its intent to begin reviewing security programs within 6 months of thecertification deadline, potentially as part of more comprehensive safety inspections. (58) In November, 2001, President Bush signed the Aviation and Transportation Security Act ( P.L.107-71 ) establishing the Transportation Security Administration (TSA) within DOT. The actaccorded TSA with responsibility for security "in all modes of transportation, including "...modesof transportation that are exercised by the Department of Transportation." According to TSA, thisprovision placed DOT's pipeline security authority (under Presidential Decision Directive 63)within TSA. The act specified for TSA a range of duties and powers related to general transportationsecurity, such as intelligence management, threat assessment, mitigation, security measure oversightand enforcement, among others. Due to high public concern about aviation, however, andaviation-related deadlines specified in the act, TSA focused primarily on aviation security during itsfirst year of existence. (59) On November 25, 2002, President Bush signed the Homeland Security Act of 2002 ( P.L. 107-296 ) creating the Department of Homeland Security (DHS). Among other provisions, the acttransferred to DHS the Transportation Security Administration from DOT (Sec. 403). During 2003,TSA increased its focus on transportation modes beyond aviation. According to TSA officials, theagency took the lead as the national transportation security manager for pipeline security, buildingupon prior federal efforts and relationships (particularly those with the OPS) to do what it could "toprotect the critical infrastructure from terrorists." (60) These efforts were led by the Pipelines Branchin TSA's Transportation Infrastructure Security division. On December 17, 2003, President Bush issued Homeland Security Presidential Directive 7 (HSPD-7) clarifying executive agency responsibilities for identifying, prioritizing and protectingcritical infrastructure. HSPD-7 maintains DHS as the lead agency for pipeline security (Par. 15),and instructs DOT to "collaborate in regulating the transportation of hazardous materials by allmodes (including pipelines)" (Par. 22h). The order also requires that DHS and other federalagencies collaborate with "appropriate private sector entities" in sharing information and protectingcritical infrastructure (Par. 25). HSPD-7 supersedes PDD-63 (Par. 37). TSA's Pipeline Branch is implementing its plans with respect to pipeline security inspections, standards development, and critical asset analysis. According to TSA, the agency expects pipelineoperators to maintain security plans based on the OPS/industry consensus security guidancecirculated in 2002 and subsequent revisions. (61) In 2003 the agency visited 24 of the largest 25-30pipeline operators to review their security plans and inspect their facilities. The agency plans tocomplete the remaining large operator inspections by April 2004, and then begin inspections ofmajor gas distribution systems. During the reviews, TSA evaluates whether each company hasfollowed the intent of the OPS/industry security guidance, and seeks to collect the list of assets eachcompany has identified meeting the criteria established for critical facilities. According to TSA,nearly all operators visited by the agency have met the minimum security guidelines, and some havegone "way beyond" the minimum requirements. All but two of the 24 operators have provided TSAwith copies of their security plans and system maps, as well as critical infrastructure information. The two operators declining to provide this information did not believe they had adequate assurancesthe information would be protected from public disclosure. The OPS joined TSA on approximatelyone-third of its operator inspections in 2003. (62) TSA seeks the OPS' participation in these reviews,but does not require it. (63) TSA's FY2005 budget justification maintains that the agency "will... issue regulations where appropriate to improve the security of the [non-aviation transportation] modes." (64) Accordingly,TSA ultimately intends to establish pipeline security regulations to move beyond voluntarycompliance, as is now the case, and provide a clear basis for future enforcement. The agencybelieves such regulations may be necessary because it believes existing OPS safety regulationsprovide only limited enforcement authority in security, especially counter-terrorism. TSA has begunthe process of developing new pipeline security regulations, but it is not clear when TSA willactually issue them. TSA believes it has the OPS' agreement that future TSA security plans will bethe only ones required of operators and that TSA will be responsible for reviewing them. (65) According to TSA, the agency intends to work with industry to help operators better identifytheir most critical assets. Industry has been assessing asset criticality under the current securityguidance, but TSA plans to publish a new multi-modal (including pipelines) model providing aclearer basis for identifying assets that might be subject to terrorist attacks. The model accounts forpotential loss of human life and well-being (e.g., illness, access to emergency services),reconstitution, economic impact, and symbolic importance. TSA expects assessments to beconducted initially within each transportation mode, with final assessments across all transportationmodes. TSA intends to use the model results for allocating resources to protect the highest priorityassets across different modes of transportation. TSA's Pipeline Branch has been developing, andplans to maintain in the future, its own inventory of critical pipeline infrastructure based on thismodel. (66) The TSA has also been developing a new multi-modal asset vulnerability tool, the Transportation Risk Assessment and Vulnerability Evaluation (TRAVEL) model, which it expectsthe major transportation modes (including pipelines) to use for evaluating the vulnerability of criticalassets. According to TSA staff, the model should evaluate operator security plans based on a set ofpre-determined relevant and realistic "attack scenarios." For pipelines, these scenarios specify avariety of physical and cyber-attacks to the network, including attacks incorporating chemical andbiological agents. By applying one model across transportation modes, TSA seeks to establish amore consistent approach to assessing vulnerability than mode-specific models might provide. (67) According to TSA, the TRAVEL model has not yet been finalized and expanded to includepipelines, although it has already been used in other transportation modes. (68) In addition to the activities above, TSA intends to establish qualifications for personnel seeking unrestricted access to critical transportation assets, including pipeline assets. TSA has also beenaddressing legal issues regarding recovery from terrorist attacks, such as FBI control of crime scenesand eminent domain or property seizure in pipeline restoration around a crime scene. (69) Government and industry have taken substantial actions during the last two years to improvepipeline security and oversight. As one industry executive remarked, "Before 9/11, we nevercontemplated somebody flying a jet into some critical facility we have. Now we not only think aboutit, but we're also putting very different contingency plans in place." (70) Federal agencies acknowledgeindustry's progress. The President's 2003 infrastructure protection strategy, for example, noted that"pipeline facilities already incorporate a variety of stringent safety precautions" and that "as a whole,the response and recovery capabilities of the pipeline industry are well proven..." (71) Senior DHSofficials have also asserted that "pipelines are the best organized and have the best security practices"among maritime and land transportation sectors. (72) Notwithstanding the progress to date in improving pipeline security, continued implementation of industry and government programs faces several challenges. As discussed in detail in thefollowing sections, many in industry are concerned about the quality of information about actualterrorism threats that they receive from DHS. Industry is also generally concerned that criteria foridentifying critical facilities continue to evolve. As a result, the pipeline industry is concerned thatit may be forced to spend too much on pipeline security, or spend in the wrong places -- divertinglimited resources from safety programs and other important uses. TSA faces resource constraintsof its own, limiting the agency's ability to improve industry security standards and oversee pipelinesecurity in the field. TSA and the OPS currently cooperate on security inspections, but many inindustry are still concerned about the possibility of redundant, conflicting regulatory regimes. The DHS' Homeland Security Advisory System communicates terrorist threats to the public based on five threat conditions: low, guarded, elevated, high and severe (represented by the colorsgreen, blue, yellow, orange and red). (73) Thepipeline industry's security guidance links specificsecurity measures to these five threat levels. While this approach ensures some consistency in terrorpreparedness among pipeline systems, many operators believe they require more specific threatinformation to make better security decisions and focus protection where it is truly needed. Forexample, these operators question whether an "orange" DHS threat level applies equally across thecountry. (74) By uniformly responding to what theyperceive as ambiguous warnings, operators believethey may expend scarce resources to bolster security at facilities that are not really under increasedthreat. Furthermore, operators do not believe federal agencies have been as effective as they couldbe communicating the specific threat information they do receive. According to one industryrepresentative, "CNN tells us first, then we hear from FBI, DOE and other agencies." (75) Concerns about non-specific threat information are not endemic to pipelines, however, and they are not new. DHS Secretary Ridge has acknowledged that the current color-coded terror alert systemneeds improvement to provide greater "granularity." He expressed the department's intention tocreate a system that could raise threats for specific industries or geographic areas without changingthreat levels elsewhere. However, Secretary Ridge also commented that information on terroristmovements was still too vague for such specific warnings. (76) Various industry representatives state that they need clear and stable definitions of pipeline asset criticality so they will know exactly what assets to protect, and how well to protect them. Otherwise,the pipeline industry risks hardening too many facilities, hardening the wrong facilities, or both. Either outcome would increase ultimate costs to consumers without commensurate security benefits,and could potentially divert scarce security resources from better uses within or outside the pipelineindustry (e.g., securing electric power stations). Despite the security guidance put forward by the OPS in 2002, pipeline operators are still uncertain how regulators will ultimately identify critical facilities -- and what protections regulatorswill expect for them. The definition of criticality developed by industry in 2002 (and supported inthe OPS' guidance) avoided numerical thresholds, relying instead on discretionary qualitativemetrics like "significance" of impact. (77) The OPShas expressed its belief that this criticalitydefinition may be too general and that clearer criticality thresholds are needed. (78) The HSPD-7directive appears to narrow the definition of "criticality" by emphasizing "infrastructure and keyresources that could be exploited to cause catastrophic health effects or mass casualties" (Par. 13). It is not clear, however, how this emphasis will change what is considered to be critical pipelineinfrastructure. The pipeline industry is also concerned that, in its efforts to ensure consistency among transportation modes, TSA will not appropriately treat pipeline assets as unique (non-vehicular)transportation and a key component in the nation's broader energy infrastructure. (79) For example,many are concerned that threshold parameters such as "fair market value of lost asset" in TSA'smodel might not appropriately account for the downstream economic impact of disrupted gas or oilsupplies. (80) The President's FY2005 budget request for DHS does not include a separate line item forTSA's pipeline security activities. The budget request does include a $146 million line item for"Transportation Security Enterprise," which encompasses all security activities in non-aviationtransportation modes, including pipelines. (81) According to TSA's budget office, the Pipelines Branchreceives from the agency's general operational budget "a normal allocation for routine operations"such as regulation development, travel, and outreach. (82) According to TSA's pipeline branch, thecurrent budget will fund five full-time staff, the same staff level as in FY2004. These staff willmaintain TSA's asset database, support TSA's multi-modal risk models, develop new securitystandards and issue regulations -- all with the consultation of industry and other federal agencies. In addition, TSA staff will conduct pipeline security inspections and enforce any future securityregulations. (83) At its current staffing level, TSA's Pipelines Branch has limited field presence for inspections and possible enforcement of future regulations, an issue of particular concern to TSA. (84) (Forcomparison, the OPS can deploy around 500 federal and state safety inspectors across the samepipeline network.) According to TSA, the agency cannot now use OPS inspectors extensively forsecurity work because the OPS faces resource constraints of its own; only a handful of OPSinspectors are trained in security; and even if the OPS could "lend" inspectors to TSA, the agencywould require compensation TSA cannot currently offer. (85) Furthermore, it is not clear that TSA hasa mechanism under law to delegate inspection authority to state agencies like the OPS does. Evenif TSA did have such a mechanism, states appear generally unwilling to take on this responsibility,lack the required security inspection skills, and might not be able to adequately safeguard securityinformation. (86) The TSA is reluctant to usecontractors for field work because the pipeline industryis concerned about safeguarding security information. (87) TSA's plan to focus security inspections, at least initially, on the largest pipeline anddistribution system operators seeks to make the best use of limited staff. It is an open question,however, how many of the remaining operators -- some 1,000 systems -- should also be inspected. Criticality assessment and risk analysis are still evolving, so the basis for prioritizing one set ofpipelines over another for security purposes is debatable. For example, while possibly less criticalfrom a national perspective, smaller pipeline systems still present local security risks, and couldarguably be more vulnerable than larger systems if they have smaller security budgets and fewer staffdedicated to infrastructure protection. Without security plan verification and a credible threat ofenforcement, operator compliance with security guidance may be inadequate, leaving the pipelinenetwork as a whole less secure than it might be with more universal inspection and enforcementcoverage. The relationship between the OPS and TSA on pipeline security matters is still evolving, butappears to be generally cooperative. While TSA believes it has an understanding with the OPS thatTSA will be the lead agency for pipeline security, a memorandum of agreement between the agencieshas not been signed. According to agency correspondence, when DHS was created, TransportationSecretary Mineta did not believe that a formal agreement between TSA and the OPS would benecessary because the two agencies were already working together. (88) The OPS sees a strong link between pipeline security and safety. One senior agency administrator has asserted that "safety and security are interdependent...the distinction is a functionof intent to do damage." (89) In the context of itsongoing safety activities, the OPS maintains that"pipeline integrity is a broad umbrella covering safety, security and reliability." (90) Nonetheless, theOPS acknowledges TSA's superior access to information on threats and vulnerabilities, as well asTSA's broader multi-sector perspective. Accordingly, OPS staff believe that while the OPS willnot be the major player in pipeline security, the agency will always have a role. In particular,according to the OPS, the agency plans to ensure that pipeline security measures do not adverselyimpact pipeline safety. (91) In the short term, theOPS plans to independently conduct security spill andresponse exercises and, with TSA, to jointly inspect operator security plans based on its securityguidance of last year. (92) The OPS has not,however, made a long-term commitment to securityinspections, currently using only minimal resources in the form of a few staff working part-time withTSA. The pipeline industry is generally concerned that it might face redundant, conflicting regulatory regimes under different agencies with "teams from government stumbling over each other to inspectpipes." (93) Consequently, TSA believes a sharperdistinction ultimately may be needed between itssecurity activities, and the safety activities of the OPS. TSA is concerned that too much OPSinvolvement in pipeline security may create confusion among operators as to which agency is incharge of security and what requirements may be in force. The OPS and TSA believe theirresponsibilities have been worked out, however, without the need for formal agreements. Theagencies are engaged in ongoing roundtable discussions with the pipeline trade associations andFERC to address additional concerns as they emerge. (94) U.S. pipeline operators currently report no specific threats to their networks -- but the nation's's pipeline system is extensive and presents an inviting target. It is widely accepted thatprotecting their assets better is in the best interest of operators, and federal agencies are monitoringand encouraging these efforts. As a practical matter, industry and government could spend vast sumsto enhance pipeline security -- but this investment would have to be balanced against many otherinvestment needs and opportunities. The OPS and TSA face resource limitations and have manyother priorities besides pipeline security concerns. Furthermore, it is widely held that pipelines arealready safer and more secure than most other critical infrastructures. While the pipeline industrycontinues to face challenges protecting its assets, many analysts believe that more urgent securitychallenges lie elsewhere. Both government and industry have taken numerous steps to try to improve pipeline security. Federal activities in this area are relatively new and agency responsibilities are still being sorted out,but discussions with a variety of industry representatives suggest that these efforts are generallythought to be moving in a logical direction. Furthermore, ongoing dialogue among the operators andfederal agencies appears to be addressing many elements of federal pipeline security policy that havebeen causing concern. As oversight of the federal role in pipeline security continues, questions may be raised concerning the existing resources of TSA and its ability to execute its various pipeline securityresponsibilities, especially the implementation and enforcement of any potential future pipelinesecurity regulations. Congressional policymakers may pose questions: Are TSA's pipeline securityactivities adequately funded? Is there a solid basis for how TSA prioritizes the most "critical"pipeline systems so that important network security vulnerabilities are not overlooked? Should TSAinspect more pipeline systems to ensure universal compliance with security guidelines? Is there anappropriate division of responsibility for pipeline security among the federal agencies to minimizethe possibility of regulatory confusion and best balance agency missions with capabilities? In addition to these specific issues, Congress may wish to assess how the various elements of U.S. pipeline security activity fit together in the nation's overall strategy to protect criticalinfrastructure. For example, increasing the number of pipeline security inspections by TSA couldbe of limited value if asset "criticality" is not clearly defined and federal threat information remainsambiguous. Likewise, diverting pipeline resources away from safety to enhance security mightfurther reduce terror risk, but not overall pipeline risk, if safety programs become less effective asa result. U.S. pipeline security necessarily involves many groups: federal agencies, oil and gaspipeline associations, large and small pipeline operators, and critical and non-critical asset owners. Reviewing how these groups work together to achieve common security goals could be an oversightchallenge for Congress. The Critical Infrastructure Assurance Office (CIAO), created by PDD-63 as an interagency office within the Commerce Department in 1998, was charged with coordinating federal criticalinfrastructure assurance initiatives and raising industry awareness of infrastructure risks, especiallythose related to information systems. (95) Amongother activities, CIAO facilitated private sector(including oil and gas) input to the national strategy for critical infrastructure through the Partnershipfor Critical Infrastructure Security, and helped support formation of the Energy Information Sharingand Analysis Center (ISAC). (96) The National Infrastructure Protection Center (NIPC) within the FBI was also created by PDD-63 in 1998. The mission of the NIPC was to detect, prevent, respond to and investigatemalicious acts against the nation's critical infrastructures. NIPC was a primary source of threatinformation to the Energy ISAC, and also worked with industry on national critical infrastructurestrategy. The NIPC was viewed by industry as "a central focus for law enforcement and incidentanalysis, but not the central point for all forms of private sector cooperation." (97) The Office of Energy Assurance (OEA) was established within the Department of Energy by Secretary Abraham in May, 2001 to help protect the country against major energy supply disruptions. While the DOE is not responsible for pipeline security, its activities under PDD-63 as the leadagency for all other energy security has had implications for oil and gas pipelines. For example,OEA co-sponsored the development of guidelines for municipal governments to respond to naturalgas supply disruptions. (98) The OEA's NationalInfrastructure Simulation and Analysis Center(NISAC) was chartered under Section 1016 of the USA Patriot Act ( P.L. 107-56 ) in October, 2001. The NISACs's stated mission has been to provide new computer modeling and simulationcapabilities for critical infrastructure analysis focusing on interdependencies, vulnerabilities, andcomplexities. (99) NISAC has promoted, amongother capabilities, the ability to assess the propagationand escalation of minor initiating events between energy, communication and waterinfrastructures. (100) The Homeland Security Act of 2002 transferred the activities of the Critical Infrastructure Assurance Office, the National Infrastructure Protection Center, and the Office of Energy Assurance(Sec. 201) into the new Information Analysis and Infrastructure Protection (IAIP) Directorate ofDHS. The stated mission of IAIP is to "analyze intelligence and information from other agencies(including the CIA, FBI, DIA and NSA) involving threats to homeland security and evaluatevulnerabilities in the nation's infrastructure." (101) Among other activities, IAIP intends to evaluatecross-infrastructure (e.g., energy, transportation and telecom) dependencies from the broadestperspective, building on criticality and vulnerability analysis done by the separate infrastructuresector lead agencies -- such as TSA for pipelines. IAIP also intends to offer guidance on "protectionaction strategies" with the overall goal of "enabling protection with better information." IAIP alsointends to dedicate "technical experts" to facilitate analysis done by the infrastructure sector leadersand their industry partners, but will not seek direct regulatory relationships with industry unlesssector lead agencies fail to do so. (102) In addition to greater oversight of pipelines by regulatory agencies, the Department ofJustice(DOJ) has increased its enforcement activities related to pipelines. For example, on January 22,2003, the Justice Department, with the Environmental Protection Agency and the state ofWashington, announced a settlement with Olympic Pipeline Co. and Shell Pipeline Co., resolvingclaims from the Bellingham pipeline accident. That settlement imposed some $92 million in civilfines and enhanced spill prevention spending, on top of $21 million in penalties imposed in relatedcriminal proceedings. (103) On March 11, 2003, emphasizing the environmental aspects of homeland security, Attorney General Ashcroft announced a crack down on companies failing to protect against possible terroristattacks on storage tanks, transportation networks, industrial plants -- and pipelines. He pledged toincrease prosecution of civil and criminal cases, where appropriate, to make companies comply withenvironmental and safety laws. (104) Along withother requirements, he asserted the department'sintention to enforce laws that "call for facilities to develop emergency response plans" and that "assure that pipelines do not leak or explode." (105) The Justice Department has not initiated any new pipeline cases since March. However, on April 1, 2003, DOJ and EPA did announce a $34 million civil penalty -- the largest in EPA history-- to Colonial Pipeline for seven recent oil spills. Along with other safety provisions, the penaltysettlement requires Colonial to treat its entire 5,500 mile network as "high consequence" under OPSrules. (106) While there are currently fewsecurity-specific regulations in the federal code, high profilepipeline safety settlements do have security connections as noted earlier in this report. Moreover,they indicate DOJ's future willingness to enforce new security regulations that may arise from recentlegislation. One area related to pipeline safety not under the OPS's primary jurisdiction is the siting approval of new gas pipelines, which is the responsibility of the Federal Energy RegulatoryCommission (FERC). FERC's primary role is regulating prices for the transmission and sale ofwholesale oil and natural gas in interstate commerce. But companies building interstate gas pipelinesmust first obtain from FERC certificates of public convenience and necessity. (FERC does notoversee oil pipeline construction.) FERC must also approve the abandonment of gas facility use andservices. These approvals may include safety and security provisions with respect to pipelinerouting, safety standards and other factors. (107) As a practical matter, however, FERC has traditionallyleft these considerations to the OPS. (108) On September 14, 2001, the Federal Energy Regulatory Commission (FERC) notified FERCregulated companies that it would "approve applications proposing the recovery of prudentlyincurred costs necessary to further safeguard the nation's energy systems and infrastructure" inresponse to the terror attacks of 9/11. FERC also committed to "expedite the processing on apriority basis of any application that would specifically recover such costs from wholesalecustomers." Companies could propose a surcharge over currently existing rates or some other costrecovery method. (109) According to FERC, 3pipeline operators have filed formal requests for securitycost recovery to date. Of these applications 2 were approved, 1 was withdrawn. (110) On February 2003, FERC handed down a new rule (RM02-4-000) to protect critical energyinfrastructure information (CEII). The rule defines CEII as information that "must relate to criticalinfrastructure, be potentially useful to terrorists, and be exempt from disclosure under the Freedomof Information Act." According to the rule, critical infrastructure is "existing and proposed systemsand assets, whether physical or virtual, the incapacity or destruction of which would negatively affectsecurity, economic security, public health or safety, or any combination of those matters." CEIIexcludes "information that identifies the location of infrastructure." The rule also establishesprocedures for the public to request and obtain such critical information, and applies both toproposed and existing infrastructure. (111) On May 14, 2003, FERC handed down new rules (RM03-4) facilitating the restoration of pipelines after a terrorist attack. The rules allow owners of a damaged pipeline to use blanketcertificate authority to immediately start rebuilding, regardless of project cost, even outside existingrights-of-way. Pipeline owners would still need to notify landowners and comply withenvironmental laws. Prior rules limited blanket authority to $17.5 million projects and 45-dayadvance notice. (112) Major pipeline incidents, like other transportation incidents, are investigated independently by the National Transportation Safety Board (NTSB). NTSB investigations would examine what causedan incident and whether it was accidental or deliberate. In this respect, NTSB could play a role interror incident investigations. Since 1969, NTSB has investigated over 100 natural gas and oilpipeline incidents. Based on the probable cause of an incident, NTSB may make recommendationsto prevent recurrences. NTSB may also conduct special studies of pipeline safety issues of nationalsignificance, and may evaluate the safety effectiveness of government agencies involved intransportation. For example, NTSB reviewed federal oversight of oil pipeline safety in 1996. (113) More recently, NTSB investigated both the Bellingham and Carlsbad pipeline accidents. | Nearly half a million miles of oil and gas transmission pipeline crisscross the United States. The nation's pipeline industry has made substantial investments to protect these systems and respond tothe possibility of terror attacks. However, U.S. pipelines are inherently vulnerable because of theirnumber and dispersion. Due to the essential role pipelines play in our economy, Congress isexamining the adequacy of federal pipeline security efforts. The Transportation Security Administration (TSA), within the Department of Homeland Security (DHS), is the lead federal agency for security in all modes of transportation -- includingpipelines. The agency oversees industry's identification and protection of critical pipeline assetsthrough security reviews, risk assessment and inspections. The Office of Pipeline Safety (OPS),within the Department of Transportation (DOT), is the lead federal regulator of pipeline safety . While TSA and the OPS have distinct missions, pipeline security and safety are intertwined. Thereare questions about the appropriate division of responsibility between the agencies and about theresources they will have for mandated security activities. As the lead agency for pipeline security, TSA expects pipeline operators to maintain security plans based on security guidance initially circulated in 2002. TSA also plans to issue pipelinesecurity regulations, although it is unclear if and when it will do so. This agency also intends to issuenew analytic models to help operators identify critical facilities and assess vulnerability to terroristattack. In 2003, TSA inspected 24 of the largest 25-30 pipeline operators to review their securitypractices and collect critical asset data. TSA found that nearly all of these operators had met orexceeded minimum security guidelines. All but two of the 24 operators also provided TSA with theirsecurity plans and critical infrastructure information. The OPS joined TSA on approximatelyone-third of these inspections and expects a continued security role. The agencies have no formalcooperative agreement defining responsibilities and at this point do not think they need one. Industry and government agencies generally assert that efforts to promote U.S. pipeline security are on the right track. Nonetheless, TSA's current funding for pipeline security will provide onlylimited capability for inspections and enforcement of any future regulations. The President' sFY2005 budget request does not include a line item for TSA's pipeline activities; they will be fundedfrom the agency's general operational budget. In addition to appropriations issues, Congress isconsidering several policy concerns: Operators believe they need more specific federal threatinformation to improve security decisions. Many operators also believe they need clear and stabledefinitions of what constitutes a "critical" asset. Finally, operators are concerned about potentiallyredundant, conflicting regulatory regimes under TSA and the OPS. This report will be updated asevents warrant. |
P roposals to index capital gains for inflation have recently reentered the public debate. The proposed change would eliminate taxes on the part of capital gains that reflects inflation. It would increase the basis (the amount subtracted from sales price to determine capital gains) by inflation occurring since acquisition of the asset. President Trump's head of the White House National Economic Council, Larry Kudlow, has long proposed the indexation of capital gains for inflation through regulation, and Americans for Tax Reform has written a letter urging Treasury Secretary Steven Mnuchin to index capital gains. Past analyses (as discussed in " History of Proposals to Index Capital Gains " section below) indicate that the change would require legislation. Senators Ted Cruz and James Inhofe have introduced S. 2688 , the Capital Gains Inflation Relief Act of 2018, which would index the basis of assets for purposes of the capital gains tax. Similar bills, H.R. 2017 and H.R. 6444 , have been introduced in the House by Representative Jack Emmer and Representative Devin Nunes. Chairman of the House Ways and Means Committee Kevin Brady has indicated that some discussion of this issue is ongoing. Under the current system, taxable income from investments is not adjusted for inflation, a treatment applying not only to capital gains, but to dividends, interest, and returns from depreciating assets (because depreciation is based on original cost). Although there is general agreement that measuring real income from capital assets requires an adjustment for inflation, all of these types of income receive other tax benefits that tend to offset the lack of inflation indexing and, in some cases, were explicitly adopted for that purpose. Capital gains reflect the change in value of an asset and are measured as the sale price minus the basis. Basis is generally the cost of acquiring the asset, but that cost is reduced by depreciation and increased by improvements in the case of assets such as buildings. Assets yielding capital gains have a number of tax benefits that reduce their effective tax rates, including a lower rate, deferral of tax until gains are realized, and exclusion of gain at death. Taxes on long-term capital gains held for at least a year (and dividends) are currently lower than those imposed on ordinary income, with 0%, 15%, and 20% rates. Those tax rules were not altered by the recent tax revision, as they remain linked to prior-law income levels. Taxpayers whose income would have fallen in the 15% or lower tax rate under the prior system pay no tax on capital gains and dividends. Taxpayers otherwise will pay a 15% tax rate except for those whose income would have fallen in the 39.6% bracket, who pay 20%. For married couples in 2018, the 15% rate applies at $156,150 of taxable income and the 20% rate applies at $480,050 of taxable income. A married couple with more than $250,000 of taxable income ($200,000 for a single) is also subject to a 3.8% tax (equivalent to the Medicare tax on labor income) on passive income, including capital gains (as well as dividends, interest, rents, royalties, and annuities and passive income from partnerships and Subchapter S firms) up to the amount in excess of $250,000 ($200,000 for a single) that is equivalent to the Medicare tax paid on self-employment income. Corporations pay taxes on gains at ordinary rates, now 21%. Certain types of capital gains have special rules. Gain that results from depreciation of assets is subject to tax at ordinary rates to the extent of the gain, although gain arising from depreciation of real property is subject to a 25% ceiling. Gain on collectibles is taxed at 28%. Gain on the sale of a home is eligible for a $500,000 exclusion for a married couple and a $250,000 exclusion for a single person. Capital gains receive two benefits not available to other forms of passive income, such as interest and dividends. First, tax is not paid until an asset is sold, allowing for a delay in tax payments; this deferral of tax is beneficial because of the time value of money. Second, assets that are held until death do not pay capital gains tax on the appreciation during the decedent's lifetime (and longer if, in turn, the decedent inherited appreciated assets). Assets received from inheritances are stepped-up, and the basis in the hands of the heir is the value at the time of death. (Thus, if the asset were immediately sold, there would be no capital gain.) Although evidence is limited, about half of capital gains are estimated to never be taxed because of the step-up in basis provision. Capital gains on corporate stock are also largely effectively exempt from income tax when they are held in a pension or individual retirement plan. Evidence indicates that about two-thirds of stocks owned by Americans are held in such an exempt form. The U.S. tax code contains restrictions on losses: although losses can offset gains (first netting against each type, long or short term, and then overall), the amount that can offset ordinary income is limited to $3,000 (which can be carried forward to the future). Allowing net short-term losses to offset net short-term gains dollar for dollar confers an advantage because short-term gains are taxed at ordinary rates and long-term gains are taxed at a lower rate. The limit prevents taxpayers from selectively selling assets with losses and not gains. The limit has become more restrictive because it has not been indexed for inflation since 1978. Dividends are also eligible for the same lower rates available for capital gains and the benefits of being held in pension and retirement plans. In addition, in most cases, dividends are not affected by the lack of inflation indexing because they are generally smaller than the real gain (as some real returns are typically reinvested and result in real appreciation of stocks). Taxes are levied on nominal interest at ordinary rates. However, inflation overall is beneficial to borrowers who are able to deduct nominal interest, thus bidding up the interest rate and compensating lenders. This benefit tends to be larger than the penalty for interest income because of the large share of interest-bearing assets in pension and retirement funds and indexing interest would increase the tax burden on interest financial assets (or rather, reduce the current subsidy that exists). In addition, some income from lending through bank accounts is never taxed because it is received as imputed income in the form of the value of banking services. Under tax law prior to the 2017 tax revision ( P.L. 115-97 ), the effect was also due to higher tax rates of the corporations and businesses borrowing funds compared to the rates of the lenders. This effect arising from the rate differentials may have been reversed, or at least reduced, because the tax revision reduced the tax rates on corporate and business incomes more than the rates on individuals. Depreciation deductions are taken on the asset's original cost, and the undepreciated basis (i.e., the amount of the cost left after depreciation deductions) is not increased by inflation. Nevertheless, depreciation is accelerated enough to offset or more than offset the effects of inflation, depending on the asset. Many depreciable assets are expensed (i.e., the cost deducted immediately), including investments in intangible assets and investments in equipment up to $1 million for smaller businesses (this expensing is phased out at $2.5 million). Since 2008, all equipment has been eligible for bonus depreciation (generally 50% of the cost could be expensed). Under the 2017 tax revision, P.L. 115-97 , equipment can be expensed through 2022, with expensing then phased out by 20% per year (each year 20% will be subject to depreciation over several years rather than being immediately deductible). Allowing a deduction for the cost of goods sold without indexing also results in taxation of the nominal return. Last-in, first-out (LIFO) inventory methods that treat the item sold as the last item acquired can roughly compensate for inflation (although the LIFO method also excludes real gain or loss in the value of the good, such as might occur, for example, with crude oil). Most firms do not use LIFO because the tax accounting method must be the same as the financial accounting method and using LIFO tends to reduce stated profits for financial purposes. Indexing would increase the basis of the asset (i.e., the amount deducted from the sales price to determine gain or loss) by the change in the price level between the date of acquisition and the date of sale. For example, if the inflation rate is 2% and the real rate of return is 7%, an asset purchased for $100 would sell for $109.14 a year later if interest is compounded annually. The nominal gain is 9.14%. Without indexing, the gain if the asset were sold would be $9.14. With indexing, the basis would be increased from $100 to $102, and the gain would be $7.14, which is a 7% return on $102. For assets such as common stock, the basis is the purchase price. For assets that depreciate, such as machines and buildings, the basis is the purchase price minus cumulative depreciation plus improvements. For assets that are fully or almost fully depreciated, indexing the basis would increase taxes given the higher recapture tax rate on the gain reflecting depreciation (unless an exception were made). The effect of indexing for inflation depends on the measure of inflation used. There are several such measures, including the Consumer Price Index for All Urban Consumers (CPI-U), the chained CPI-U, and the gross domestic product (GDP) deflator (or implicit price deflator). Elements of tax code that are indexed (such as rate brackets and the standard deduction) use the chained CPI-U, but until 2018 used the standard CPI-U. The consumer price index is based on a basket of consumer goods that is fixed in the CPI-U and varies in the chained CPI-U to reflect changes in consumption as relative prices change. Inflation rates as measured by the chained CPI-U are generally smaller than those measured by the standard CPI-U. The GDP deflator reflects all domestically produced goods and services with the weights changing as the mix of goods changes. From 2008 to 2017, the CPI-U increased by 15%, the chained CPI-U by 12.9%, and the GDP deflator by 14.3%. One reason for using the GDP deflator for capital gains is that much of this gain might be reinvested rather than consumed and a broader index may be more appropriate. There may, however, be an advantage for using a common price index for all elements of the tax code that are indexed. The effect of the indexing also depends on what assets are included and whether the provision applies to both short-term and long-term gains, or some other category based on holding period. In recent years, the largest share of net gains has been from partnerships whose underlying assets could be a mix of tangible and financial assets. In 2012, partnerships accounted for 45.5% of net gains, followed by corporate stock at 24.9%, and unincorporated business and trust interests at 7.5%. The other categories accounting for more than 1% were interests in mutual funds at 2.9%, capital gains distributions at 2.8%, land at 2.5%, business real property (e.g., commercial and industrial buildings) at 1.9%, and residential rental property at 1.8%. Gains on other financial assets of all types (public and private bonds and notes, put and call options, and futures contracts) totaled 1.6%. Residences account for only 0.8%; although residences are likely a significant source of capital gains, there is a $500,000 exclusion for married couples ($250,000 for singles) that limits their importance (although their basis could nevertheless also be indexed for inflation). This exclusion was set in 1997 and thus has not been indexed for 20 years, which would strengthen the case for including these assets (or, alternatively, indexing the exclusion amount). Indexing could apply to both short-term gains currently taxed at full rates and long-term gains subject to lower rates. It could be applied to assets yielding gains or to assets producing losses. In 2012, transactions yielding gains amounted to $844 billion, with losses of $204 billion, for net gains of $640 billion. For short-term assets, gains were 11.6% of the total, losses were 63.7%, and short-term net gains were 3.9%. Of assets with long-term gains, 11% were held less than 2 years, 20% less than 3 years, a third less than 5 years, and half less than 10 years. About a quarter of gains were from assets held for 20 years or more. Corporate stock has a similar holding pattern. Real estate (residential rental property, business structures, and land) has longer holding periods with less than 2% held less than 2 years, 14% less than 5 years, and 32% less than 10 years. Gains from assets held for 20 years or more accounted for 36%. A proposal can index gains regardless of the type of taxpayer, or it can exclude corporate gains. The current lower rates on capital gains apply only to individuals. Another issue is whether indexing applies to past as well as future inflation or only to inflation going forward, or whether it applies to existing assets or only on inflation for newly acquired assets. The consequences for revenue effects, lock-in effects, and investment incentives would vary. Current proposals (with the exception of legislative proposals such as S. 2688 ) are general in nature and do not specify what assets are to be affected or what measure of inflation to use, although indexing by regulation would seem to be questionable if not applied generally. S. 2688 limits the application to assets held for more than three years and uses the implicit price deflator for GDP as the measure of inflation. The bill would index based on the change in the GDP deflator from the quarter preceding acquisition to the quarter preceding the sale. It would apply to common stock in a C corporation (i.e., a corporation treated as such under the income tax) and tangible assets (such as plant and equipment) used in the trade or business. Indexing would not apply to capital gains earned by corporations. The adjustment cannot create or expand a loss. It applies to both past and future inflation. S. 2688 also has provisions to deal with special circumstances (such as stock held in mutual funds and real estate investment trusts), as well as antiabuse provisions relating to hedging and short sales. This section explains the history of proposals to index capital gains beginning with the high inflation rates in the 1970s. It also discusses the claims made in the early 1990s that capital gains could be indexed for inflation by regulation. Capital gains have generally been taxed at lower rates, either through an exclusion of part of the gain or a lower rate. Although concerns about taxing nominal capital gains date back to 1918, the high inflation rates of the 1970s resulted in considerable attention to indexing capital gains. An indexing proposal applying to assets held for a year was passed by the House during consideration of the Revenue Act of 1978, but the final bill instead increased the exclusion of gain from 50% to 60%. (The exclusion was eventually eliminated in 1986 when tax rates were reduced.) The Senate adopted capital gains indexing via a floor amendment to the Tax Equity and Fiscal Responsibility Act in 1982, but the provision was dropped in conference. During consideration of the Tax Reform Act of 1986, the original Treasury Study (often referred to as Treasury I) proposed to tax capital gains at ordinary rates and index them for inflation. That proposal would have broadly indexed the return to investment including depreciation, inventories, and interest. The proposal as it emerged from the White House (sometimes referred to as Treasury II) gave individuals an option of a 50% exclusion or, after 1991, indexing for inflation. It dropped the other indexing proposals except for inventories. The 1986 act did not contain indexing and taxed capital gains at ordinary rates (no exclusion). In 1989, President George H. W. Bush proposed a top rate of 15% on capital gains, roughly halving top rates. The Ways and Means Committee considered two proposals: (1) Chairman Dan Rostenkowski proposed to index capital gains, and (2) Representatives Ed Jenkins, Ronnie Flippo, and Bill Archer proposed a 30% capital gains exclusion through 1991 followed by inflation indexation. The latter measure was approved by the committee, but it was not enacted. President Bush continued to propose exclusions, but they were not enacted into law, although the capital gains tax rate was capped at 28% in 1990 when the ordinary rate structure was slightly revised. In 1991, the President again proposed a 30% exclusion, but no action was taken. In 1992, the President proposed a 45% exclusion. The House adopted a proposal for indexation for inflation for newly acquired assets. The Senate passed a separate set of graduated rates on capital gains that tended to benefit more moderate-income individuals. The latter provision was included in a bill ( H.R. 4210 ) containing many other tax provisions that was vetoed by the President. In 1994, the Republican "Contract With America" campaign proposed a 50% exclusion for capital gains, and indexing the basis for all subsequent inflation, while eliminating the 28% cap; this exclusion would be about a 40% reduction on average from current rates. The Ways and Means Committee reported out H.R. 1215 , which restricted inflation indexing to newly acquired assets (individuals could "mark to market"—pay tax on the difference between fair market value and basis as if the property were sold to qualify for indexation), did not allow indexation to create losses, and provided a flat 25% tax rate for corporations. The 1995 reconciliation bill ( H.R. 2491 , 104 th Congress) that was vetoed by the President included these revisions but delayed the indexation provision until 2002. In 1997, President Clinton and the 105 th Congress agreed to a tax cut as part of the reconciliation ( P.L. 105-34 ). The Administration's tax cut proposal included a change in tax treatment of owner-occupied housing (moving from existing provisions and rollover provisions to a larger exclusion), which was adopted in the final law. The House bill included a reduction in the 15% and 28% rates to 10% and 20% for capital gains, about a 30% cut. Capital gains would also be indexed for assets acquired after 2000 and held for three years; mark-to-market would also be allowed. The Senate and the final bill did not include indexing, although a floor amendment proposed indexing. President Clinton had indicated that he would veto a bill that included capital gains indexing, as it would violate the budget agreement. Under the final law, there was a maximum tax of 20% on capital gains held for a year. The law change also would have taxed gain from assets held five years and acquired after 2000 at a maximum rate of 18%. For gain in the 15% bracket and below, an 8% rate would apply to any gain on assets held for five years and sold after 2000, with no required acquisition date. These changes based on holding period never went into effect because they were superseded by changes in 2003. The 1999 House bill ( H.R. 2488 , 106 th Congress) would have cut the rates to 15% and 10%: the conference version cut rates to 18% and 8% and proposed indexing of future gains, but the bill was vetoed. Capital gains were discussed during the consideration of the economic stimulus bill at the end of 2002, but not included in any legislative proposal (and no proposal was adopted). Subsequent changes involved further rate reductions in 2003 (during the 108 th Congress) on a temporary basis that were extended and finally made permanent except for very high incomes. Although bills continued to be introduced, capital gains indexing was no longer part of the capital gains debate, perhaps because inflation rates had become so low and because the tax rates were lower. Indexing by regulation appeared on the scene in January 1992 in a column by Paul Roberts in the Washington Times and an editorial in the Wall Street Journal . The Tax Section of the New York State Bar Association, in February 1992, sent a memorandum discussing not only the problems of indexing by regulation but also taking the position that such indexation by regulation was invalid. Reportedly, the issue was considered by the George H. W. Bush Administration with some disagreement among officials. According to Larry Zelenak, the news reports indicated that regulatory indexing was favored by Budget Director Richard Darman, but opposed by Treasury Secretary Nicholas Brady and White House Counsel C. Boyden Gray. The latter argued that the Administration lacked the authority to index by regulation. A Congressional Research Service (CRS) report issued initially in March 1992 reviewed case law and indicated that the President did not have the authority. A May 1992 article by Zelenak also concluded that indexing by regulation would be invalid. Both analyses, however, questioned whether such a change would be subject to judicial challenge because there might be no one with standing to challenge the new regulation. The ability to index by regulation claim was supported by a study commissioned by the National Taxpayers Union Foundation and the National Chamber Foundation on August 17, 1992. The study was coauthored by Cooper, Carvin, and Colatriano and subsequently published in the Virginia Tax Review . A brief version of the argument was published in the Wall Street Journal on August 31, 1992. About the same time, the Department of the Treasury reportedly prepared an internal analysis (reached independently), which was referenced in a Justice Department memorandum that concurred with the Treasury's opinion that the Administration did not have the authority to index by regulation. Up until that time, the Bush Administration had continued to consider indexing by regulation but, according to news reports, dropped the idea after the two legal analyses. In a subsequent article about the role of the Attorney General, then-Attorney General William P. Barr, in making the point that the role is as a detached legal advisor, used the indexation issue as an example, stating that "the question was clear, can we, simply through administrative action, index capital gains?" and that "not only did I not think we could, I did not think that a reasonable argument could be made to support that position." Although there was no further consideration of indexing by regulation, Bob Dole, the 1996 Republican presidential nominee, indicated that he would immediately index capital gains if elected, and Wall Street Journal editorials argued that such authority existed. In 2012, after a 14-year hiatus, interest was briefly revived in the issue, perhaps due to the presidential election and Cooper and Colatriano's second analysis claiming the right to index. Until recently, there was another hiatus in interest to index capital gains. More recent articles have addressed this issue. Law professors Daniel Hemel and Davin Kamin argued that the executive does not have the right to index, challenged some of the arguments in the more recent Cooper and Colatriano analysis, and suggested several possible parties with the standing to challenge any administrative decision. These legal issues were also discussed in a recent article by Lee Sheppard, who concluded that Treasury does not have the authority to index capital gains for inflation. This section compares, using effective tax rates, indexing capital gains to alternative tax benefits (exclusions or lower rates) by holding period, using examples of an appreciating asset with deferral such as corporate stock, and a depreciating asset such as real estate, and a fixed asset such as land (which yields current income). It also estimates the share of nominal gain excluded by indexing by asset type and holding period and discusses other differences between the two approaches. Table 1 shows the effective tax rates for investors subject to the maximum capital gains tax under present law with and without indexing for five types of assets: 1. a no-dividend stock (a purely appreciating asset that pays no current return), 2. a stock that pays a dividend and appreciates more slowly, 3. a commercial building that earns rent and depreciates, 4. a residential building that earns rent and depreciates, and 5. an asset that earns a rent and neither appreciates nor depreciates in real value (illustrated by land). The effective tax reflects the total burden, and thus for buildings and land the effective ordinary income rates as well as the effective capital gains tax rates. Given the assumed top statutory tax rate of 23.8%, even without indexing, assets held for five years or more in which all of the return is a gain (corporate stock, no dividends) has a lower effective tax rate due to the value of deferral. For stock paying dividends, the benefits of deferral are smaller (because dividends are taxed currently), but eventually (at around 10 years) deferral of the remaining gain leads to lower effective tax rates. The last three assets have no real gain, with capital gains tax applying only to prior depreciation and inflation. For the commercial building (representing nonresidential buildings in general), the economic depreciation rate is higher than inflation, so this asset declines in nominal value whereas the residential building and land increase in nominal value. Residential buildings have a favorable treatment compared with commercial buildings and land because of their faster depreciation (compare tax rates after 30 years to the 29.6% tax rate on rents), but they are also more affected by selling earlier, because the capital gains tax is applied to a larger depreciation amount. Table 2 shows how much of the nominal gain is excluded due to indexing for each of the five assets using the same assumptions as in Table 1 about rates of return and tax rates. Although the absolute amount of gain due to inflation is larger over time, the share of gain that reflects inflation declines over time as well as varying by asset (with the exception of land, in which all of the gain is due to inflation). For example, if instead of lower rates, gains were taxed at ordinary rates (37%) and indexed, the result is equivalent, for corporate stock with no dividend, to applying a lower rate of 29% for an asset held for a year, 31.4% for an asset held for 10 years, and 34.8% for an asset held for 30 years. These are smaller than the effective exclusion from allowing a 20% rate rather than a 37% rate, which is equivalent to a 46% exclusion. The rates would be lower for stock paying dividends, but except for land (assuming no real appreciation) and commercial buildings held less than 25 years, the current lower rates more than compensate for inflation. The most generous benefits from indexing (as compared with rate changes) would apply to gains from land and commercial buildings. The variation in exclusion equivalents across assets reflects the size of the real gain relative to inflation. For example, the corporate stock with no dividends has the largest real appreciation rate and thus the smallest share reflecting inflation except for residential structures held for 25 and 30 years. If part of the return is paid in dividends, the real capital gain becomes smaller and thus inflation more important as part of the nominal gain. Land with no real appreciation has all of its gain reflecting inflation. For a commercial building, tax depreciation slightly exceeds economic depreciation only in the first year so that most of the nominal gain is due to inflation. The excess of tax depreciation over economic depreciation rises each year so that more of the gain over time reflects depreciation, with a smaller share due to inflation. A similar pattern happens, but more quickly, for residential buildings. Once a building is fully depreciated there is no basis to index (hence no benefit to the residential building held for 30 years). Indexing the basis for inflation is more favorable for riskier assets than a lower rate or an exclusion. Indexing the basis reduces the expected effective tax rate by allowing a fixed exemption, but does not change the rate of the variation in return. Higher rates on the variation in return mean that the government shares in more of the risk. With indexing, the return is increased but the risk is reduced in the same amount as before. A reduction in the tax rate would increase the return but also increase the riskiness in the after-tax return. Thus indexing causes the same reduction in burden to the taxpayer for an exclusion with the same expected revenue loss, but produces a more risky revenue stream than would a lower rate or exclusion. Indexing for inflation as a revenue-neutral replacement of the lower rate would lower tax rates on assets held over a shorter period and raise them on assets held for a long period. It would benefit buildings that are sold more frequently and favor nonresidential buildings over residential ones. Land that does not appreciate in real value would receive the greatest benefit. It would favor stocks that pay dividends over growth stocks. Residential buildings would receive less benefit than other real estate, and their benefit relative to stocks depends on whether they are held long enough to have little or no basis to index. Some of these patterns may not be consistent with the objectives of capital gains relief, as discussed in more detail in the following sections. In particular, some proposals in the past (and provisions that were a part of the law, although never in effect, such as those enacted in 1997) provided more beneficial treatment to assets held longer. The proposed legislation also limits the benefits to assets held for at least three years. Some justifications for favoring assets held over a longer period of time are to reduce the lock-in effect (the incentive to retain investments to avoid the capital gains tax), because capital gain grows as a share of the sales price over time. Tax benefits for land would likely receive the largest relative tax cut on gains and be capitalized into the value. This section examines issues associated with providing tax benefits to capital gains through inflation indexing either as an addition or a substitute for current provisions. The history of indexing capital gains for inflation indicates that indexing was considered but eventually an alternative benefit in the form of exclusions and lower rates was enacted. As a result, the argument that it is fair to index gains because part of the income is unreal may be considered less compelling in the light of current benefits. Alternatively, indexing could be substituted in a revenue-neutral way for existing rates, which would then be increased. The analysis of a variety of issues depends on whether indexing is an addition or a substitute, not only in the types of assets affected, but in concerns such as revenue cost, distribution, and lock-in effects. An issue also arises if capital gains are indexed and other elements of the tax law are not. For that matter, indexing capital gains by regulation to measure the true cost as deemed determined by the tax code would imply indexing a broad range of capital assets, including indexing of the basis for interest deductions and payments, depreciation, and inventory. In addition, if dividends are paid in excess of real earnings, an adjustment to the portion taxed as dividends versus being treated as a return of capital might be considered. As mentioned, most of these assets have other benefits in the tax code that offset the effects of inflation, and a broader inflation adjustment approach might consider cutting back on some of those benefits (such as accelerated depreciation). (Note, however, that as long as expensing is retained for equipment and research investments, there is no basis to index.) A particular concern is that, absent other changes, tax sheltering may be available by borrowing while deducting nominal interest to invest in capital gains with indexing. This arbitrage possibility already exists due to the benefits currently available to capital gains, but it would be increased if indexing were an addition to rather than a substitute for the current lower rates. Fundamentally, however, the question is why capital gains should be singled out for indexation, but not other assets? If indexing of capital gains is added to current benefits, then a revenue loss would occur. One estimate indicated that in 2012, the last year for which data on the distribution of gains by holding period were available, the revenue loss was a third of capital gains revenue. In that year, capital gains revenue was $82.8 billion, so the revenue loss was around $27 billion. The revenue loss would be smaller if losses could not expand or be converted into losses rather than gains, and taxpayers might sell more assets, although there would be more sheltering opportunities. Under these circumstances, the estimated losses were projected at between $10 billion and $20 billion, 12% to 24% of the total revenue. A second source, using the CPI-U, estimated conservatively a revenue loss of $102 billion over 10 years, which (given some growth) would indicate less than $10 billion per year. Another estimate found failure to index resulted in $34 billion in additional taxes (a quarter of the $134 billion collected in FY2017) was from inflation. Because capital gains fluctuate much more than inflation, the share of gain eliminated due to inflation indexing will vary over time, so that the upper limit of the estimates is consistent between the first and third sources at around $30 billion. The loss due to an indexation proposal would, however, depend on the coverage of assets (both by type and longevity) and whether the indexation could be used to produce or expand losses. The revenue loss might also be reduced (as noted in the first estimate) to the extent that lower rates cause more sales (i.e., reduce the lock-in effect, which is the payment of tax to sell an asset and acquire another). Estimates of the amount of revenue loss offset by increased sales based on statistical studies range widely, from 20% to 70%. Many of these statistical studies, however, appear to find responses that are larger than would be feasible given the ratio of realizations and may be more consistent with a lower end, or a 20% offset. It is also unclear whether indexing would yield as large an effect on sales as an exclusion or lower rate with the same revenue consequence. The lock-in effect is largest for assets that have been held for a longer period of time and thus have accumulated gains, and for assets in which gains are larger relative to sales price (such as stocks with no dividends). These assets, however, are the ones that receive the smallest exclusions and thus may lead to a more modest lock-in reduction. Revenue losses would be smaller in the short and medium term if indexing were confined to future inflation or a more restrictive approach of applying it to newly acquired assets (the latter was proposed in the past). Such a change would lead to an initially small but rapidly growing revenue loss. Allowing gains only for future inflation would do less to reduce the lock-in effect. Allowing indexation only on newly acquired assets would reduce the lock-in effect by making the sale and purchase of new assets desirable in order to qualify for inflation indexing. An argument has been made that lowering the taxes on capital gains via inflation indexing would boost economic growth. This growth effect would presumably occur only if indexing were an addition to current tax benefits and not a revenue-neutral substitute. It is unlikely, however, that a significant, or any, effect on economic growth would occur from a stand-alone indexing proposal. Revenue collected because of the lack of indexing of capital gains, using the largest estimate above, was $34 billion for FY2017. Two methods are used for projecting the effects of indexation. The first uses a rule of thumb that capital income is approximately 25% of net national product. Using this approach, the revenue loss amounts to 0.8% of total income from capital, and, assuming a real rate of return of 7%, an increase in the cost of capital (net of depreciation) of 0.06%, or about 6 basis points. The second approach divides the revenue estimate by the estimated capital stock to provide a direct estimate of the change in the cost of capital, which is 0.07%, or 7 basis points. These effects are quite modest, and they would be smaller still with more restrictive proposals that limited the application to losses, included only some types of assets, or provided minimum holding periods. In addition, unlike some other tax cuts (such as expensing or corporate rate cuts) that occur at the firm level and have the potential to draw capital from abroad as well as potentially increase saving, capital gains are on the savers side, which means their effects operate solely through saving with some of that saving leaking into investments in other countries. Capital gain effects are also limited because of evidence that savings is not very responsive to changes in rates of return. Additionally, the increase in debt from crowding out would lead, in the absence of other changes, to an offsetting effect that would eventually be expected to reduce the capital stock. Although the effects would still be small, larger effects might be retained per dollar of revenue loss by applying indexation to newly acquired assets, thus avoiding a windfall gain from lowering taxes on existing assets. If enacted as a stand-alone policy, inflation indexation would favor higher-income individuals. According to the Tax Policy Center, 60.4% of capital gains taxes are paid by the top 0.1% of taxpayers, 80.1% by the top 1%, and 90.2% by the top 5%. The Penn Wharton Budget Model estimate for the effect of indexing shows 63.1% of the tax cut is received by the top 0.1%, 86.1% by the top 1%, and 95.0% by the top 5% of taxpayers. A measure of how a tax change affects the relative distribution is to consider the percentage change in after-tax income. Penn Wharton has a relatively low estimate of the revenue cost and found that for the top 0.1% after-tax income increases by approximately 1%. For the remainder of the top 1%, the increase is 0.3%, whereas the bottom 95% has virtually no change. The higher end of the estimates cited above would suggest a magnitude about three times this size, with a 3% increase for the top 0.1% and a 1% increase for the remainder of the top 1%. Note that any reduction in revenue due to unlocking should not reduce this estimate, as individuals who are now induced to sell assets and pay offsetting taxes nevertheless receive a benefit from the tax reduction (in the form of a more desirable portfolio) that is at least worth the taxes. Several issues relate to economic efficiency, or the degree to which decisions about the type of investments to make are distorted by taxes. An argument that can be made for providing relief for capital gains on corporate stocks and dividends is the additional layer of tax due to taxation at both the corporate and the noncorporate levels. This additional tax discourages investment in the corporate sector in favor of investment in noncorporate business and owner-occupied housing. That concern has diminished due, in part, to recent tax changes. While investment in stocks remains more heavily taxed than owner-occupied housing (generally taxed at close to a relatively low, and in some circumstances, negative rates), the tax rate has declined, changing the relative tax position of corporate and noncorporate businesses. Examining the top statutory rates, under prior law, a corporation would pay a tax of 35% and the individual would pay 23.8% on the remaining 65%, for a total rate of 50.5%. An investment in a passthrough business would pay either 39.6% or 43.4% if subject to the 3.8% tax. Under the new law, the corporate tax is 21% plus 23.8% of the remaining 79%, for a total of 39.8%. This rate can be compared with several alternative rates. First, for passthrough businesses that are eligible for the 20% deduction, the new top 37% rate is reduced to 29.6%. Each of these types of businesses may or may not be subject to the 3.8% Medicare/net investment tax; with these taxes, the rates are 40.8% and 33.4%. In all four cases, the passthrough tax rate has declined relative to the corporate rate (and for individuals not eligible for the passthrough deduction and subject to the 3.8% tax, the passthrough rate is higher). Aside from this change, the tax rate on corporate-sector investments is lower to the extent capital gains are held until death; assuming a 4% dividend and a 3% real appreciation rate, with half of gains excluded at death, the combined corporate rate falls to 38.2% bringing the passthrough and corporate combined rates closer together. Corporate-sector investments also tend to make intangible (i.e., research) and equipment investments more tax favored than noncorporate-sector investments, which are more concentrated in structures. Taking those effects into account, the corporate sector was taxed at effective rates similar to the noncorporate sector prior to the change, and, at least in the short term, the favorable treatment of equipment was increased. The corporate sector is also less likely to be subject to property taxes compared with the passthrough sector and owner-occupied housing. On the whole, there does not appear to be a case for further lowering of the capital gains tax rates based on the tax burden on the corporate sector. One of the largest distortions in the tax code, which remains even after the tax changes in P.L. 115-97 , although it is somewhat moderated, is the favoritism of debt over equity. Debt-financed investments are generally subject to negative effective tax rates because nominal interest can be deducted at the statutory rate, whereas the investment income it generates is taxed at a lower effective rate. In addition, whereas interest income is taxed too heavily because of inflation, most interest income is not subject to tax because it is in retirement plans or received as untaxed banking services. This favoritism has been somewhat reduced in the corporate sector due to the lower corporate rate and tighter restrictions on the deduction of interest, and indexing capital gains for inflation can bring these rates closer together by reducing the tax on equity. However, there are alternatives that can also accomplish the same purpose, such as indexing interest for inflation, which would raise rather than lose revenue. Another option might be to disallow a percentage of interest deductions in a revenue-neutral package with capital gains indexing. Another distortion that occurs because of taxes is the discouragement of paying dividends. Although dividends and capital gains are taxed at the same rate, capital gains still benefit from being taxed only on realization or not taxed at all. The result leads to retaining too much income in the firm or using stock buy backs instead of dividend payments (which prevents those who prefer a steady source of dividend income from receiving it). Indexing capital gains for inflation would increase that distortion. The differential treatment would also favor firms that tend to retain earnings compared with those that are growing more slowly and paying more dividends. Inflation indexing may reduce the lock-in effect, which distorts portfolio choices of individuals. This issue has already been discussed in the revenue section, and, as indicated there, inflation indexing may be an inferior tool to reduce this effect given that it favors short-lived assets. Over the years, some have expressed concerns about speculation and shortened investment horizons, which may lead to volatility and instability in the market and cause firms to focus too much on short-term earnings rather than long-term objectives. Their concerns have sometimes led to proposals for financial transaction taxes or provided capital gains benefits that rise the longer an asset is held. It is unclear whether it would be appropriate to intervene in markets for this reason, because speculators (those concerned about short-term prices rather than underlying fundamentals) also provide market liquidity. (For example, the commodities market in pork bellies would be highly illiquid if the only participants were farmers and meat processors.) If speculation were a concern, however, general inflation indexing without some holding period would be inferior to a rate reduction because it is more beneficial to short-lived assets. Indexing capital gains for inflation would be more complicated than an exclusion or lower rate, because a different inflation adjustment would have to be applied to each vintage of investments. If done quarterly, it would require four different adjustments for each year for a dividend reinvestment plan. This type of complex adjustment is of less concern now than it was in the past, with vastly improved computing facilities so that brokers could be required to make adjustments. It would, however, increase their compliance burden as well as the Internal Revenue Service's audit burden. Real estate investors would have to adjust basis each year and homeowners would have to adjust original acquisition costs and improvements if these assets were included. Mutual funds with both covered and excluded assets would have to allocate their basis to determine what share could be indexed. Compliance would be easier if applied to future inflation, because those holding older assets may have more difficulties knowing the date of acquisition. Complications could also arise for partnerships in which there is considerable flexibility in allocating income, assets, and in tracing covered and noncovered assets through multiple layers of ownership; and for corporations (if included) in which the basis of stocks in subsidiaries is adjusted after dividend payments. This appendix provides formulas for estimating effective tax rates and exclusion factors for various assets. Corporate stock with no dividend is a purely appreciating asset, where using continuous compounding for each dollar of investment: (1) e ( R+p)T = e (r+p)T (1-t) +t, or, with indexing e (R+p)T = e (r+p)T (1-t) +te pT where e is a natural constant, R is the after-tax real return, p is the inflation rate, r is the pretax return, T is the holding period, and t is the tax rate. With indexing, the original cost is increased for inflation. This equation can be solved by rearranging to: (2) e ( r +p) r ) = (e ( R +p)T -t)/(1-t), or with indexing, e ( r +p) r ) = (e ( R +p)T -te pT )/(1-t) and taking the natural log of both sides, leading to: (3) r = ln [(e ( R +p)T -t)/(1-t)]/T – p, or with indexing, r = ln [(e ( R +p)T -te pT )/(1-t)]/T – p The effective tax rate is (r-R)/r. For determining the exclusion, equate an inclusion rate, x, times the tax without indexing with the tax paid with indexing and then subtract from 1 to get an exclusion rate: (4) xt(e (R+p)T -1) = t(e (R+p)T -e p t ) With a dividend or rent, as is the case with the other assets, the user cost of capital modified to allow for finite life and capital gains taxation is used. The standard formula for a solution for the user cost of capital for a depreciating asset is: (5) r = (R+d)(1-uz)/(1-u) –d where d is the economic depreciation rate, z is the present value of depreciation, and u is the ordinary tax rate applied to the flow of current earnings. The assets cover three types of different current yield assets: those that appreciate (a stock that pays dividends), assets that depreciate (such as a building) and assets that have no change in real value (such as land whose value only grows with inflation). Land that grows in real value would be similar to a dividend paying stock. A stock that pays a dividend (taxed at rate t) and also appreciates rather than depreciating and has no depreciation can be solved (replacing the value of d with –g, where the growth rate is g) as: (6) r = [(R-g)(1-e -(R-g)T (1-t)+te -(R+p)T )]/[(1-e -(R-g)T) )(1-t)] +g Note that this formula is in present value unlike the one for a completely appreciating asset in (1) that is in future value, so that the deduction of basis is discounted by the nominal after-tax discount rate, R+p. With indexing, the relationship is: (7) r = [(R-g)(1-e -(R-g)T (1-t)+te -R T )]/[(1-e -(R-g)T) )(1-t)] +g The extra terms in the equation are to capture the finite dividend period, the gain on sale, and the capital gain tax on the sale. There is also no z, tax depreciation. Note that without capital gains tax, the pretax return would be (R-g)/(1-t) +g, indicating that the dividend part of the return is subject to the full tax rate and the gain is not taxed at all. Indexing causes the return of basis to be discounted at the real rate, R, rather than the nominal rate, R+p. The exclusion would be determined in a similar manner to (4) as: (8) xt(e - (R -g )T -1) = t(e - (R -g )T -e pT ) For a depreciating asset using straight line depreciation as used for buildings that is sold before the depreciation period is completed: (9) r =[(R+d)(1-uz – e - ( R+ d)T (1-t)-t(1-T/T*)e -(R+p)T )]/[(1- e - ( R -d)T )(1-u)] –d and with indexing, (10) r =[(R+d)(1-uz – e - ( R -d)T (1-t)-t(1-T/T*)e -RT ]/[(1- e - ( R -d)T )(1-u)] –d (1-T/T*), where T* is the depreciation period, is the basis which becomes zero when depreciation is completed. In this case and with land, u is the ordinary tax rate and t is the capital gains tax rate. The exclusion equivalent is determined by the inclusion rate x: (11) xt(e - ( R+ d)T -(1-T/T*)e -(R+p)T ) ) = t(e - ( R+ d)T -(1-T/T*)e -RT ) For land, the formula is: (12) r =[R(1 – e - R T (1-t)-te -(R+p)T )]/[(1- e -R )T )(1-u)] and with indexing, (13) r =[R(1 – e - R T (1-t)-te -RT )]/[(1- e -R )T )(1-u)] The inclusion rate is determined by the include rate x 14) xt(e - R T -e -(R+p)T ) ) = t(e - ( R )T -e -RT ). | Recently, proposals to index capital gains for inflation have reentered the public debate. The proposed change would eliminate the part of capital gains that reflects inflation by increasing the basis (i.e., the amount subtracted from sales price to determine capital gains) by inflation occurring since acquisition of the asset. President Trump's head of the White House National Economic Council, Larry Kudlow, has long proposed the indexation of capital gains for inflation through regulation, and Americans for Tax Reform has urged Treasury Secretary Steven Mnuchin to index capital gains. Senators Ted Cruz and James Inhofe have introduced S. 2688, the Capital Gains Inflation Relief Act of 2018, which would index the basis of assets for purposes of the capital gains tax. Similar bills, H.R. 2017 and H.R. 6444, have been introduced in the House by Representative Jack Emmer and Representative Devin Nunes. Chairman of the House Ways and Means Committee Kevin Brady has indicated that some discussion of this issue is ongoing. Capital gains already receive benefits including (along with dividends) lower tax rates, tax deferral until assets are sold, and gains exclusion on assets passed on at death. Capital gains earned in retirement and pension plans are also effectively exempt from income tax. Other types of earnings from capital (such as interest and business investments) are also taxed on nominal income, but those effects are also offset by other tax benefits. The effects of capital gains indexing depend on a variety of features: the choice of the price index, assets covered (by type and holding period), whether indexing generates or increases losses, whether indexing applies to past as well as future inflation, and whether indexing is in addition to or a substitute for current tax benefits. Past legislative proposals to index capital gains for inflation have never been enacted, although in some cases proposals led to alternatives such as exclusions or lower rates. In 1992, a proposal advanced to index capital gains for inflation by regulation was eventually rejected based on findings that the Department of the Treasury does not have the authority to index capital gains. Compared with an exclusion or lower rate, indexing favors short-term assets relative to long-term ones. Indexing provides the smallest exclusion equivalents to growth stocks that pay little or no dividends and the largest equivalents to gains from land, commercial buildings, and to a lesser extent residential buildings and stocks that pay substantial dividends. Some of these patterns may not be consistent with policy objectives that may favor lower rates on stocks and assets held for a long period. Compared to an exclusion, inflation indexing would favor risky assets. The analysis of various economic issues depends on whether indexing is in addition to or a substitute for current benefits. Questions arise as to whether interest, depreciation, and inventories should also be indexed. As an additional provision, depending on the design, estimates suggest a range of $10 billion to $30 billion per year in revenue costs. Economic growth effects would be relatively small, with even the largest revenue estimate pointing to a decrease in the cost of capital of 6 to 7 basis points (lower required returns of 0.06% to 0.07%). Evidence also suggests that the savings effect would be small and likely to be offset by crowding out of private investment by government borrowing if debt-financed. The change would favor high-income individuals, with about 60% benefiting the top 0.1% and around 90% benefiting the top 1% in the income distribution. Favorable treatment for capital gains on stocks has been advanced due to the double taxation of dividends, but the 2017 tax changes have made that justification less persuasive. Capital gains indexing would reduce the distortion between debt and equity but increase the favoritism of retaining earnings over paying dividends. It would reduce the lock-in effect that causes individuals to retain current assets because of the tax, although not as much as an exclusion equivalent. Administrative and compliance costs would increase because each vintage of assets would require a different exclusion, but improved computing facilities make that issue less burdensome. |
The primary source of federal aid to K-12 education is the Elementary and Secondary Education Act (ESEA), particularly its Title I, Part A program of Education for the Disadvantaged. The ESEA was initially adopted in 1965, and was most recently reauthorized and amended by the No Child Left Behind Act of 2001 (NCLB), P.L. 107-110 , that authorized ESEA programs through FY2008. It is widely expected that the 111 th Congress will consider whether to amend and extend the ESEA. The NCLB initiated a major expansion of federal influence on several aspects of public K-12 education, primarily with the aim of increasing the accountability of public school systems and individual public schools for improving achievement outcomes of all pupils, especially the disadvantaged. States that receive grants under ESEA Title I-A must implement in all public schools and school districts a variety of standards-based assessments in reading, math and science; make annual adequate yearly progress (AYP) determinations for each public school and local educational agency (LEA); and require virtually all public school teachers and aides to meet a variety of qualification requirements. State AYP policies must incorporate an ultimate goal of all public school pupils reaching a proficient or higher level of achievement in reading and mathematics by the end of the 2013-2014 school year. Further, states participating in ESEA Title I-A must enforce a series of increasingly substantial consequences for most of their schools and almost all school districts that fail to meet the AYP standards for two consecutive years or more. Major ESEA programs other than Title I-A provide grants to support the education of migrant students; recruitment of and professional development for teachers; language instruction for limited English proficient (LEP) students; school safety and drug abuse prevention programs; after-school instruction and care; expansion of charter schools and other forms of public school choice; education services for Indian, Native Hawaiian, and Alaska Native students; Impact Aid to compensate LEAs for taxes foregone due to certain federal activities; and a wide variety of innovative educational approaches or instruction to meet particular student needs. The ESEA contains 45 separately authorized programs, plus approximately 20 specified sub-programs. The methods by which federal funds are provided to grantees under these programs fall into five general categories: programs under which federal funds are allocated by the U.S. Department of Education (ED) to states, as well as to all or most LEAs via one or more formulas specified in the ESEA (example: ESEA Title I, Part A, Education for the Disadvantaged); programs under which federal funds are allocated by ED to states via a statutory formula, while state educational agencies (SEAs) suballocate these funds either on a competitive or discretionary basis, or via a state-developed allocation formula consistent with general statutory guidance (example: ESEA Title IV, Part B, 21 st Century Community Learning Centers); programs under which federal funds are allocated by ED directly to LEAs via formulas specified in the ESEA (example: ESEA Title VIII, Impact Aid); programs under which federal funds are allocated by ED to state and/or local grantees on a competitive or discretionary basis (example: ESEA Title V, Part D, Subpart 6, Gifted and Talented Students); and programs under which federal funds are allocated by ED to a single eligible grantee specified in the ESEA (example: ESEA Title II, Part C, Subpart 2, National Writing Project). ESEA allocation formulas are mechanisms established through statute or other official policy documents that define how appropriated funds are to be allocated among SEAs or LEAs nationwide. They take the form of mathematical equations through which ED, and possibly also SEAs, calculate specific grant amounts for each potential grantee meeting statutory eligibility criteria. They almost always include one or more population factors, but typically include a number of additional factors. This report discusses and analyzes the current allocation formulas for ESEA programs in the first three categories listed above. It provides the following: 1. a description of general categories of factors used in the ESEA's allocation formulas; 2. descriptions of each program's formula(s); and 3. analyses of general patterns and issues related to these formulas. Other CRS reports provide more detailed discussions and analyses of the allocation formulas of major individual ESEA programs. This report will be updated infrequently, when major changes occur in ESEA program allocation formulas. It is important to understand the vocabulary commonly applied to federal K-12 education allocation formulas. Therefore, an explanation of key terms precedes the discussion of the ESEA formulas. Level of Recipient Entity and Level at Which Grants Are Calculated by ED. Under most ESEA formula grant programs, grants are made to LEAs via the SEAs. If LEAs are the ultimate grantees in a state formula grant program, the ESEA program may provide for substate distribution of grants by SEA-administered competition, through a statutory substate allocation formula directing SEAs how to determine LEA grants or, less frequently, through a statutory LEA-level formula with grants calculated by ED itself but distributed to LEAs by SEAs (with limited options for SEAs to adjust the LEA grants as calculated by ED). Under a few ESEA formula grant programs, LEA grants are calculated and directly allocated by ED (e.g., Impact Aid). Formula Factors. Allocation formulas have one or more factors that target funds to SEAs, LEAs, or other entities to accomplish or facilitate some policy outcome. For example, a program aiming to serve children from poor families would have a formula based on estimated numbers of school-age (5-17 years) children in poor families. In a simple formula, each state would be allocated funds in proportion to the estimated number of such children living in that state: that is, a state's proportion is obtained by dividing its number of school-age children in poor families by the total number of such children nationwide. For example, if 14% of all school-age children in poor families live in California, this simple formula would allocate 14% of all state grant funds to California. A formula can include more than one population factor, and it can weight the factors differently. For example, a formula could distribute 50% of funds based on total school-age population and 50% based on school-age children in poor families. Population Factor. The most common allocation formula factor is a population factor. Almost all federal K-12 education program allocation formulas include such a factor. The most common population factors are school-age children in poor families and total school-age children. In addition, several ESEA programs allocate funds on the basis of a population factor that is specifically related to the program's purpose, such as Indian pupils, migratory children, or children whose parents live or work on federal property. Usually, a population factor is direct, but sometimes it is indirect. For example, if a program allocates grants in proportion to grants made under ESEA Title I-A, this provision indirectly incorporates the Title I-A formulas' population factors (primarily school-age children in poor families). Title I-A Grant Factor. Many ESEA programs allocate some or all of their funds in proportion to grants made under the largest ESEA program—aid for the Education of the Disadvantaged under Title I, Part A. For example, grants under ESEA Title II, Part D, Education Technology, are made in proportion to Title I-A grants (subject to a higher state minimum grant provision than under Title I-A). Thus, grants calculated under Title I-A become an allocation factor for several other programs. Eligibility Threshold. Many ESEA programs require LEAs to meet population factor thresholds in order to be eligible to receive grants. For example, under the Title I-A Concentration Grant allocation formula, LEAs must meet either of two population factor eligibility thresholds: (1) 6,500 population factor children (mostly school-age children in poor families) or (2) a population factor child percentage (population factor children divided by total school-age population) of 15%, in order to receive grants. Expenditure Factor. Several ESEA program allocation formulas include an expenditure factor. These are based on state or (less frequently) LEA average per pupil expenditure for public K-12 education. Expenditure factors are intended to adjust for state or local differences in the costs of providing public K-12 education, although they are often criticized as reflecting differences in ability to pay for educational services as well. In most cases, floors and ceilings, based on percentages of the national average, are applied to this factor (e.g., a floor of 80% and a ceiling of 120% of the national average per pupil expenditure). Usually, an expenditure factor is direct, but sometimes it is indirect. For example, if a program allocates grants in proportion to grants made under ESEA Title I-A (see above), this provision indirectly incorporates the Title I-A formulas' expenditure factors. Hold Harmless. Some formulas establish a minimum state or LEA grant equal to a specified percentage of the amount received in a previous year. Usually, this is the immediately preceding year, although sometimes it is a "base year" that may be several years in the past. The minimum percentage may be the full amount received in the previous year (i.e., 100%) or, more often, some lesser percentage (e.g., 85%). Raising a state or LEA to its hold harmless level almost always reduces grants to other states or LEAs that do not benefit from the hold harmless. Hold harmless amounts are only guaranteed if funds are sufficient to pay for them. If not, hold harmless amounts are ratably reduced (see below) to meet the level of the appropriation. Further, in almost all cases, hold harmless provisions only apply to grantees meeting program eligibility criteria for the current year, not necessarily every grantee that received a grant in the preceding year. Foundation Grant. Under some ESEA programs, each state or LEA first receives a "foundation grant" amount, then additional appropriations, if any, are allocated on the basis of a population and possibly other formula factors. If funds are insufficient to pay the full foundation grant amount, then each grantee receives an equal proportion of its foundation grant. The foundation grant may be an equal amount per grantee (e.g., $3 million per state) or, more often, it is the amount received in a base year under one or more antecedent programs. The latter usually occurs when two or more programs are consolidated into one new program in a reauthorization of the ESEA. Minimum State Grant. In addition to hold harmless amounts (see above), which are always expressed in terms of a percentage of a previous year grant, several programs have a state minimum grant expressed primarily in terms of a percentage of all allocations to states or as a fixed dollar amount per state. Such minimum grant provisions are aimed at providing what advocates argue is a minimum 'viable' grant to all states. State minimums are set at a percentage of total state grants (typically 0.25%, 0.35%, or 0.5%). Occasionally, they are fixed dollar amounts (e.g., $500,000) or the greater (or lesser) of a fixed amount or a percentage of the total. In some cases, one or more "caps" may be placed on these minimums (e.g., a state minimum might be 0.25% of total state grants, subject to a cap of 150% of the national average grant per population factor child multiplied by the state total number of such children). When applying the minimum, the money to increase grants to relatively low population states that would otherwise receive less than the minimum amount comes from all other states, which would see their initial grants ratably reduced. Ratable Reduction or Ratable Increase. This is the process of either reducing or increasing grants as initially calculated in order to adjust for the level of available appropriations or application of certain formula factors, such as a state minimum or LEA hold harmless. These reductions or increases are applied in proportion to initial grants (i.e., they are "ratable"). For example, raising certain states to minimum grant amounts requires that funds be redistributed from states with initial grants above the minimums. Ratable reduction reduces funds in proportion to their initial grants for states above minimum levels and redistributes these funds to states with initial grants below minimum levels. When ratable reduction occurs, all states (or LEAs) above the minimum have their initial grants reduced by the same percentage, resulting in different dollar amount changes. Similar processes of ratable reduction occur in the application of hold harmless provisions. Fiscal Accountability Requirements. Most ESEA programs include one or more of three types of fiscal accountability requirements. These are intended to assure that federal funds provide a net increase over state and local funds devoted to K-12 education. The two most common ESEA fiscal accountability requirements are (1) maintenance of effort: recipients must provide, from state and local sources, a level of funding (either aggregate or per pupil) in the preceding year that is equal to at least some specified percentage (usually 90%) of the level in the second preceding year; and (2) funds must be used so as to supplement, and not supplant , state and local funds that would otherwise be available for the same purpose as under the ESEA program in question. A third type of fiscal accountability requirement, comparability, applies only to Title I, Parts A, C, and D: services provided with state and local funds in schools participating in Title I-A must be comparable to those in non-Title I-A schools of the same LEA. Treatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs . ESEA programs usually distribute funds by formula only to the 50 states, the District of Columbia, and Puerto Rico (the latter two entities are defined as 'states' for the purposes of program formulas). Other entities usually receive funds from amounts that are reserved from the total appropriation. These set-asides can include funds for the Outlying Areas (American Samoa, Guam, Commonwealth of the Northern Marianas, and the U.S. Virgin Islands), and funds provided to the Bureau of Indian Affairs (BIA) for services to certain Indian students. Typically, a total of 1% of program appropriations is reserved for these entities. Other Reservations from Appropriations. Under many programs, before remaining funds are allocated to states, a portion of appropriations is also reserved for such national activities as competitive grants, program evaluation, research, or technical assistance related to the overall program. Further Adjustments by SEAs of LEA Grants as Calculated by ED. Many state grant formulas permit states to reserve a proportion of their total grant for state level activities. These activities include state administration of the program together with statewide services, such as technical assistance and program evaluation, aimed at assisting and improving the implementation of the program. Under Title I-A, states are required to reserve 4% of state grants (subject to certain limitations described later in this report) for school improvement activities. A typical total state set-aside might be 5% of the state grant, with no more than 1% of the grant (i.e., 20% of the set-aside) for administration and 4% for other state activities. The following Tables 1-9 summarize the provisions of ESEA allocation formulas with respect to many of the formula factors or provisions discussed above. As illustrated in Table 1 , the recipients of a majority of the funds under almost all ESEA formula grant programs are LEAs. Under most of these programs, grants are provided to LEAs via SEAs: that is, they are "state-administered formula grant" programs. Funds are allocated by ED directly to LEAs only under a limited number of ESEA programs. Within states, either (a) funds are allocated to LEAs under formulas that are specified in the ESEA, but are actually calculated by SEAs, or (b) funds are distributed on a competitive or discretionary basis within states. Title I-A is the only ESEA program under which funds are allocated via SEAs, but grants are calculated by ED at the LEA level. Even under Title I-A, SEAs make a number of authorized adjustments to initial LEA grants as calculated by ED. As indicated in Table 2 , in terms of numbers of programs in each category (without regard to program size), ESEA formula grant programs fall relatively evenly into three groups: (a) programs where the primary population factor is school-age children in poor families (either directly or indirectly), (b) programs under which the primary population factor is a measure of total school-age population; and (c) programs with a primary population factor that is specifically related to the program's purpose (e.g., Indian children and youth for the Title VII-A-1 Indian Education program). The programs where school-age children in poor families are the indirect primary formula factor are those where all or part of funds are allocated in proportion to grants under ESEA Title I-A. Two programs, Improving Teacher Quality (Title II-A) and Safe and Drug-Free Schools and Communities (Title IV-A), have both (a) and (b) as primary population factors. In terms of funding, given the relative size of Title I-A, as well as the number of other programs with allocations linked to those under Title I-A, a majority of ESEA funds are allocated under programs where school-age children in poor families are the primary population factor. Note that all ESEA formula grant programs are included in Table 1 and Table 2 , above. The remaining tables in this section include only the ESEA formula grant programs that are relevant to the specific topic of the table. As listed in Table 3 , there are five ESEA programs under which grants are made, in part or in full, on the basis of LEA grants calculated under Title I, Part A. Four of these programs base allocations on total Title I-A grants, whereas the fifth uses Title I-A Concentration Grants only. In calculating grants under such programs outside of Title I-A, the Title I-A LEA hold harmless provision is not to be applied to the Title I-A grants upon which allocations are based. Only the ESEA formula grant programs listed below in Table 4 include an expenditure factor, either directly or indirectly (i.e., as a result of allocating funds in proportion to grants under Title I-A). Under the Title I-A formulas (and by extension, the other formulas based on Title I-A grants), Title I-C, Title I-D, and the Title VII-A-1 Indian Education program, the expenditure factor is based on state average per pupil expenditure for public K-12 education, after applying a floor and ceiling (in the case of Indian Education, a floor only) on the basis of the national average per pupil expenditure. The Title VIII Impact Aid programs employ an expenditure factor (local contribution rate) that in most cases is either one-half of the state average per pupil expenditure or one-half of the national average per pupil expenditure. ESEA formula grant programs that have minimum or hold harmless provisions at either the state or LEA level are listed in Table 5 . State minimum grant provisions are applied to several programs; they range from up to 0.25% of total grants to states with respect to appropriations equal to or below the FY2001 funding level for Title I-A Basic and Concentration Grants, to 0.5% of the total amount available for state grants under several programs. In general, state minimum grant provisions (expressed as a percentage of total state grants) are more common than hold harmless provisions (expressed as a percentage of grants for a previous year) in the ESEA. Only the Title I-A formulas have LEA hold harmless provisions (minimum percentages of the previous year grant, if sufficient funds are available and eligibility thresholds are met where applicable), while only the Safe and Drug-Free Schools and Communities program has a state level hold harmless (which is not currently fully met). Several of the ESEA formula grant programs include provisions allowing SEAs to reserve a limited percentage of state total grants for administration, evaluation, and technical assistance. Maximum reservations for these specific activities range from approximately 1% for Title I-A to 5% under a number of other ESEA programs. As noted in Table 6 , some programs have maximum reservation percentages above 5%, but these funds are to be used for a variety of activities in addition to administration, evaluation, and technical assistance, such as statewide competitive grant programs. Limits on the use of funds by LEAs for administration, evaluation, and technical assistance occur only with respect to four ESEA programs, with limits ranging from 2% to 5%. As seen in Table 7 , a large majority of ESEA formula grant programs provide for grants to be made to the Outlying Areas (American Samoa, Commonwealth of the Northern Mariana Islands, Guam, and the Virgin Islands). Some programs simply treat these areas the same as the 50 states, the District of Columbia, and Puerto Rico; others reserve a share of state grants (either 0.5% or 1%) for this purpose. A somewhat smaller majority of ESEA formula grant programs provide funds to the Bureau of Indian Affairs (BIA) for services to Indian pupils, either by treating the BIA the same as a state, or more often by reserving 0.5% or 1% of grants for this purpose. Only a few ESEA formula grant programs reserve a share of formula grant funds for national programs or activities. National programs are much more often authorized under separate provisions of the statute (e.g., Safe and Drug-Free Schools and Communities national programs are authorized in ESEA Title IV, Part A, Subpart 2, whereas state formula grants are authorized under Subpart 1). Similarly, only a few programs authorize reservations from formula grant appropriations for evaluations and technical assistance. However, as with national programs, several ESEA formula grant programs contain separate authorizations for evaluations (e.g., evaluations for Title I-A are authorized in Title I-E). In addition, the ESEA contains a general authorization (in Title IX, Part F) for the Secretary of Education to reserve for program evaluation up to 0.5% of appropriations under any ESEA program, except those in Titles I and III (or any other ESEA program for which the reservation of funds by the Secretary for evaluation is explicitly provided). As indicated in Table 8 , most ESEA formula grant programs have both maintenance of effort and supplement, not supplant, provisions. A few programs have only one, but not both of these fiscal accountability provisions. Only Title I, Parts A, C, and D have comparability provisions (requirements that educational services funded from state and local sources be comparable in schools that do, and do not, participate in the program within the same LEA). Table 8 depicts the types of fiscal accountability provisions that are in place; details about these provisions are included in the discussions of individual programs. As shown in Table 9 , three current ESEA programs allocate grants on a competitive basis if annual appropriations are below a specified threshold level, then allocate funds to states by formula if appropriations meet or exceed this threshold. The threshold is $100 million for two of these programs and $250 million for the third. Only one of these programs, Mathematics and Science Partnerships, has met its threshold thus far. Detailed descriptions of individual ESEA program allocation formulas are provided below. Programs are discussed in the order of their appearance in the ESEA. Title I, Part A, of the ESEA authorizes aid to LEAs for the education of disadvantaged children. Title I-A grants provide supplementary educational and related services to low-achieving and other pupils attending pre-kindergarten through grade 12 schools with relatively high concentrations of pupils from low-income families. In recent years, it has also become a "vehicle" to which a number of requirements affecting broad aspects of public K-12 education for all pupils have been attached as a condition for receiving Title I-A grants. These include requirements for assessments of pupil achievement; adequate yearly progress (AYP) standards and determinations for schools, LEAs, and states; consequences for schools and LEAs that fail to make AYP for two consecutive years or more; plus teacher and paraprofessional qualifications. Under Title I-A, funds are allocated to LEAs via SEAs. Annual appropriations bills specify portions of each year's appropriation to be allocated under four different formulas; once funds reach LEAs, the amounts allocated under the four formulas are combined and used jointly. Under three of the formulas—Basic, Concentration, and Targeted Grants—funds are calculated initially at the LEA level, and state total grants are the total of allocations for LEAs in the state, adjusted to apply state minimum grant provisions. Under the fourth formula, Education Finance Incentive Grants, grants are first calculated for each state overall, with state totals subsequently suballocated by LEA using a different formula. A primary rationale for using four different formulas to allocate shares of the funds for a single program is that the formulas have distinct allocation patterns, providing varying shares of allocated funds to different types of LEAs or states (e.g., LEAs with high poverty rates or states with comparatively equal levels of spending per pupil among their LEAs). In addition, some of the formulas contain elements that are deemed to have important incentive effects or to be significant symbolically, in addition to their impact on allocation patterns. In the discussion below, each of the four ESEA Title I-A allocation formulas is discussed separately. Basic Grants are the original Title I-A formula, authorized and implemented each year since FY1966. It is also the formula under which the largest proportion of funds is allocated (47% of FY2008 appropriations), and under which the largest proportion of LEAs participate (approximately 91% in FY2007), largely due to its low LEA eligibility threshold (see below). However, because all post-FY2001 increases in Title I-A appropriations have been provided for the Targeted and Education Finance Incentive Grant formulas (see below), the proportion of Title I-A funds allocated under the Basic Grant formula has been declining steadily since FY2001, when it was 86%. Compared to some of the other Title I-A formulas, the Basic Grant formula is relatively straightforward. Grants are based on each LEA's share, compared to the national total, of a population factor multiplied by an expenditure factor, subject to available appropriations, an LEA minimum or "hold harmless," and a state minimum. These formula factors are described below, followed by a mathematical expression of the formula. Population Factor. Children aged 5-17: (a) in poor families, according to the latest available estimates for LEAs from the Census Bureau's Small Area Income and Poverty Estimates (SAIPE) program (these constitute approximately 96% of all formula children for FY2007); (b) in institutions for neglected or delinquent children or in foster homes (approximately 3.9% of all formula children for FY2007); and (c) in families receiving Temporary Assistance for Needy Families (TANF) payments above the poverty income level for a family of four (less than 0.1% of all formula children for FY2007). Each element of the population factor is updated annually. Eligibility Threshold. In order for an LEA to be eligible for a Basic Grant, the number of children counted in the population factor must constitute 10 or more such children and more than 2% of the total school-age population. Expenditure Factor. State average per pupil expenditure for public K-12 education, subject to a minimum of 80% and a maximum of 120% of the national average, further multiplied by 0.40. The expenditure factor is the same for all LEAs in the same state. LEA Minimum Grant or " Hold Harmless " Level. If sufficient funds are appropriated, each LEA is to receive a minimum of 85%, 90%, or 95% of its previous year grant, depending on the LEA's school-age child poverty rate, assuming that the LEA continues to meet the Basic Grant formula's eligibility thresholds. Minimum State Grant. Each state is to receive a minimum of up to 0.25% of total Basic Grant appropriations if total Basic Grant funding is equal to or less than the FY2001 level (as has been the case each year since FY2001 thus far), and up to 0.35% of total Basic Grant appropriations in excess of the FY2001 amount, if any. A state may not, as a result of the state minimum provision, receive more than the average of (1) 0.25% of the total FY2001 amount for state grants plus 0.35% of any amount above the FY2001 level, and (2) 150% of the national average grant per formula child, multiplied by the number of formula children in the state. Ratable Reduction. After maximum grants are calculated, if appropriations are insufficient to pay the maximum amounts (as has been the case every year beginning with FY1967), these amounts are reduced by the same percentage for all LEAs, subject to LEA hold harmless and state minimum provisions , until they equal the aggregate level of appropriations. Fiscal Requirements. There are three Title I-A fiscal accountability requirements, which are applicable to total LEA grants under all four formulas: (1) maintenance of effort: recipient LEAs must provide, from state and local sources, a level of funding (either aggregate or per pupil) in the preceding year that is at least 90% as high as in the second preceding year; (2) Title I-A funds must be used so as to supplement, and not supplant , state and local funds that would otherwise be available for the education of disadvantaged pupils in Title I-A participating schools; (3) comparability: services provided with state and local funds in schools participating in Title I-A must be comparable to those in non-Title I-A schools of the same LEA. Treatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. With one possible exception, Puerto Rico is treated the same as a state under the Basic Grant formula. Grants to schools operated or supported by the Bureau of Indian Affairs, the Outlying Areas of Guam, American Samoa, the Virgin Islands, and the Commonwealth of the Northern Mariana Islands, as well as a competitive grant to the Outlying Areas plus certain Freely Associated States are provided via reservation of 1% of total Title I-A appropriations. Further Adjustments by SEAs of LEA Grants as Calculated by ED. Among ESEA programs, a distinctive aspect of Title I-A is that after calculation of LEA grants by ED, applying the methods discussed herein, SEAs make a number of adjustments before determining the final amounts that LEAs actually receive. These adjustments are made to the total of Title I-A grants to LEAs under all four formulas combined. These adjustments include (1) reservation of 4% of state total allocations to be used for school improvement grants; (2) reservation of 1% of state total allocations under all formulas for ESEA Title I, Part A, plus Title I, Parts C and D (discussed below), or $400,000, whichever is greater, for state administration; (3) optional reservation of up to 5% of any statewide increase in total Part A grants over the previous year for academic achievement awards to participating schools that significantly reduce achievement gaps between disadvantaged and other pupil groups or exceed adequate yearly progress standards for two consecutive years or more; (4) adjustment of LEA grants to provide funds to eligible charter schools or to account for recent LEA boundary changes; and (5) optional use by states of alternative methods to reallocate all of the grants as calculated by ED among the state's small LEAs (defined as those serving an area with a total population of 20,000 or fewer persons). Basic Grant Allocation Formula Step 1: Preliminary Grant 1 = PF * EF or L_HH, whichever is greater In Step 1, the population factor is multiplied by the expenditure factor for each eligible LEA. If this is less than the LEA's hold harmless level, the latter amount is used. Step 2: Preliminary Grant 2 = ( Preliminary Grant 1 / ∑ Preliminary Grant 1 ) * APP or L_HH, whichever is greater In Step 2, the amount for each LEA in Step 1 is divided by the total of these amounts for all eligible LEAs in the nation, then multiplied by the available appropriation. Again, if this is less than the LEA's hold harmless level, the latter amount is used. Step 3: Preliminary Grant 3 = (Preliminary Grant 2 * S_MIN_ADJ * L_HH_ADJ) or L_HH, whichever is greater In Step 3, the amount for each LEA in Step 2 is adjusted through application of the state minimum grant provision and by a factor to account for the aggregate costs of raising affected LEAs to their hold harmless level, given a fixed total appropriation level. The state minimum grant adjustment is upward in the smallest states, where total grants are increased through application of the minimum, and downward in all other states, where funds are reduced in order to pay the costs of applying the minimum. The LEA hold harmless adjustment is downward for all LEAs except those at their hold harmless level. Again at this stage, if this is less than the LEA's hold harmless level, the latter amount is the LEA's grant. Step 4: Final Grant = Preliminary Grant 3 * SCH_IMP_ADJ * S_ADMIN_ADJ * AWD_ADJ * OTR_ADJ In the final step of calculating LEA grants under all Title I-A allocation formulas, LEA grants as calculated in Step 3 are further adjusted for the school improvement and state administration reservations, possible state reservations for achievement awards, and other possible adjustments (such as for grants to charter schools) discussed above. Where: PF = Population factor EF = Expenditure factor L_HH = LEA minimum or "hold harmless" level APP = Appropriation S_MIN_ADJ = State minimum adjustment (proportional increase (in small states) or decrease (in other states) to apply the statewide minimum grant) L_HH_ADJ = LEA minimum or "hold harmless" adjustment (proportional decrease, in LEAs not benefitting from the LEA "hold harmless," to apply the LEA minimum grant) SCH_IMP_ADJ = Reservation by SEA for school improvement grants S_ADMIN_ADJ = Reservation by SEA for state administration AWD_ADJ = Possible reservation by SEA for achievement awards OTR_ADJ = Other possible adjustments by the SEA ∑ = Sum (for all eligible LEAs in the nation) The Concentration Grant formula is essentially the same as that for Basic Grants, with one major exception—it has a much higher LEA eligibility threshold. There are also differences regarding the LEA hold harmless and state minimum grant provisions. Although the Title I-A statute has included Concentration Grant formulas (with varying provisions and sometimes under different names) since 1970, the current version dates from 1988 ( P.L. 100-297 ). A relatively small (10% of FY2008 appropriations) and declining (from 14% in FY2001) proportion of Title I-A appropriations is allocated under the Concentration Grant formula. Approximately 48% of LEAs receive Concentration Grants (FY2007). As with Basic Grants, Concentration Grants are based on each eligible LEA's share, compared to the national total, of a population factor multiplied by an expenditure factor, subject to available appropriations, an LEA minimum or "hold harmless," and a state minimum. These formula factors are described below, followed by a mathematical expression of the formula. Population Factor. Same as Basic Grants (see above). Eligibility Threshold. In order for an LEA to be eligible for a Concentration Grant, the number of children counted in the population factor must exceed either 6,500 such children or 15% of the total school-age population. Expenditure Factor. Same as Basic Grants (see above). LEA Minimum Grant or " Hold Harmless " Level. The hold harmless rates for Concentration Grants are the same as those for Basic Grants. Unlike Basic Grants and all of the other Title I-A formulas, the hold harmless applies to all LEAs that received grants for the previous year, even if they do not currently meet one of the Concentration Grant formula's eligibility thresholds, unless they fail to meet one of the thresholds for 4 consecutive years. That is, an LEA that is eligible to receive a Concentration Grant in one year can continue to receive a Concentration Grant for three succeeding years, even if it does not meet either of the eligibility thresholds in those succeeding years. Minimum State Grant. The Concentration Grant state minimum is a modified version of the Basic Grant minimum. Each state is to receive a minimum of up to 0.25% of total Concentration Grant appropriations if total Concentration Grant funding is equal to or less than the FY2001 level (as has been the case each year since FY2001 thus far), and up to 0.35% of total Concentration Grant appropriations in excess of the FY2001 amount, if any. A state may not, as a result of the state minimum provision, receive more than the average of (1) 0.25% of the total FY2001 amount for state grants plus 0.35% of the amount above this, and (2) the greater of (i) 150% of the national average grant per formula child, multiplied by the number of formula children in the state, or (ii) $340,000. Ratable Reduction. Same as Basic Grants (see above). Fiscal Requirements. Same as Basic Grants (see above). Treatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Same as Basic Grants (see above). Further Adjustments by SEAs of LEA Grants as Calculated by ED. With one exception, these are the same as for Basic Grants. The exception is that in states where the state total number of children counted in the population factor constituted less than 0.25% of the national total of such children as of the date of enactment of the NCLB, SEAs may allocate Concentration Grants among all LEAs with a number or percentage of children counted in the population factor that is greater than the state average for that year (not just LEAs meeting the 6,500 or 15% thresholds). Concentration Grant Allocation Formula. The mathematical expression of the Concentration Grant formula is the same as that for Basic Grants (above), with one exception. As discussed immediately above, in states where the number of children counted in the population factor constituted less than 0.25% of the national total of such children as of the date of enactment of the NCLB, the state total is to be allocated on the basis of the population factor among the LEAs that are to receive grants. These LEAs may include, at state discretion, either those LEAs in the state meeting the Concentration Grant eligibility criteria described above, or all LEAs in the state with a number or percentage of children counted in the population factor that is greater than the state average. In either case, for states where the number of children counted in the population factor constituted less than 0.25% of the national total of such children as of the date of enactment of the NCLB only (after state totals have been determined): LEA Grant = PF / ∑ PF * ALL or L_HH, whichever is greater Where: PF = Population factor ALL = State total allocation L_HH = LEA minimum or "hold harmless" level ∑ = Sum (for all eligible LEAs in the state) Targeted Grants were initially authorized in 1994, but no funds were appropriated for them until FY2002, after the formula was slightly modified by the NCLB. Beginning in FY2002, all increases in Title I-A appropriations have been allocated as either Targeted or Education Finance Incentive Grants (below). Thus, Targeted Grants constitute a substantial (21% of FY2008 appropriations) and growing portion of total Title I-A grants. They are allocated among a large majority of LEAs (83% in FY2007). The allocation formula for Targeted Grants is essentially the same as that for Basic Grants, except for significant differences related to how children in the population factor are counted. For Targeted Grants, the poor and other children counted in the formula are assigned weights on the basis of each LEA's school-age child poverty rate and number of school-age children in poor families. As a result, LEAs receive higher grants per child counted in the formula , the higher their poverty rate and/or number. There is also a somewhat higher LEA eligibility threshold for Targeted Grants than for Basic Grants. Aside from these two differences, Targeted Grants are, like Basic Grants, based on each eligible LEA's share, compared to the national total, of a population factor multiplied by an expenditure factor, subject to available appropriations, an LEA minimum or "hold harmless," and a state minimum. These formula factors are described below, followed by a mathematical expression of the formula. Population Factor. The children counted for calculating Targeted Grants are the same as for Basic Grants (see above). However, for Targeted Grants, LEA-specific weights are applied to these child counts to produce a weighted child count that is used in the formula. Children counted in the formula are assigned weights on the basis of each LEA's school-age child poverty rate and (separately) number of school-age children in poor families. As a result, an LEA would receive higher grants per child counted in the formula , the higher its poverty rate or number. The weighting factors are applied in the same manner nationwide; formula children in LEAs with the highest poverty rates have a weight of up to four, and those in LEAs with the highest numbers of such children have a weight of up to three, compared to a weight of one for formula children in LEAs with the lowest poverty rate and number of such children (see Table 10 , below). The higher of its two weighted child counts (on the basis of numbers and percentages) is actually used in the formula for calculating grants for each LEA. There are five ranges associated with each of the number and percentage weighting scales. These steps, or quintiles, were based on the actual distribution of Title I-A population factor children among the nation's LEAs, according to the latest available data in 2001 (at the time that the NCLB was being considered). Based upon those data, one-fifth of the national total of population factor children were in LEAs in each of the five numbers ranges and, separately, each of the five percentage ranges. The Targeted Grant population factor weights are applied in a stepwise manner, rather than the highest relevant weight being applied to all population factor children in the LEA, and the greater of the two weighted child counts for each LEA is the number actually used to calculate the Targeted Grant. For example, assume an LEA has 2,000 population factor children, the total school-age population is 10,000, and therefore the population factor percentage is 20%. The population factor figure used to calculate Targeted Grants would be determined as follows: Numbers Scale: Step 1: 691 * 1.0 = 691 The first 691 population factor children are weighted at 1.0. Step 2: (2,000 - 691) = 1,309 * 1.5 = 1,963.5 For an LEA with a total number of population factor children falling within the second step of the numbers scale, the number of population factor children above 691 (the maximum for the first step) is weighted at 1.5. Total (Numbers Scale) = 2,654.5 The weighted population factor counts from Steps 1 and 2 are combined. Percentage Scale: Step 1: 15.58% * 10,000 = 1,558 * 1.0 = 1,558 A number of population factor children constituting up to 15.58% of the LEA's total school-age population is weighted at 1.0. Step 2: (20% - 15.58%) = 4.42% * 10,000 = 442 * 1.75 = 773.5 For an LEA with a population factor percentage falling within the second step of the percentage scale, the number of population factor children above 15.58% of the LEA's total school-age population (the maximum for the first step) is weighted at 1.75. Total (Percentage Scale) = 2,331.5 The weighted population factor counts from Steps 1 and 2 are combined. Since the numbers scale weighted count of 2,654.5 exceeds the percentage scale weighted count of 2,331.5, the numbers scale count would be used as the population factor for this LEA in the calculation of Targeted Grants. Eligibility Threshold. In order for an LEA to be eligible for a Targeted Grant, the number of children counted in the population factor (with no weights applied) must constitute 10 or more such children and 5% or more of the total school-age population. Expenditure Factor. Same as Basic Grants (see above). LEA Minimum Grant or " Hold Harmless " Level. Same as Basic Grants (see above). Minimum State Grant. Each state is to receive a minimum of up to 0.35% of all Targeted Grant appropriations. A state may not, as a result of the state minimum provision, receive more than the average of: (1) 0.35% of total state grants, and (2) 150% of the national average grant per formula child, multiplied by the number of formula children in the state. (In the latter calculation, population factor child counts are not weighted.) Ratable Reduction. Same as Basic Grants (see above). Fiscal Requirements. Same as Basic Grants (see above). Treatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Same as Basic Grants (see above), with the additional provision that for Puerto Rico (only), a cap of 1.82 is placed on the aggregate weight applied to the population factor under the Targeted Grant formula. Further Adjustments by SEAs of LEA Grants as Calculated by ED. Same as Basic Grants (see above). Targeted Grant Allocation Formula. Same as Basic Grants (see above), except that the population factor (PF) would be the weighted child count, as described above. The EFIG formula is in several ways significantly different from the other Title I-A allocation formulas. As with Targeted Grants, EFIG Grants were initially authorized in 1994, but no funds were appropriated for them until FY2002, after the formula was (in the case of EFIG) considerably modified by the NCLB. Beginning in FY2002, all increases in Title I-A appropriations have been allocated as either EFIG or Targeted Grants. Thus, as with Targeted Grants, EFIG Grants constitute a substantial (21% of FY2008 appropriations) and growing portion of total Title I-A grants. They are allocated among a large majority of LEAs (83% in FY2007). The distinctive elements of the EFIG formula begin with the fact that the first stage in the process of calculating grants is based on data for states as a whole, not LEAs. LEA grants are determined in a separate, later stage of the allocation process. A second major difference is that the EFIG formula includes not only a population factor and an expenditure factor, but also two unique factors. These are an effort factor, based on average per pupil expenditure for public K-12 education compared to personal income per capita for each state compared to the nation as a whole, and an equity factor, based on variations in average per pupil expenditure among the LEAs in each state. A third distinctive feature of the EFIG formula is that while population factor child counts are not weighted when calculating state total grants, they are weighted in the separate process of suballocating state total grants among LEAs. This intra-state allocation process is based on the same number and percentage scales as used for Targeted Grants, although the weights attached to each point on those scales varies among states, based on the state's equity factor. A final difference between the EFIG Grant and other Title I-A formulas is that the expenditure factor is modified through application of slightly more narrow floor and ceiling constraints for EFIG Grants. Thus, state total EFIG Grants are based on each state's share, compared to the national total, of a population factor multiplied by an expenditure factor, an effort factor, and an equity factor, adjusted by a state minimum. Then, each LEA's share of the state total EFIG Grant is based on a weighted population factor count for the LEA, compared to the total for all LEAs in the state, adjusted by an LEA hold harmless provision. These formula factors are described below, followed by a mathematical expression of the formula. Population Factor. In the first-stage calculation of state total EFIG Grants, this factor is the same as for Basic Grants—the estimated number of children aged 5-17: (a) in poor families; (b) in institutions for neglected or delinquent children or in foster homes; and (c) in families receiving TANF payments above the poverty income level for a family of four. In the second-stage suballocation of state total grants among LEAs, as under all stages of the allocation process for Targeted Grants, weights are applied to these child counts before they are actually used in the formula. This process is the same as for Targeted Grants with respect to the number and percentage scales used, and use of the greater of the two weighted child counts to calculate LEA grants. However, for EFIG Grants only, the weights attached to each point on the number and percentage scales differs, depending on the state's equity factor (described below). This variation is illustrated in Table 11 , below. As indicated in Table 11 , the weights rise more rapidly as the numbers and percentages of population factor children increase in states with higher equity factors. For states with an equity factor below 0.10, the weights are the same as for Targeted Grants. For states with equity factors between 0.10 and 0.20, or above 0.20, the maximum weights are 50% higher, and twice as high, respectively, as for Targeted Grants. As is discussed below, states with higher equity factors have relatively high degrees of variation in average per pupil expenditure among the state's LEAs. Factors Not Found in Other ESEA Program Formulas. As noted above, the EFIG formula has two additional factors not found in any other ESEA program allocation formula. Effort Factor. The effort factor is based on a comparison of state average per pupil expenditure (APPE) for public elementary and secondary education with state personal income per capita (PCI). More specifically, it is the ratio of APPE to PCI for each state divided by the ratio of APPE to PCI for the nation. The resulting index number is greater than 1.0 for states where the ratio of expenditures per pupil for public elementary and secondary education to personal income per capita is greater than average for the nation as a whole, and below 1.0 for states where the ratio is less than average for the nation as a whole. Narrow bounds of 0.95 and 1.05 are placed on the resulting multiplier, so that its influence on state grants is rather limited and its importance is largely symbolic. Equity Factor. The equity factor is based upon a measure of the average disparity in average per pupil expenditure among the LEAs of a state called the coefficient of variation (CV). The CV is expressed as a decimal proportion of the state average per pupil expenditure. In the CV calculations for this formula, an extra weight (1.4 vs. 1.0) is applied to estimated counts of children from poor families. The effect is that grants would be maximized for a state where expenditures per pupil from a poor family are 40% higher than expenditures per pupil from a non-poor family. Typical state equity factors range from 0.0 (for the single-LEA jurisdictions of Hawaii, Puerto Rico, and the District of Columbia, where by definition there is no variation among LEAs), to approximately 0.25 for a state with high levels of variation in expenditures per pupil among its LEAs; the equity factors for most states fall into the 0.10 - 0.20 range. In calculating grants, the equity factor is subtracted from 1.30 to determine a multiplier to be used in calculating state grants. As a result, the lower a state's expenditure disparities among its LEAs, the lower is its CV and equity factor, the higher is its multiplier and its grant under the EFIG formula. Conversely, the greater a state's expenditure disparities among its LEAs, the higher is its CV and equity factor, and the lower is its multiplier and its grant under the EFIG formula. Eligibility Threshold. Same as Targeted Grants (see above). Expenditure Factor. State average per pupil expenditure for public K-12 education, subject to a minimum of 85% (not 80%, as in the other Title I-A formulas) and a maximum of 115% (not 120%, as in the other Title I-A formulas) of the national average, further multiplied by 0.40. The expenditure factor is the same for all LEAs in each state. LEA Minimum Grant or " Hold Harmless " Level. Same as Basic Grants (see above), with one exception. The hold harmless is not taken into consideration in the initial calculation of state total grants. Therefore, it is possible (and has occurred in a small number of instances) that state total grants are insufficient to fully pay hold harmless amounts to all LEAs in the state. In that case, each LEA gets a proportional share of its hold harmless amount. Minimum State Grant. Same as Target Grants (see above). Ratable Reduction. Same as Basic Grants (see above). Fiscal Requirements. Same as Basic Grants (see above). Treatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Same as Basic Grants (see above). Further Adjustments by SEAs of LEA Grants as Calculated by ED. Same as Basic Grants (see above). Education Finance Incentive Grant Allocation Formula. Stage 1: Calculation of State Total EFIG Allocations Step 1: Preliminary State Grant = PF * EF * EFF * (1.30 - EQ) In Step 1, the population factor is multiplied by the expenditure factor, the effort factor, and 1.30 minus the equity factor for each state. Step 2: Final State Grant = ( Preliminary State Grant / ∑ Preliminary State Grant) * APP * S_MIN_ADJ or S_MIN, if greater In Step 2, the amount for each state in Step 1 is divided by the total of these amounts for all eligible states in the nation, then multiplied by the available appropriation, adjusted through application of the state minimum grant provision. The state minimum grant adjustment is upward in the smallest states, where total grants are increased through application of the minimum, and downward in all other states, where funds are reduced in order to pay the costs of applying the minimum. Stage 2: Calculation of LEA EFIG Allocations Step 1: Preliminary LEA Grant 1 = ( PF / ∑ PF ) * S_ALL, or L_HH, whichever is greater In Step 1, the population factor for each eligible LEA is divided by the total population factor for all eligible LEAs in the state. If this is less than the LEA's hold harmless level, the latter amount is used. Step 2: Preliminary LEA Grant 2 = Preliminary LEA Grant 1 * L_HH_ADJ or L_HH, whichever is greater In Step 2, the amount for each LEA in Step 1 is adjusted through application of a factor to account for the aggregate costs of raising affected LEAs in the state to their hold harmless level, given a fixed total state allocation level. The LEA hold harmless adjustment is downward for all LEAs except those at the hold harmless level. Step 3: Final LEA Grant = Preliminary LEA Grant 2 * SCH_IMP_ADJ * S_ADMIN_ADJ * AWD_ADJ * OTR_ADJ In the final step of calculating LEA grants under all Title I-A allocation formulas, LEA grants as calculated in Step 2 are further adjusted for the school improvement and state administration reservations, possible state reservations for achievement awards, and other possible adjustments (such as for grants to charter schools) discussed above. Where: PF = Population factor EF = Expenditure factor EFF = Effort factor EQ = Equity factor APP = Appropriation S_MIN_ADJ = State minimum adjustment (proportional increase (in small states) or decrease (in other states) to apply the statewide minimum grant) S_MIN = State minimum S_ALL = State total allocation L_HH = LEA minimum or "hold harmless" level L_HH_ADJ = LEA minimum or "hold harmless" adjustment (proportional decrease, in LEAs not benefitting from the LEA "hold harmless," to apply the LEA minimum grant) SCH_IMP_ADJ = Reservation by SEA for school improvement grants S_ADMIN_ADJ = Reservation by SEA for state administration AWD_ADJ = Possible reservation by SEA for achievement awards OTR_ADJ = Other possible adjustments by the SEA ∑ = Sum (for all states in the nation in Stage 1, and for all eligible LEAs in the state in Stage 2) Under ESEA Title I-A, two different mechanisms are authorized for the generation of funds for School Improvement activities. Whatever the source, these funds are to be targeted on schools that are identified as being in need of improvement, corrective action, or restructuring because they have failed to make AYP for two consecutive years or more. First, states are to reserve 4% of their total Title I-A LEA grants, under the four formulas described above, for School Improvement activities. Second, the ESEA authorizes a separate appropriation for state School Improvement Grants. These funds are allocated to states in proportion to state total grants under ESEA Title I, Parts A, C (State Agency Migrant Program; see below), and D (State Agency Neglected, Delinquent, or At-Risk Program; see below). At least 95% of each state's funds from either source (the reservation or the separate appropriation) is to be allocated to LEAs for schools identified as being in need of improvement, corrective action, or restructuring. For each such school that will be served using School Improvement Grants, the state must provide the LEA with at least $50,000 but not more than $500,000. The funds are allocated at state discretion: there is no statutory intrastate allocation formula for School Improvement funds, beyond the general direction that they are to be directed to LEAs with schools identified as being in need of improvement, corrective action, or restructuring. Through the Consolidated Appropriations Act, 2010 ( P.L. 111-117 ), the School Improvement Grants program was amended to provide a maximum grant of $2 million to each school served using funds appropriated under the American Recovery and Reinvestment Act (ARRA; P.L. 111-5 ) or FY2010 appropriations. In addition, provisions in P.L. 111-117 altered school eligibility criteria to receive School Improvement Grants to include any school eligible to receive assistance under Title I-A that has not made adequate yearly progress (AYP) for at least two years or is in the state's lowest quintile of performance based on proficiency rates or, for secondary schools, has a graduation rate below 60%. Title I Grant Factor: Funds are allocated to states in proportion to total grants under Title I, Parts A, C, and D. School Improvement Grant Allocation Formula State Grant = [ ( T1A + T1C + T1D ) / ∑ ( T1A + T1C + T1D ) ] * APP Each state (including Outlying Areas and the Bureau of Indian Affairs) receives a School Improvement Grant equal to its proportional share of total grants under ESEA Title I, Parts A, C, and D. Where: T1A = State total grant under ESEA Title I, Part A T1C = State total grant under ESEA Title I, Part C T1D = State total grant under ESEA Title I, Part D APP = Appropriation (separate) for School Improvement Grants ∑ = Sum (for all states) Subpart 1 of Title I-B authorizes the Reading First program. Under Reading First, grants are allocated among participating states on the basis of a population factor, subject to a state minimum. SEAs then make competitive subgrants to LEAs, with priority given to LEAs in which the estimated number of children aged 5-17 in poor families is at least 6,500 or the poverty rate for 5-17 year-olds is at least 15%. Each participating LEA is to receive a share of the state's Reading First grant that is at least proportional to its share of state total grants under Title I-A. LEAs are to use these funds to improve reading programs for pupils in grades K-3 in schools that either have percentages of pupils from low-income families that are among the highest in the LEA or have been identified for improvement, corrective action, or restructuring under Title I-A. The supported reading instruction must be grounded in scientifically based reading research. Subpart 1 also authorizes discretionary targeted assistance performance awards to states that have demonstrated improvements in pupil reading performance. This program is no longer funded. Population Factor. Children aged 5-17 in poor families, according to the latest available estimates for LEAs from the Census Bureau's SAIPE program. These estimates are updated annually. Minimum State Grant. Each state is to receive a minimum of 0.25% of total state grants. Treatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Puerto Rico is treated as a state, although its grants are capped; its share of state grants may not exceed the share of funds it receives for Title I-A grants. Bureau of Indian Affairs schools receive 0.5% of total appropriations, and an additional 0.5% is allocated to the Outlying Areas of Guam, American Samoa, the Virgin Islands, and the Commonwealth of the Northern Mariana Islands. Other Reservations from Appropriations. At the national level, the Secretary of Education may reserve up to $25 million, or 2.5% of total appropriations, whichever is less, for program evaluation and national activities, and $5 million for dissemination of information. And in any fiscal year when the total appropriation for this program exceeds the appropriation for FY2003, the Secretary is to reserve $90 million, or 10% of the increase over the FY2003 appropriation, whichever is less, for Targeted Assistance grants to states. Targeted Assistance grants were made with funds appropriated for each of FY2004-2006. The latter would be competitive awards, although available funds are to be distributed among eligible states in proportion to the population factor for Title I-A Basic Grants. At the state level, up to 20% of grants may be used for a variety of state activities (no more than 10% of this reservation may be used for state administration). At the local level, up to 3.5% of funds may be used for planning and administration. Reading First Allocation Formula. State Grant = [ ( PF / ∑ PF ) * APP ] * S_MIN_ADJ, or S_MIN if greater Each state receives a Reading First Grant equal to its proportional share of the population factor for all states, adjusted downward to provide funds to raise the smallest states to the state minimum level. Where: PF = Population factor APP = Appropriation S_MIN_ADJ = State minimum adjustment (proportional decrease to apply the statewide minimum grant) S_MIN = State minimum grant ∑ = Sum (for all states) Subpart 3 of Title I-B authorizes the William F. Goodling Even Start Family Literacy Programs. Under Even Start, funds are allocated to states in proportion to grants under Title I-A, with a state minimum. Within states, funds are competitively awarded to partnerships of LEAs and other entities to provide a combination of services to parents and their children aged birth to seven years, including early childhood education, adult basic education, and parenting skills training to parents lacking a high school diploma. Under this program, as well as any other ESEA program outside Title I-A where grants are made in proportion to ESEA Title I-A grants, grants are made in proportion to Title I-A grants as if no LEA hold harmless were applied. Thus, in practice, Even Start grants are made in proportion to what Title I-A grants would be if Title I-A had no LEA hold harmless provision, not actual Title I-A grants. Title I-A Grant Factor. Grants to states are made in proportion to Title I-A grants, calculated as if no LEA hold harmless were applied. Minimum State Grant. Each state is to receive a minimum of the greater of $250,000 or 0.5% of total funding for state grants. Fiscal Requirements. Even Start is one of many "covered programs" to which a general ESEA maintenance of effort requirement applies. Recipient LEAs must provide, from state and local sources, a level of funding (either aggregate or per pupil) in the preceding year that is at least 90% as high as in the second preceding year. Treatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Puerto Rico is treated as a state. A total of 5% of appropriations (if $200 million or less) or 6% (if above $200 million) is to be reserved to serve Indian tribes and tribal organizations, the Outlying Areas, and children of migratory workers. Other Reservations from Appropriations. At the national level, the Secretary may reserve up to 3% of total appropriations for program evaluation and technical assistance activities. The Secretary may also reserve funds for research. If appropriations are greater than in the previous year, up to $1 million may be reserved for competitive grants to states for statewide family literacy initiatives. At the state level, up to 6% of state grants may be reserved for administration, technical assistance, program improvement, and other activities (no more than 50% of this reservation may be used for administration). Even Start Allocation Formula State Grant = [ ( T1A / ∑ T1A ) * APP ] * S_MIN_ADJ, or S_MIN, if greater Each state receives an Even Start grant equal to its proportional share of total grants under ESEA Title I, Part A, adjusted downward to provide funds to raise the smallest states to the state minimum level. Where: T1A = State total grant under ESEA Title I, Part A, but calculated as these grants would be if no LEA hold harmless were applied APP = Appropriation S_MIN_ADJ = State minimum adjustment (proportional decrease to apply the statewide minimum grant) S_MIN = State minimum grant ∑ = Sum (for all states) Subpart 4 of ESEA Title I-B authorizes grants to LEAs to improve the services provided by school libraries. If annual appropriations are less than $100 million (as has been the case each year thus far), competitive grants to LEAs are made directly by ED. If appropriations were $100 million or above, grants would be made by formula to SEAs, in proportion to Title I-A grants, and SEAs would make competitive grants to LEAs. The Migrant Education Program (MEP) provides grants to SEAs to develop or improve education programs for migrant children. Most migrant programs are administered by LEAs and operate during the regular school year, as well as during the summer months. In the allocation of funds, each state first receives a base grant amount equal to its FY2002 grant amount, adjusted for updated migrant children counts (discussed below). States are held harmless at this amount to mitigate a substantial redistribution of funds under the new provisions. Appropriations in excess of the FY2002 level are provided to states based on their proportional share of the sum of (1) the number of identified eligible migrant children, ages 3 through 21, residing in the state during the previous year, plus (2) the number of identified eligible migrant children, ages 3 through 21, who received services under the MEP in summer or intersession programs provided by the state during the previous year. The sum of these two groups of migrant children is multiplied by 40% of the average per-pupil expenditure (APPE) in the state, except that the state's APPE may not be less than 32% or more than 48% of the national APPE. Appropriations for MEP have not exceeded the FY2002 appropriations level of $396 million. Thus, since FY2002, the amount of a state's grant allocation has been based on the level of its FY2002 base-year state grant, which is largely dependent on the state's 2000-2001 count of eligible migrant children residing in the state relative to other states, although these numbers have been adjusted in recent years for inaccurate or incomplete data submitted by states for the calculation of their FY2002 MEP grants. That is, for each state, ED calculates a defect rate that is then applied to the 2000-2001 counts of eligible migrant children that were used to make FY2002 awards. These counts are then multiplied by 40% of the average per-pupil expenditure (APPE) in the state used to calculate the FY2002 grants, except that the state's APPE may not be less than 32% or more than 48% or the national APPE. States receive a proportional share of available appropriations based on the results of this calculation. Thus, the base grant amount received by states is actually an "adjusted" FY2002 grant. States receiving funds under MEP are required to develop a comprehensive state plan for addressing the needs of migrant children. They have substantial flexibility in determining which services and activities to offer. Uses of funds may include, for example, providing instruction (remedial, compensatory, bilingual, multicultural, and vocational), health services, counseling and testing, career education, preschool services, and transportation to migrant students. Priority for services, however, must be given to migrant children who are failing or most at risk of failing to meet state academic content standards and achievement standards and whose education has been interrupted during the regular school year. Population Factor. The 12-month count is based on the number of eligible students from 3 to 21 years of age, who within three years of making a qualified move, resided in the state for one or more days from September 1 to August 31 of the reporting year. The summer and intersession count is based on the unduplicated number of eligible migrant children that were served in either a traditional summer or year-round school intersession program at least once during the reporting year. Expenditure Factor. The state's migrant education student count is multiplied by 40% of the state's average per pupil expenditure. The state's APPE may not be less than 32% of the national APPE or greater than 48% of the national APPE Hold Harmless. Each state receives its "adjusted" FY2002 grant amount provided appropriations are sufficient to make these awards. Treatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Grants to Puerto Rico are determined by multiplying the number of children calculated using the population factors by the product of (1) the percentage which Puerto Rico's APPE is of the lowest APPE of any of the 50 states and (2) 32% of the national APPE. No funds are provided to the Outlying Areas or the Bureau of Indian Affairs under this program. Other Reservations from Appropriations. The Secretary of Education may reserve up to $10 million of total appropriations to make grants or enter into contracts for the coordination of migrant education activities. Up to $3 million of the $10 million may be used to award competitive grants to SEAs that propose a consortium arrangement with another state that will improve the delivery of services to migrant children whose education is interrupted. Fiscal Accountability Requirements. The MEP is one of many "covered programs" to which a general ESEA maintenance of effort requirement applies. Recipient LEAs must provide, from state and local sources, a level of funding (either aggregate or per pupil) in the preceding year that is at least 90% as high as in the second preceding year. In addition, Title I-C funds must be used so as to supplement, and not supplant , state and local funds that would otherwise be available for the education of migrant pupils, and the Title I-A comparability requirement also applies to Title I-C. Migrant Education Program Allocation Formula If appropriations are equal to or less than the FY2002 level of $396 million Step 1: ADJ_COUNT = 00_01CNT * DR In Step 1, a state's adjusted student count is calculated by multiplying its 2000-2001 student count, the count used to make FY2002 grants, by a defect rate. The defect rate adjusts the 2000-2001 migrant child count for inaccurate or incomplete data submitted by states for the calculation of their FY2002 awards. Step 2: GCNT = ADJ_COUNT * EF In Step 2, the adjusted count from Step 1 is multiplied by an expenditure factor to produce the count used to make state grant determinations. In making this calculation, the adjusted count is multiplied by 40% of the average per-pupil expenditure in the state used for calculating FY2002 grants, except that the state's APPE may not be less than 32% or more than 48% or the national APPE. Step 3: State Grant = (GCNT / ∑ GCNT) * APP In Step 3, a state receives a proportional share of funds based on the grant count calculated in Step 2. This proportion is equal to the state's grant count divided by the national grant count, multiplied by the appropriated amount. If appropriations exceed the FY2002 level Step 1: MSC = NMC + MCSI If appropriations exceed the FY2002 appropriations level, any additional funds over this level are allocated based on the sum of the prior year counts of the number of identified eligible migratory children, aged 3 through 21, residing in the state and the number of identified eligible migratory children, aged 3 through 21, who received services through summer or intersession programs provided by the state. Step 2: State Grant 1 = 02_GRANT + [(MSC * EF) / ∑ (MSC * EF)] * (EXCESS) In Step 2, the state's migrant education student count is multiplied by and expenditure factor (40% of the state's average per pupil expenditure). The state's APPE may not be less than 32% of the national APPE or greater than 48% of the national APPE. After calculating the state's proportional share of migrant children adjusted for the state's expenditure factor, the amount is multiplied by the appropriations amount in excess of the FY2002 appropriations amount. This total is added to the state's adjusted FY2002 grant amount to determine the state's initial grant. (See previous set of calculations for determination of the FY2002 adjusted grant amount.) Step 3: Final State Grant = State Grant 1 * (APP / ∑ State Grant 1) In Step 3, if funds are not sufficient to provide the amount calculated in Step 2 to each state, all states have their grant amounts ratably reduced by multiplying the state's initial grant amount by the result of dividing the total appropriation by the total amount generated under Step 2. Where: ADJ_ COUNT = Adjusted 2000-2001 eligible migrant child count 00_01CNT = 2000-2001 eligible migrant child count used to make FY2002 state grants DR = Defect rate GCNT = Grant count used for calculation of state awards EF = Expenditure factor APP = Annual appropriation MSC = Total number of migrant children NMC = Number of migrant children living in the state during the prior year MCSI = Number of migrant children who received services during summer or intercession programs during the prior year 02_GRANT = State's FY2002 grant amount based on its adjusted student count EXCESS = Appropriations in excess of the FY2002 appropriations level ∑ = Sum (for all states) Title I-D authorizes a pair of programs intended to improve education for pupils who are neglected, delinquent, or at risk of dropping out of school. Subpart 1 authorizes grants for the education of children and youth in state institutions for the neglected or delinquent, including community day programs and adult correctional institutions. Funds are allocated to states on the basis of a population factor multiplied by an expenditure factor. A portion of each state's grant is to be used for transition services for children and youth transferring to regular public schools. Subpart 2 provides aid for programs operated by LEAs in collaboration with locally operated correctional facilities, and in coordination with the Title I-A program. These funds are allocated to states as part of the Title I-A allocation process (described above). Once Title I-A grants reach SEAs, the portion of state total grants that is based on delinquent youth in local programs is set aside and separately allocated to LEAs providing services to such youth. SEAs are to allocate these funds to LEAs with concentrations of youth in local correctional facilities. SEAs may allocate these funds through a state-developed formula or on a discretionary basis. Therefore, the remainder of this discussion is based on the Subpart 1 state agency program only. Population Factor. Neglected or delinquent children and youth receiving public education services in institutions operated by state agencies, including those in community day programs and adult correctional institutions. Such children and youth must receive at least 15 hours per week of educational services in adult correctional institutions, and at least 20 hours per week in other eligible institutions. Expenditure Factor. Same as for Title I-A Basic Grants (see above). Ratable Reduction. After maximum grants are calculated, if appropriations are insufficient to pay the maximum amounts (as has been the case for every year from FY1981 to the present), these amounts are reduced by the same percentage for all states until they equal the aggregate level of appropriations. Fiscal Requirements. The State Agency Neglected and Delinquent program is one of many "covered programs" to which a general ESEA maintenance of effort requirement applies. Recipient LEAs must provide, from state and local sources, a level of funding (either aggregate or per pupil) in the preceding year that is at least 90% as high as in the second preceding year. In addition, Title I-D funds must be used so as to supplement, and not supplant , state and local funds that would otherwise be available for the education of neglected and delinquent pupils, and the Title I-A comparability requirement also applies to Title I-D. Treatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Grants are available only for the 50 states, the District of Columbia, and Puerto Rico. Puerto Rico is treated in the same manner as it is treated under the Migrant Education Program (see above). State Agency Neglected and Delinquent Allocation Formula Step 1: Grant 1 = PF * EF In Step 1, the population factor is multiplied by the expenditure factor for each state. Step 2: Grant 2 = ( Grant 1 / ∑ Grant 1 ) * APP In Step 2, the amount for each state in Step 1 is divided by the total of these amounts for all states, then multiplied by the available appropriation. Where: PF = Population factor EF = Expenditure factor APP = Appropriation (separate) for Neglected and Delinquent state grants ∑ = Sum (for all states) Title I-F authorizes grants via SEAs to LEAs to implement comprehensive reform strategies in schools participating in Title I-A. This program is no longer funded. If state grants were funded, appropriations would be allocated to states in proportion to Title I-A Basic Grants (calculated as if no LEA hold harmless were applied). Title I-G authorizes grants to SEAs to pay advanced placement test fees on behalf of low-income individuals, as well as competitive grants to SEAs, LEAs, or non-profit educational entities with relevant expertise, to support activities intended to expand access to advanced placement programs for low-income individuals. While the test fee grant program (Section 1704) does not have an explicit allocation formula, the statute does provide that in the allocation of available funds among the states, the Secretary of Education "shall consider" each state's number of children counted in the Title I-A population factor. At annual appropriations levels of $75 million or less (as has been the case each year thus far), Title I-H authorizes competitive grants to SEAs or LEAs for dropout prevention and reentry programs in high schools with dropout rates above the state average and for middle schools whose graduates attend these high schools. At annual appropriations levels above $75 million but less than $250 million, competitive grants would be made to SEAs for dropout prevention and reentry services to be provided via competitive subgrants to LEAs. If annual appropriations were $250 million or above, grants would be made by formula to SEAs, in proportion to Title I-A grants, with competitive subgrants to LEAs. At all funding levels, the Secretary of Education is authorized to carry out a variety of activities as part of a "coordinated national strategy" for dropout prevention and reentry. Title II, Part A authorizes a program of state grants that may be used for a variety of purposes related to recruitment, retention, and professional development of K-12 teachers and principals. In the allocation of funds, each state first receives an amount equal to its FY2001 grant under two antecedent programs. Remaining funds, if any, are allocated as follows: 35% on the basis of total population aged 5-17, and 65% on the basis of population aged 5-17 in poor families, with a state minimum grant amount of 0.5% of funds available for state grants. SEAs may reserve up to 5% of funds for administration and statewide services, such as teacher or principal support programs, or certification reform, and must suballocate at least 95% of grants to LEAs. In making grants to LEAs, each LEA first receives an amount equal to its FY2001 grant under the two antecedent programs. Remaining funds, if any, are allocated as follows: 20% on the basis of total population aged 5-17, and 80% on the basis of population aged 5-17 in poor families. LEAs may use these grants for purposes that include recruiting and retaining highly qualified teachers, and professional development activities for teachers and principals, consistent with a locally developed needs assessment. Foundation Grant. In the allocation of grants to states, if sufficient funds are available, each state first receives an amount equal to the total of the grants it received for FY2001 under two antecedent programs: the Eisenhower Professional Development Program authorized under Title II, Part B, of the ESEA as in effect immediately preceding enactment of the NCLB, and the Class Size Reduction Program authorized under Section 306 of the Department of Education Appropriations Act, 2001 ( P.L. 106-554 ). In the suballocation of state grants to LEAs, if sufficient funds are available, each LEA first receives an amount equal to the total of the grants it received for FY2001 under the same two antecedent programs. If an LEA did not receive a grant under one or both of the antecedent programs in FY2001, its foundation grant is to be equal to the amount it would have received if it had participated in each program that year. The antecedent programs and their allocation formulas continue to substantially influence the distribution of current grants under Title II-A, as the FY2001 appropriation for state grants under these programs ($2,062,620,000) constitutes approximately 71% of the FY2008 appropriation for state grants under Title II-A ($2,920,572,000). The formulas for the two antecedent programs may be briefly described as follows: Eisenhower Professional Development Program : In the allocation of grants to states, 50% of funds were allocated on the basis of grants under Title I-A, and 50% on the basis of population aged 5-17, with a 0.5% state minimum. For substate allocations to LEAs, 50% of funds were allocated on the basis of total public and private school enrollment, and 50% on the basis of Title I-A grants. Class Size Reduction Program : Allocations of the amounts available for state grants were initially calculated using: (1) the Eisenhower Professional Development Program formula (above), and (2) the ESEA Title I-A formula. The greater of these two amounts was selected for each state, then these amounts were ratably reduced to the available state grant funding level, while applying a 0.5% state minimum. For substate allocation to LEAs, 20% of funds was allocated on the basis of total public and private school enrollment, and 80% on the basis of school-age children in poor families. Thus, the foundation grants incorporate a mixture of factors related to poverty or Title I-A grants, plus total school-age population or enrollment. In particular, the substate allocation formula for Title II-A is very similar to the substate formula for the Class Size Reduction Program. Overall, while proportions differ, formulas for the antecedent programs are similar to the factors used to allocate the remaining Title II-A funds, although less current population and other data are involved since the foundation grants are based on FY2001 population and other factors. Population Factor. In the allocation of funds to states, 35% of funds above the amount necessary to provide foundation grants is allocated on the basis of total school-age population (ages 5-17) and 65% on the basis of school-age population in poor families. In the suballocation of state total grants to LEAs, 20% of funds above the amount necessary to provide foundation grants is allocated on the basis of total school-age population and 80% on the basis of school-age population in poor families. LEA Minimum Grant or " Hold Harmless " Level. There is no direct LEA "hold harmless" provision, but see the foundation grant entry above. Minimum State Grant. Each state is to receive a minimum of 0.5% of total grants (i.e., both the foundation grant formulas and the formula for allocation of funds above the foundation grant level incorporate a 0.5% state minimum). Ratable Reduction. If funds are insufficient to provide full foundation grants to each state, grants are reduced by the same percentage for all states until they equal the aggregate level of appropriations. Fiscal Requirements. Title II-A is one of may "covered programs" to which a general ESEA maintenance of effort requirement applies. Recipient LEAs must provide, from state and local sources, a level of funding (either aggregate or per pupil) in the preceding year that is at least 90% as high as in the second preceding year. In addition, Title II-A funds must be used so as to supplement, and not supplant , state and local funds that would otherwise be available for activities authorized under this program. Treatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Puerto Rico is treated as a state under the Title II-A formula. One-half of one percent of total Title II-A state grants is reserved for grants to the Bureau of Indian Affairs and the same amount is reserved for the Outlying Areas. Other Reservations from Appropriations. At the state level, up to 5% of grants may be reserved for administration and other state activities. Of this amount, the lesser of: (i) 2.5% of each state's grant, or (ii) an annually specified lower percentage that would result in a national total of $125 million, may be reserved for grants to local partnerships consisting of an institution of higher education, a college-level school of arts and sciences, and a high need LEA (with either 10,000 or more children from poor families or a school-age poverty rate of at least 20%, and a high percentage of teachers who are not highly qualified). Teacher and Principal Training and Recruiting Fund Allocation Formula Stage 1: Calculation of State Total Teacher and Principal Training and Recruiting Fund Allocations If appropriations are equal to or less than the FY2001 level Step 1: Final State Grant = ( S_EIS_01 + S_CSR_01 ) * ( APP / APP_01 ) In Step 1, if appropriations are equal to or less than the FY2001 level, each state receives an equal proportion of its FY2001 grants under the two antecedent programs. This proportion is equal to the total amount available for state grants in the current year (after all national reservations) divided by the comparable amount for FY2001. If appropriations exceed the FY2001 level Step 1: Preliminary State Grant = S_EIS_01 + S_CSR_01 + ( EXCESS * 0.35 ) * ( POP / ∑ POP ) + ( EXCESS * 0.65 ) * ( POV / ∑ POV ) In Step 1, if total appropriations exceed those for the two antecedent programs in FY2001, each state first receives its FY2001 grant under those programs. Of the remaining funds available for state grants, 35% is allocated in proportion to state share of total population aged 5-17, and 65% is allocated in proportion to population aged 5-17 in poor families. Step 2: Final State Grant = Preliminary State Grant * S_MIN_ADJ, or S_MIN if greater In Step 2, if total state grant appropriations exceed the FY2001 level, each state's final grant is equal to the greater of: (i) the amount calculated in Step 1 multiplied by a (downward) adjustment to pay for increased grants to states where the initial (Step 1) grant was less than the minimum, or (ii) the state minimum. Stage 2: Calculation of Teacher and Principal Training and Recruiting Fund LEA Allocations If appropriations are equal to or less than the FY2001 level Final LEA Grant = ( L_EIS_01 + L_CSR_01 ) * ( S_ALL / S_ALL_01 ) If appropriations are equal to or less than the FY2001 level, each LEA receives an equal proportion of its FY2001 grants under the two antecedent programs. This proportion is equal to the total amount available for state grants in the current year (after all national reservations) divided by the comparable amount for FY2001. If appropriations exceed the FY2001 level Final LEA Grant = L_EIS_01 + L_CSR_01 + ( POP / ∑ POP ) * ( S_EXCESS * 0.2 ) + ( POV / ∑ POV ) * ( S_EXCESS * 0.8 ) Of the state total allocation, after LEAs receive their foundation grants (FY2001 amounts under the two antecedent programs), 20% of the excess state allocation is allocated on the basis of each LEA's share of the state total of the total population aged 5-17, and 80% on the basis of population aged 5-17 from poor families. Where: S_EIS_01 = State total Eisenhower Professional Development Program grant, FY2001 S_CSR_01 = State total Class Size Reduction Program grant, FY2001 APP = Appropriation (for the current year) APP_01 = Total appropriation for FY2001 state grants under the Eisenhower Professional Development and Class Size Reduction Programs ($2,062,620,000) EXCESS = Appropriation in excess of total Eisenhower Professional Development Program and Class Size Reduction Program grants, FY2001 POP = Total population aged 5-17 POV = Population aged 5-17 in poor families S_MIN == State minimum allocation S_MIN_ADJ = State minimum adjustment (proportional increase (in small states) or decrease (in other states) to apply the statewide minimum grant) L_EIS_01 = LEA Eisenhower Professional Development Program grant, FY2001 L_CSR_01 = LEA Class Size Reduction Program grant, FY2001 S_ALL = State total allocation for grants to LEAs, current year S_ALL_01 = State total allocation for grants to LEAs under the antecedent programs, FY2001 S_EXCESS = State allocation for grants to LEAs, current year, in excess of the FY2001 level ∑ = Sum (for all states in the nation in Stage 1, and for all LEAs in the state in Stage 2) Part B authorizes grants to eligible partnerships—that include an SEA, an engineering, mathematics, or science department of an institution of higher education (IHE), and a high-need LEA—for activities that include professional development, summer workshops or institutes, and recruitment of mathematics and science teachers, as well as development of rigorous curricula in these fields. Title II-B funds are allocated to states by formula if appropriations are equal to or greater than $100 million, as has been the case in recent years. Population Factor. Children aged 5-17 in poor families, according to the latest available estimates for LEAs from the Census Bureau. Minimum State Grant. Each state is to receive a minimum of 0.5% of total funds available for grants to states. Fiscal Requirements. Title II-B funds must be used so as to supplement, and not supplant , state and local funds that would otherwise be available for the activities authorized under this program. Treatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Puerto Rico and the Outlying Areas are treated fully as states. Other Reservations from Appropriations. Of the total amount appropriated for Title II-B, 0.5% of total appropriations is reserved for a national evaluation. There is no specific authority for this reservation in Title II-B itself, rather it appears to be an exercise of general authority—in ESEA Title IX, Part F—for the Secretary to reserve up to 0.5% of appropriations for any ESEA programs, except those under Titles I and III, for evaluation activities. Mathematics and Science Partnerships Allocation Formula State Grant = [ ( PF / ∑ PF ) * APP ] * S_MIN_ADJ, or S_MIN if greater Each state receives a Mathematics and Science Partnerships grant equal to the greater of (1) its proportional share of the population factor for all states, adjusted downward to provide funds to raise the smallest states to the state minimum level, or (2) the state minimum grant. Where: PF = Population factor APP = Appropriation for Mathematics and Science Partnerships grants to states S_MIN_ADJ = State minimum adjustment (proportional decrease to apply the statewide minimum grant) S_MIN = State minimum grant ∑ = Sum (for all states) Part D authorizes the Education Technology State Grants (EdTech) program, which is intended to help elementary and secondary schools improve student academic achievement by utilizing technology. Formula grants are made to states based on the proportion of Title I-A funds received by each state relative to the total amount of funding provided through Title I-A. States subsequently award 50% of the grants in the form of formula subgrants to all eligible LEAs that submit an application for authorized activities. Each LEA receives the same proportion of funding from the 50% that it received under Title I, Part A for the same year. The remaining EdTech funds are awarded competitively to high-need districts or local partnerships through a state- determined, competitive process. All local formula and competitive grant recipients must use at least 25% of the funds received for continual and effective professional development. Other funds may be used for relevant technology-related purposes, such as the development or expansion of the Internet and other technology efforts to connect schools and teachers with parents and students. The discussion below relates only to the portion of Title II-D funds that is allocated by formula. Title I-A Grant Factor. Grants are allocated to states in proportion to total Title I-A grants (calculated as if no LEA hold harmless were applied). Minimum State Grant. Each state is to receive at least 0.5% of total state grants. Maximum SEA and Eligible Entity Reservations for Administration, Evaluation, and Technical Assistance. No recipient of funds may use more than 5% of the funds received for administrative costs or technical assistance, of which not more than 60% may be used by the recipient for administrative costs. Fiscal Requirements. Title II-D is one of may "covered programs" to which a general ESEA maintenance of effort requirement applies. Recipient LEAs must provide, from state and local sources, a level of funding (either aggregate or per pupil) in the preceding year that is at least 90% as high as in the second preceding year. Title II-D funds must also be used to supplement, not supplant , state and local funds that would otherwise be available for the activities authorized under this program. Treatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Puerto Rico is treated as a state. Grants to the Outlying Areas are provided through a reservation of 0.5% of Title II-D appropriations specifically available for state and local technology grants. Grants to the Bureau of Indian Affairs are provided through a reservation of 0.75% of Title II-D appropriations specifically available for state and local technology grants. Other Reservations from Appropriations. Not more than 2% of the total Title II-D appropriation may be reserved for studies and other national technology activities. Education Technology State Grants Allocation Formula Stage 1: Calculation of State Total Education Technology Grant State Grant = [ ( T1A / ∑ T1A ) * APP ] * S_MIN_ADJ, or S_MIN, if greater Each state receives an EdTech grant equal to its proportional share of total grants under ESEA Title I, Part A, adjusted downward to provide funds to raise the smallest states to the state minimum level. If funds are sufficient, no state receives less than its minimum grant amount. Stage 2: Calculation of LEA Formula Grant LEA Grant = ( L_T1A / ∑ L_T1A ) * ST_APP] Each LEA receives an EdTech grant equal to its proportional share of total grants provided to LEAs in the state under ESEA Title I, Part A. Where: T1A = State total grant under ESEA Title I, Part A, but calculated as these grants would be if no LEA hold harmless were applied APP = Appropriation S_MIN_ADJ = State minimum adjustment (proportional decrease to apply the statewide minimum grant) S_MIN = State minimum grant L_T1A = LEA total grant under ESEA Title I, Part A ST_APP = Amount of state total grant used to made formula grants to LEAs ∑ = Sum (for all states or LEAs) Title III-A authorizes formula grants to states to ensure that limited English proficient (LEP) students and immigrant children develop English proficiency. Grants to the 50 states, the District of Columbia, and Puerto Rico are determined based on the state's proportional share of LEP students and immigrant students relative to the U.S. population of LEP students and immigrant students. For the purposes of this report section, the term "state" includes the District of Columbia and the Commonwealth of Puerto Rico. States are required to distribute funds to eligible local entities based on the number of LEP students in schools served by the entity relative to the total population of LEP students served by all eligible entities in the state. If this calculation would result in an eligible entity receiving a grant of less than $10,000, the SEA may not provide the subgrant. While 95% of the state allocation must be distributed to the local level, the SEA must reserve up to 15% of its allotment to award subgrants to eligible entities that have experienced a "significant increase" in the percentage or number of immigrant students who have enrolled during the prior fiscal year in public and non-public elementary and secondary schools in the geographic area served by the eligible entity. These subgrants, however, do not have to be awarded by a formula. Population Factors. Grants are determined based on the state's proportional share of LEP students and immigrant students relative to the U.S. population of LEP students and immigrant students. These shares are then weighted with a higher weight (0.8) being assigned to the state's population of LEP students and a lower weight (0.2) being assigned to the state's population of recent immigrant students. In determining the number of LEP and immigrant students in an individual state and in the United States, statutory language directs ED to use "the more accurate" of (1) data available from the American Community Survey (ACS), or (2) the number of children being assessed for English proficiency as required under Title I-A of the ESEA. In practice, ED has been using the ACS data to make state allocations since FY2005. Title III grants for a specific fiscal year have been based on ACS data from two years prior. For example, FY2008 grants are based on the 2006 ACS data. Minimum State Grant. No state can receive a grant of less than $500,000. Maximum SEA and LEA reservations for Administration, Evaluation, and Technical Assistance. Each SEA may not reserve more than 5% of its allotment to carry out professional development activities, planning, evaluation, administration, technical assistance, or recognition of subgrantees that have exceeded their annual measurable achievement objectives. Each eligible entity receiving funds may not use more than 2% of such funds for administration. Fiscal Requirements. Title III-A is one of may "covered programs" to which a general ESEA maintenance of effort requirement applies. Recipient LEAs must provide, from state and local sources, a level of funding (either aggregate or per pupil) in the preceding year that is at least 90% as high as in the second preceding year. In addition, Title III funds must be used so as to supplement the level of federal, state, and local funds that, in the absence of Title III funds, would have been expended to support programs for LEP and immigrant children and youth. Further, Title III funds shall not be used to supplant such federal, state, and local funds; that is, Title III funds may not be used to pay for services that, in the absence of Title III funds, would be required to be provided by other federal, state, or local funds. Treatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Puerto Rico is treated as a state, but its grant may not exceed 0.5% of the total available for state grants. Grants to the Outlying Areas are provided through a reservation of 0.5% of the total Title III-A appropriations. There is no specific reservation for the Bureau of Indian Affairs, but funds are available to support students in BIA schools (see below). Other Reservations from Appropriations. The Secretary of Education is required to reserve the greater of 0.5% or $5 million of the total Title III-A appropriation for grants to eligible entities that operate elementary, secondary, and postsecondary schools predominantly for Native American and Alaska Native children. Eligible entities include, for example, an Indian tribe or an elementary or secondary school that is operated or funded by the BIA. The Secretary is also required to reserve 6.5% of the total Title III-A appropriation for national activities. Of the reserved funds, not more than 0.5% of total Title III-A appropriations may be used for evaluation activities, and not more than $2 million may be reserved for the National Clearinghouse for English Language Acquisition and Language Instruction Educational Programs (NCELA). English Language Acquisition State Grants Allocation Formula Stage 1: Calculation of State English Language Acquisition Grant State Grant = [ (( LEP / ∑ LEP ) * 0.8) + ((RIM / ∑ RIM ) * 0.2) * APP ] * S_MIN_ADJ, or S_MIN, if greater Each state receives an English Language Acquisition grant equal to its proportional share of LEP children and recent immigrant children weighted by 0.8 and 0.2, respectively, adjusted downward to provide funds to raise the smallest states to the state minimum level. Stage 2: Calculation of English Language Acquisition Grant for an Eligible Entity Eligible Entity Grant = (EE_LEP / ∑ EE_LEP) * ST_APP Each eligible entity receives an English Language Acquisition grant equal to its proportional share of LEP students in schools served by the eligible entity. If this calculated amount is less than $10,000, the eligible entity may not receive a grant. Where: LEP = Number of limited English proficient students in a state RIM = Number of recent immigrant children and youth in a state APP = Appropriation S_MIN_ADJ = State minimum adjustment (proportional decrease to apply the statewide minimum grant) S_MIN = State minimum grant EE_LEP = Number of limited English proficient students in schools served by the eligible entity ST_APP = Amount of state total grant used to made formula grants to eligible entities ∑ = Sum (for all states or eligible entities) Title IV-A is the federal government's major initiative to prevent drug abuse and violence in and around schools. One-half of state grant funds is allocated on the basis of total population aged 5-17, and one-half is allocated in proportion to Title I-A Concentration Grants, with a minimum grant amount of the greater of 0.5% of total funding for state grants or each state's grant for FY2001. SEAs subsequently make formula grants to LEAs based on each LEA's share of total Title I-A funding (60%) and share of enrollment in public and private non-profit elementary and secondary schools (40%). Title IV-A also provides funds to state governors to create programs to deter youth from using drugs and committing violent acts in schools, and for national programs supporting a variety of national leadership projects designed to prevent drug abuse and violence in elementary and secondary schools (e.g., the Safe Schools/Healthy Students initiative). Population Factor. In the allocation of funds to states , 50% of the appropriations available for grants to states is allocated in proportion to total school-age (ages 5-17) population. In the allocation of state total grants to LEAs , 40% of state total funds is distributed on the basis of total K-12 enrollment in public and private, non-profit schools. Title I-A Grant Factor. In the allocation of funds to states , 50% of the appropriations available for grants to states is allocated in proportion to Title I-A Concentration Grants (calculated as if no LEA hold harmless were applied). In the allocation of state total grants to LEAs , 60% of state total funds is distributed in proportion to total Title I-A grants. Minimum State Grant. If sufficient funds are appropriated, each state is to receive the greater of two minimum amounts: (a) 0.5% of total allocations to states; or (b) a hold harmless amount equal to the state's FY2001 allocation under this program. If appropriations are insufficient to provide the full FY2001 minimum to all states, as has been the case in some recent years, each state receives an equal proportion of its FY2001 grant. (Since the 0.5% minimum was applied to FY2001 grants as well, this also provides each state with at least 0.5% of current state grants.) Fiscal Requirements. Title IV-A is one of many "covered programs" to which a general ESEA maintenance of effort requirement applies. Recipient LEAs must provide, from state and local sources, a level of funding (either aggregate or per pupil) in the preceding year that is at least 90% as high as in the second preceding year. Also, Title IV-A funds must be used so as to supplement, and not supplant , state and local funds that would otherwise be available for the activities authorized under this program. Treatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Puerto Rico is treated as a state. Grants to the Outlying Areas are provided through reservation of the greater of 1% of state grant appropriations, or $4,750,000, whichever is greater, to be allocated among the Outlying Areas at the discretion of the Secretary. An additional 1% of state grants or $4,750,000 (whichever is greater) is reserved for the Bureau of Indian Affairs, and 0.2% of state grants is reserved for programs serving Native Hawaiians. Other Reservations from Appropriations. At the national level , of the total amount appropriated for state grants under Title IV-A, up to $2 million may be reserved for a national evaluation. At the state level , the chief state executive officer may reserve up to 20% of state total grants for competitive grants. Of the remaining state funds, up to 3% may be reserved by the SEA for state administration costs, and up to 5% for statewide activities; regardless of these separate limits, at least 93% (i.e., not 92%) of state grants remaining after the state's chief executive officer's reservation is to be allocated to LEAs. Safe and Drug Free Schools and Communities Allocation Formula Stage 1: Calculation of State Total Safe and Drug-Free Schools and Communities Allocations Step 1: Preliminary State Grant = ( APP * 0.5 ) * ( T1A_CON / ∑ T1A_CON ) + ( APP * 0.5 ) * (PF / ∑ PF) In Step 1, one-half of the appropriations available for state grants is multiplied by the state share of the national total of Title I-A Concentration Grants, and one-half is multiplied by the state share of the population factor. Step 2: S_MIN = Greater of ( APP * 0.005 ) or FY2001 Grant In Step 2, the state minimum is calculated as the greater of 0.5% of total state grants or each state's Safe and Drug-Free Schools and Communities grant for FY2001. Step 3a: If appropriations exceed the FY2001 level Final State Grant = Preliminary State Grant * S_MIN_ADJ, or S_MIN if greater In Step 3a, if total state grant appropriations exceed the FY2001 level ($439,250,000), each state's final grant is equal to the amount calculated in Step 1 multiplied by a (downward) adjustment to pay for increased grants to states receiving the minimum grant amount, or the state minimum, which is greater. Step 3b: If appropriations are equal to or less than the FY2001 level Final State Grant = S_MIN * ( APP / APP_01 ) In Step 3b, if appropriations are equal to or less than the FY2001 level, each state receives an equal proportion of its FY2001 grant. This proportion is equal to the total amount available for state grants in the current year (after all national reservations) divided by the comparable amount for FY2001. Stage 2: Calculation of LEA Safe and Drug-Free Schools and Communities Allocations Final LEA Grant = ( PF / ∑ PF ) * ( S_ALL * 0.4 ) + ( T1A / ∑ T1A ) * ( S_ALL * 0.6 ) Of the state total allocation, 40% is allocated on the basis of each LEA's share of the state total of the population factor, and 60% on the basis of total Title I-A grants. Where: APP = Appropriation (for the current year) T1A_CON = Title I-A Concentration Grants (calculated as if no LEA hold harmless were applied) PF = Population factor S_MIN = State minimum allocation S_MIN_ADJ = State minimum adjustment (proportional increase (in small states) or decrease (in other states) to apply the statewide minimum grant) APP_01 = Appropriation for FY2001 ($439,250,000) S_ALL = State total allocation (less funds reserved by the SEA and the chief state executive officer) T1A = Total Title I-A Grants ∑ = Sum (for all states in the nation in Stage 1, and for all eligible LEAs in the state in Stage 2) Title IV-B supports activities provided during non-school hours that offer learning opportunities for school-aged children. Formula grants are made to states based on state shares of Title I-A grants. States subsequently award grants to local entities (e.g., LEAs, community-based organizations) on a competitive basis for a period of three to five years. SEAs are required, to the extent possible, to distribute funds equitably among the various geographic areas within the state, including urban and rural communities. Eligible entities are to serve primarily students who attend schools eligible for school wide programs under Title I-A and the families of these students. Eligible entities may use funds for before- and after-school activities that advance student academic achievement. The program's focus, however, is currently on providing after-school activities for children and youth, and literacy-related activities for their families. Title I-A Grant Factor. Grants are allocated to states in proportion to total Title I-A grants (calculated as if no LEA hold harmless were applied). Minimum State Grant. Each state is to receive at least 0.5% of total state grants. Fiscal Requirements. Title IV-B is one of many "covered programs" to which a general ESEA maintenance of effort requirement applies. Recipient LEAs must provide, from state and local sources, a level of funding (either aggregate or per pupil) in the preceding year that is at least 90% as high as in the second preceding year. Also, Title IV-B funds must be used so as to supplement, and not supplant , state and local funds that would otherwise be available for the activities authorized under this program. Treatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Puerto Rico is treated as a state. Grants to the Outlying Areas and the Bureau of Indian Affairs are provided through reservation of up to 1% of total Title IV-B appropriations. Other Reservations from Appropriations. At the national level, of the total amount appropriated for Title IV-B, up to 1% may be reserved by the Secretary for national activities. At the state level, up to 2% of grants may be reserved for administration and up to 3% for evaluation and technical assistance. 21 st Century Community Learning Centers Allocation Formula State Grant = [ ( T1A / ∑ T1A ) * APP ] * S_MIN_ADJ, or S_MIN, if greater Each state receives a 21 st Century Community Learning Center grant equal to its proportional share of total grants under ESEA Title I, Part A, multiplied by a (downward) adjustment to pay for increased grants to states receiving the minimum grant amount, or the state minimum, which is greater. Where: T1A = State total grant under ESEA Title I, Part A, but calculated as these grants would be if no LEA hold harmless were applied APP = Appropriation for state grants S_MIN_ADJ = State minimum adjustment (proportional decrease to apply the statewide minimum grant) S_MIN = State minimum grant ∑ = Sum (for all states) Title V, Part A authorizes the Innovative Programs block grant, under which aid may be provided to SEAs and LEAs that could be used for an especially wide range of educational services and activities. Part A grants are allocated to states on the basis of total population aged 5-17, with a state minimum grant amount of 0.5% of total funding for state grants. At least 85% of Title V-A funds must be allocated by SEAs to LEAs on the basis of state-developed formulas that take into consideration each LEA's enrollment of pupils in public and private schools, with adjustments to provide increased grants per pupil to LEAs with the greatest numbers or percentages of "high cost" pupils, including those from economically disadvantaged families and those living in sparsely populated areas or areas of concentrated poverty. Because the formulas for suballocation of state total grants to LEAs are developed by the states, the discussion below will focus on the national formula for allocation to states only. Of the Part A funds that may be retained by states (i.e., up to 15% of state total grants), no more than 15% of these amounts may be used for administrative costs; remaining funds reserved by states are to be used for one or more of seven specified types of programs and services, including the broad categories of statewide education reform, school improvement programs and technical assistance activities. LEAs may use their Part A funds for any of 27 different types of "innovative assistance programs." Whereas several of these are relatively specific (e.g., programs to provide same gender schools and classrooms), others are more general (e.g., promising education reform projects). Although this program and its direct predecessors were funded for each of FY1982-2007, no appropriation has been provided for this program since FY2007. Population Factor. In the allocation of funds to states, the population factor is total school-age (5-17 years) children. While substate allocation formulas are ultimately determined by the states, for the suballocation of state grants to LEAs, the population factor is each LEA's enrollment of pupils in public and private schools, with state-determined adjustments to provide increased grants per pupil to LEAs with the greatest numbers or percentages of "high cost" pupils, including those from economically disadvantaged families and those living in sparsely populated areas or areas of concentrated poverty. State Minimum. Each state is to receive at least 0.5% of total state grants. Fiscal Requirements. Under a separate (but substantively identical to others in the ESEA) maintenance of effort requirement, recipient states must provide, from state and local sources, a level of funding (either aggregate or per pupil) in the preceding year that is at least 90% as high as in the second preceding year. In addition, funds must be used so as to supplement, and not supplant , any other state, local or federal funds. Treatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Puerto Rico is treated as a state. One percent of total appropriations is reserved for grants to the Outlying Areas. The Bureau of Indian Affairs receives no funds under this program. Other Reservations from Appropriations. Of the total received by each state, an amount equal to at least 85% of the state's FY2002 grant, plus 100% of the excess over FY2002 (50% for states receiving the minimum grant), must be allocated to LEAs. Remaining funds, if any, could be used for state level activities, with a maximum of 15% of these used for administration. Innovative Programs Allocation Formula State Grant = ( PF / ∑ PF) * APP * S_MIN_ADJ, or S_MIN if greater State grants are equal to the state share of the population factor, multiplied by the appropriation, multiplied by a (downward) adjustment to pay for increased grants to states receiving the minimum grant amount, or the state minimum, whichever is greater. Where: PF = Population factor APP= Appropriation S_MIN_ADJ = State minimum adjustment (proportional increase (in small states) or decrease (in other states) to apply the statewide minimum grant) S_MIN = State minimum ∑ = Sum (for all states) Subpart 1 of Title VI-A authorizes grants to states for the development and enhancement of assessments meeting the requirements of Title I-A. In the allocation of funds, each state first receives $3 million per year, and remaining funds, if any, are allocated in proportion to population aged 5-17. Of the amount appropriated for this program each year, a minimum or "trigger" amount is to be allocated as state formula grants. Funds appropriated each year for state assessment grants that are in excess of "trigger" amounts are to be used for enhanced assessment grants, that are allocated through competition, not a formula. For FY2008, the "trigger" amount is $400 million; therefore, $400 million is allocated by formula, and the remainder of the FY2008 appropriation for Title VI-A ($8,732,000) is allocated competitively. Foundation Grant. Each state initially receives $3 million per year. Population Factor. After the payment of foundation grants to each state, remaining funds, if any, are allocated to states in proportion to total population aged 5-17. Fiscal Requirements. Title VI-A-1 funds must be used so as to supplement, and not supplant , state and local funds that would otherwise be available for the activities authorized under this program. Treatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Puerto Rico is treated as a state. Of the total appropriated for Title VI-A-1, 0.5% is reserved for grants to the Outlying Areas and 0.5% for the Bureau of Indian Affairs. State Assessment Grants Allocation Formula State Grant = $3,000,000 + ( ( PF / ∑ PF ) * ( APP - $156,000,000) ) Each state receives $3 million plus a share of remaining funds that is proportional to its share of total school-age (5-17) population in all of the states. Where: PF = Population factor APP = Appropriation for State Assessment Grants formula grants to states (i.e., "trigger" amount) ∑ = Sum (for all states) Subpart 1 of Title VI-B authorizes the Small, Rural School Achievement Program (SRSA), that provides flexibility in the use of funds under several ESEA programs to rural LEAs with fewer than 600 pupils (or meeting certain other criteria). Eligible LEAs may also receive additional grants, although these are offset by amounts received by these LEAs under certain ESEA programs. Among ESEA formula grant programs, the SRSA is unique in that an initial grant, ranging from $20,000 to $60,000, is first calculated for each eligible LEA. Then, the amounts received by each LEA under certain ESEA programs (see below) is subtracted from the initial grant, and the final grant to each LEA is the remainder (if any) after this deduction. The rationale for this procedure is that the SRSA is intended to supplement funds provided under certain other ESEA programs. SRSA funds may be used for any purpose authorized under ESEA Title I, Part A (Education for the Disadvantaged), Title II, Part A (Teacher and Principal Training and Recruiting Fund), Title II, Part D (Enhancing Education Through Technology), Title III (English Language Acquisition), Title IV, Part A (Safe and Drug-Free Schools and Communities), Title IV, Part B (21 st Century Community Learning Centers), or Title V, Part A (Innovative Programs). Grants are calculated on the basis of LEAs. State total grants are simply the total of final grants calculated on behalf of the state's eligible LEAs. Population Factor (initial grant calculation). The number of students in average daily attendance (ADA) at the public schools operated by eligible LEAs. Eligibility Criteria. Only small, rural LEAs are eligible for grants. These are defined as LEAs in which all of the schools have a rural locale code, and either the total enrollment of the LEA is 600 or less, or the total population density of the county in which the LEA is located is less than 10 persons per square mile. LEAs receiving grants under this program are not eligible to receive a grant under Title VI, Part B, Subpart 2 (below). Expenditure Factor. The initial grant for each eligible LEA is equal to $20,000 plus $100 multiplied by the number of students in the population factor in excess of 50 students. The initial amount may not exceed $60,000. Deduction from Initial Grant. Initial grants are reduced by the total of grants to the LEA under the following programs: (1) the Teacher and Principal Training and Recruiting Fund (ESEA Title II, Part A, Subpart 2); (2) Enhancing Education Through Technology (ESEA Title II, Part D); (3) Safe and Drug-Free Schools and Communities (Title IV, Part A); and (4) Innovative Programs (ESEA Title V, Part A). If the total deduction is equal to or greater than the initial grant, the LEA receives no funds under the SRSA program. Ratable Reduction. After net initial grants are calculated, if appropriations are insufficient to pay the total of these amounts, grants are reduced by the same percentage for all LEAs until they equal the aggregate level of appropriations. If, on the other hand, sufficient funds are available to give all eligible LEAs an amount in excess of their initial grant, the initial grants are ratably increased, although the $60,000 maximum grant is maintained. Fiscal Requirements. SRSA funds must be used so as to supplement, and not supplant , any other federal, state or local funds. Treatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Puerto Rico and the Outlying Areas are treated as states. There is no provision for grants to the Bureau of Indian Affairs. Small Rural Schools Achievement Program Allocation Formula Step 1: Initial Grant 1 = $20,000 + ( ( ADA - 50 ) * $100) In Step 1, each LEA receives an initial grant of $20,000 plus $100 for each student in average daily attendance in excess of 50 students. Step 2: Initial Grant 2 = Initial Grant 1 or $60,000, whichever is less In Step 2, a maximum of $60,000 is applied to the initial grant. Step 3: Initial Grant 3 = Initial Grant 2 - ( T2A + T2D + T4A + T5A ) or $0, whichever is greater In Step 3, the LEA total of grants received under ESEA Title II, Part A; Title II, Part D; Title IV, Part A; and Title V, Part A is subtracted from the amount calculated in Step 2. If this amount is equal to zero or less, the LEA receives no SRSA grant. Step 4: Final Grant = ( Initial Grant 3 / ∑ Initial Grant 3 ) * APP In Step 4, each eligible LEA receives a share of available appropriations that is proportional to its grant amount calculated in Step 3. Where: ADA = LEA students in average daily attendance T2A = LEA grant under ESEA Title II, Part A T2D = LEA grant under ESEA Title II, Part D T4A = LEA grant under ESEA Title IV, Part A T5A = LEA grant under ESEA Title V, Part A APP = Appropriation ∑ = Sum (for all eligible LEAs) Subpart 2 of Title VI-B authorizes the Rural and Low-Income School Program (RLIS), under which grants are made to rural LEAs, defined somewhat differently than under the SRSA program, that do not receive grants under the SRSA program and that have a school-age child poverty rate of 20% or more. The RLIS grants may be used for a variety of ESEA-related purposes, including (1) teacher recruitment, retention, and professional development; (2) parental involvement activities; and (3) activities authorized under ESEA Title I-A (Education for the Disadvantaged), Title II-D (Education Technology), Title IV-A (Safe and Drug-Free Schools and Communities), or Title III (English Language Acquisition). Under the RLIS program, funds are generally allocated initially to SEAs, based on the state total number of population factor students in eligible LEAs relative to the national total of such students. However, if a SEA did not apply for RLIS grants, eligible LEAs might apply directly to ED for RLIS funds, based on the LEA's number of population factor students relative to the national total of such students. As of FY2007, all RLIS funds have been allocated via SEAs. When RLIS grants are made via SEAs, states may suballocate funds among eligible LEAs in one of 3 ways: (1) on a competitive basis; (2) on the basis of the population factor used to allocate RLIS funds to states; or (3) on the basis of a state-developed alternative formula, approved by the Secretary of Education, that increases the share of funds going to LEAs with a concentration of children in poor families. Population Factor. The RLIS population factor is the number of students in average daily attendance (ADA) at the schools operated by eligible LEAs (see immediately below). Eligibility Criteria. Only rural LEAs with relatively high school-age child poverty rates are eligible for grants. These are defined as LEAs in which all of the schools have a rural locale code, and the percentage of school-age children from poor families is at least 20%. LEAs receiving grants under the SRSA program (above) are not eligible to receive a grant under the RLIS program. Fiscal Requirements. RLIS is one of many "covered programs" to which a general ESEA maintenance of effort requirement applies. Recipient LEAs must provide, from state and local sources, a level of funding (either aggregate or per pupil) in the preceding year that is at least 90% as high as in the second preceding year. In addition, RLIS funds must be used so as to supplement, and not supplant , any other federal, state or local funds. Treatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Puerto Rico is treated as a state. One-half of one percent of total RLIS grants is reserved for grants to the Bureau of Indian Affairs and the same amount is reserved for the Outlying Areas. Other Reservations from Appropriations. At the state level, up to 5% of grants may be used for administration and technical assistance. Rural and Low-Income Schools Allocation Formula State Grant = ( ADA / ∑ ADA ) * APP The grant is equal to the state total number of students in average daily attendance in schools operated by eligible LEAs compared to the national total number of such students (where grants are made via SEAs, as is the case for all funds currently). Where: ADA = Students in average daily attendance in eligible LEAs APP = Appropriation ∑ = Sum (for all eligible LEAs) Subpart 1 of Title VII-A authorizes grants to LEAs and to schools operated or funded by the Bureau of Indian Affairs (BIA). Eligible LEAs must generally meet Indian pupil enrollment thresholds of at least 10 pupils or 25% of total enrollment. Formula grants are allocated on the basis of the number of Indian pupils and the greater of the average per pupil expenditure for the state or 80% of the national average. The formula grants may be consolidated with grants under other federal education programs serving Indian pupils (under a demonstration project authority); and may be used for comprehensive programs of educational services for Indian pupils, such as culturally related activities and curriculum content, substance abuse prevention, and family literacy programs. The state total for this program is the sum of grants awarded to eligible LEAs in the state. Population Factor. Indian children and youth enrolled in educational programs provided by an LEA. Eligibility Threshold. In most cases, LEAs are eligible for grants if they enroll at least 10 Indian pupils or Indian pupils constitute at least 25% of total enrollment. These thresholds do not apply to LEAs located in Alaska, California, or Oklahoma, or on or near an Indian reservation. Eligible LEAs must establish a committee, a majority of whose members are parents of Indian children, to develop a program for the use of funds received under this Subpart. If the LEA fails to meet this requirement, an Indian tribe representing at least one-half of the Indian children served by the LEA may apply for the grant. Expenditure Factor. The expenditure factor is the state average per pupil expenditure in average daily attendance, or 80% of the national average, whichever is greater. Ratable Reduction. After maximum grants (population factor multiplied by the expenditure factor) are calculated, if appropriations are insufficient to pay the maximum amounts, these amounts are reduced by the same percentage for all LEAs until they equal the aggregate level of appropriations, subject to the LEA minimum grant provision (below). LEA Minimum Grant. If sufficient funds are available, each eligible LEA is to receive a minimum of $3,000. This minimum may be raised to $4,000 "if the Secretary determines such increase is necessary to ensure the quality of the programs provided" (Sec. 7113(b)(3)). Fiscal Requirements. Recipient LEAs must provide, from state and local sources, a level of funding (either aggregate or per pupil) in the preceding year that is at least 90% as high as in the second preceding year. Treatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. Puerto Rico and the outlying areas are treated as states. The Bureau of Indian Affairs (Education) receives a grant under the same formula as used for grants to LEAs, based on the total number of Indian students enrolled in schools funded by the Bureau. Other Reservations from Appropriations. At the LEA level, up to 5% of grants may be reserved for administration. Indian Education Allocation Formula Step 1: Preliminary LEA Grant = PF * EF In Step 1, maximum grants, equal to the population factor multiplied by the expenditure factor, are calculated for each LEA meeting the Indian student enrollment eligibility threshold (where applicable). Step 2: LEA Grant 2 = ( Preliminary LEA Grant / ∑ Preliminary LEA Grant ) * APP * L_MIN_ADJ, or L_MIN if greater In Step 2, maximum grants, as calculated in Step 1, are adjusted through application of the LEA minimum grant provision. Where: PF = Population factor EF = Expenditure factor APP = Appropriation L_MIN_ADJ = LEA minimum grant adjustment (proportional decrease, in LEAs not benefitting from the minimum LEA grant provision, to apply the LEA minimum grant) L_MIN = LEA minimum grant ∑ = Sum (for all eligible LEAs) The Impact Aid program compensates LEAs for "substantial and continuing burden" resulting from federal activities. These activities include federal ownership of certain federal lands, as well as the enrollments in LEAs of children of parents who work or live on federal land. The federal government provides compensation because these activities deprive LEAs of the ability to collect property or other taxes from these individuals even though LEAs are obligated to provide free public education to their children. Section 8003(b) authorizes payments directly to LEAs to compensate them for the cost of serving certain groups of federally connected children. The presence of these children can increase the number of children the LEA must serve without providing a commensurate increase in taxes that support public education. To be eligible for 8003(b) payments, an LEA must have at least 400 federally connected children, or such children must represent at least 3% of an LEA's average daily attendance (ADA). Population Factors. Each federally connected child is assigned to a category that has a specific weight associated with it. These weights are used to produce a weighted student count for each LEA that is used to determine grant amounts. The weights assigned to each category are shown in Table 12 . Federally connected children receiving the highest weights (i.e., 1.0 or above) have historically been referred to as "a" children, while students with lower weights have been referred to as "b" children. Expenditure Factor. Grants are calculated in part based on a local contribution rate (LCR). For most LEAs, the LCR used in this calculation is either one-half of the state APPE or one-half of the national APPE. Fiscal Requirements. An LEA is eligible for a basic support payment for any fiscal year only if the state SEA finds that either the combined fiscal effort per student or the aggregate expenditures of that LEA and the state with respect to the provision of free public education by that agency for the preceding fiscal year was not less than 90% of such combined fiscal effort or aggregate expenditure for the second preceding fiscal year. Treatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. LEAs in Puerto Rico and the Virgin Islands serving federally connected children are eligible to receive grants. Grants are not made to Outlying Areas or the BIA. Impact Aid Basic Support Payments Allocation Formula Step 1: WSC = ∑ (FCC * WGT) In Step 1, a weighted student count is calculated by multiplying each federally connected child by the appropriate weight and summing the total of these calculations. Step 2: MBSP = WSC * LCR In Step 2, the weighted student count calculated in Step 1 is multiplied by a local contribution rate to determine the LEA's maximum basic support payment. Step 3: LOT = ADA% + EXP% In Step 3, an LEA's Learning Opportunity Threshold (LOT) percentage is calculated. An LEA's LOT percentage is based on (1) the percentage of an LEA's average daily attendance that is composed of federally connected children plus (2) the percentage of an LEA's total current expenditures that is composed of Section 8003 payments. The LOT percentage cannot exceed 100%. Step 4: LOT_P = MBSP * LOT In Step 4, an LEA's maximum basic support payment is multiplied by its LOT percentage. This payment is known as an LEA's LOT payment. If appropriations are not sufficient to make 100% of LOT payments, LOT payments are (ratably) reduced. If appropriations exceed the amount needed to make LOT payments, but are not enough to provide maximum basic support payments, the percentage of LOT paid is increased. Where: WSC = Weighted student count FCC = Federally connected children WGT = Weights for categories of federally connected children MBSP = Maximum basic support payment LCR = Local contribution rate ADA% = Percentage of an LEA's average daily attendance that is composed of federally connected children EXP% = Percentage of an LEA's total current expenditure that is composed of Section 8003 payments LOT = Learning Opportunity Threshold percentage LOT_P = LOT payment ∑ = Sum (for weighted student count) Section 8003(d) authorizes payments directly to LEAs based on the number of certain federally connected children with disabilities who are eligible to receive services under the Individuals with Disabilities Education Act (IDEA). More specifically, payments are limited to certain IDEA-eligible children, most notably those whose parents are members of the Armed Forces (residing on or off military bases) and those residing on Indian lands. Population Factors. Weighted child counts are calculated for eligible federally connected children who are also eligible for IDEA by multiplying eligible "a" children by a factor of 1.0 and eligible "b" children by a factor of 0.5. An LEA's payment is its percentage share of the total weighted child count multiplied by the funds appropriated for Section 8003(d). Fiscal Requirements. An LEA is eligible for a basic support payment for any fiscal year only if the state SEA finds that either the combined fiscal effort per student or the aggregate expenditures of that LEA and the state with respect to the provision of free public education by that agency for the preceding fiscal year was not less than 90% of such combined fiscal effort or aggregate expenditure for the second preceding fiscal year. Treatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. LEAs in Puerto Rico and the Virgin Islands serving federally connected children are eligible to receive grants. Grants are not made to Outlying Areas or the BIA. Impact Aid Payments for Children with Disabilities Allocation Formula Step 1: WSC = [(HWC * 1.0) + (LWC * 0.5)] In Step 1, a weighted student count is calculated by multiplying each federally connected child eligible for IDEA by the appropriate weight. Step 2: LEA grant = (WSC /∑ WSC) * APP In Step 2, an LEA's weighted student count is divided by the total weighted student count and multiplied by the appropriation for Section 8003(d) to provide each LEA with a proportional share of available funds. Where: WSC = Weighted student count HWC = Federally connected children with high weights LWC = Federally connected children with low weights APP = Appropriation ∑ = Sum (of weighted student count for eligible LEAs) Section 8007 provides funds for construction and facilities upgrading to certain LEAs with high percentages of children living on Indian lands or children of military parents. Of these funds, 40% are used to make formula grants, and 60% are used to make competitive grants. This discussion focuses on funds awarded by formula . Formula grants are available to LEAs receiving Section 8003 payments and in which either (1) students living on Indian land constitute at least 50% of the LEA's total student enrollment, or (2) military students living on or off base constitute at least 50% of the LEA's total student enrollment. The funds available for formula grant construction payments are divided equally between these two groups of LEAs (i.e., 20% of total Section 8007 appropriation for each group). Grants for LEAs impacted by military dependent students are determined by dividing the total amount of available funding by the total number of weighted student units of military children living on or off base across all eligible LEAs, and multiplying this result by the total number of weighted student units of these children enrolled in an LEA. The same calculation is made for LEAs impacted by children living on Indian lands. Population Factors. At least 50% of an LEA's total student enrollment must be composed of either (1) military children living on or off base, or (2) children living on Indian lands. These student counts are then multiplied by their relevant weights to produce a weighted student count. (See discussion of Section 8003(b) for additional information about these categories of students and the applicable weights.) Treatment of Puerto Rico, Outlying Areas, and the Bureau of Indian Affairs. LEAs in Puerto Rico and the Virgin Islands serving federally connected children are eligible to receive grants. Grants are not made to Outlying Areas or the BIA. Impact Aid Payments for Construction Allocation Formula (for formula grants only) Step 1: WSC = [(MB * 1.0) + (MOB *0.02)] or WSC = (CIL * 1.25) In Step 1, a weighted student count is calculated by (1) multiplying the number of military children living on or off base by the appropriate weight and adding the results, or (2) multiplying the number of children living on Indian lands by the appropriate weight. Step 2: LEA grant = [(APP * 0.2) / (∑WSC)] * WSC In Step 2, the funds available for formula grants are divided equally between LEAs in which military students living on or off base constitute at least 50% of the LEA's total student enrollment and LEAs in which students living on Indian lands constitute at least 50% of the LEA's total student enrollment (20% of the total Section 8007 appropriation going to each group). For example, grants for LEAs impacted by military dependent students are determined by dividing the total amount of available funding (20% of the Section 8007 appropriation) by the total number of weighted student units of military children living on or off base across all eligible LEAs to produce an amount per weighted child. This amount is then multiplied by the total number of weighted student units of these children enrolled in the LEA. The same calculation is made for LEAs impacted by children living on Indian lands. Where: WSC = Weighted student count MB = Federally connected children with parent in the military and living on a military establishment MOB = Federally connected children with parent in the military and living off of a military establishment CIL = Children living on Indian lands APP = Appropriation ∑ = Sum (of weighted student count for eligible LEAs) This report concludes with a series of analyses of selected aspects of the ESEA allocation formulas. Given space limitations, as well as the limited availability of current grant data at the LEA level, all of these analyses are conducted at the state (not LEA) level. Table 13 , below, provides two different "federal share" calculations for each state. The first of these compares total ESEA formula grant allocations for FY2006 to total revenues for public K-12 education for the 2005-2006 school year. The table is sorted on the basis of this calculation, from lowest to highest. The second calculation compares federal grants under all K-12 education programs administered by ED, including not only the ESEA but also the Individuals with Disabilities Education Act (IDEA) and other federal programs, to total public K-12 revenues for 2005-2006 (i.e., the same denominator as in the first comparison). Figure 1 further illustrates this ESEA share for the states; states are again sorted according to the ESEA share of total public K-12 revenues, from lowest to highest. As seen in Table 13 , the share of public K-12 education revenues that is provided under ESEA programs varies substantially among the states, although ESEA funding constitutes only approximately one-tenth or less of total public K-12 education revenues in all cases except Puerto Rico. The ESEA share of revenues is lowest, 2.5% or less, for the states of Iowa, Massachusetts, Minnesota, Connecticut, and New Jersey. These states have relatively low rates of poverty, so their grants under Title I-A and other programs with formulas based on Title I-A grants are relatively low. Also, three of these states (Connecticut, Massachusetts, and New Jersey) have especially high levels of state and local source funding for public K-12 education, so federal grants are low in comparison. At the other end of the scale, Puerto Rico is a special case, with an ESEA share (21.3% of total revenues) that is at least twice as high as that of any state. Among the states, the ESEA share is highest, at 8.4% to 10.7%, for the states of New Mexico, Montana, North Dakota, South Dakota, and Alaska. These states receive relatively high grants under the ESEA Impact Aid and Indian Education programs, among others. In addition, Alaska, Montana, North Dakota, and (to a lesser extent) South Dakota benefit substantially from the state minimum grant provisions in several of the ESEA program formulas. The total federal share of revenues is in most cases slightly more than twice the ESEA share. For example, the national average for ESEA grants as a share of total public K-12 education revenues is 4.1%, while the national average for total ED funds as a share of public K-12 education revenues is 9.1%, a ratio of 2.2. States where this ratio is much lower, 1.6 or below, include South Dakota, Montana, Alaska, Wyoming, and North Dakota, plus Puerto Rico—all jurisdictions where the ESEA share is relatively high. In contrast, states where the ratio of the total federal share to the ESEA share is especially high, at 2.8 to 3.4, include Maine, Minnesota, Louisiana, Utah, Mississippi, and Iowa. Most of these states have especially low ESEA shares, but Louisiana and Mississippi have both relatively high ESEA shares and high ratios of total federal share to ESEA share, indicating a comparatively high level of support from both ESEA and other federal programs, as well as lower than average non-federal revenues per pupil. Table 14 , Table 15 , and Table 16 , along with Figure 2 , Figure 3 , and Figure 4 , provide the state expenditure, effort, and equity factors that are used in one or more of the ESEA Title I-A allocation formulas. The expenditure factor is the most broadly influential of these factors, as—in one form or the other—it applies to all Title I-A grants. Further, all Title I-A formula factors apply indirectly to several other ESEA formulas. As was discussed earlier, expenditure factors are intended to adjust for state or local differences in the costs of providing public K-12 education, although they are often criticized as reflecting differences in ability to pay for educational services as well. One version of the Title I-A expenditure factor applies to all Title I-A formulas except Education Finance Incentive Grants (EFIG), while the other version is used in the calculation of EFIG Grants. These versions differ only with respect to the constraints, expressed as a percentage of the national average per pupil expenditure, applied to the state average per pupil expenditure (80%/120% of the national average for three formulas, 85%/115% for EFIG Grants). In Table 14 and Figure 2 , states are sorted on the basis of the three-formula version of the expenditure factor, from lowest to highest. Ten states, those at the floor or the ceiling, are grouped at each end of the expenditure factor scale for the three-formula version of the expenditure factor; within each of the groups, states are listed in alphabetical order. For the EFIG Grant version, even more states are grouped at the floor (15 states) or the ceiling (13 states), since the bounds associated with this version of the expenditure factor are more narrow. The remaining states are distributed throughout the range between these bounds. While the state variation in expenditure values is not large in absolute terms, the factor does have substantial influence on the size of Title I-A grants. Holding all else constant, the expenditure factor provides grants that are 50% higher in states at the maximum factor than in states at the minimum factor under the three-formula version of the factor, and that are 35% higher in the EFIG Grant version. The effort factor used in the Title I-A EFIG Grant formula is illustrated in Table 15 and Figure 3 , below. As discussed above, this factor is intended to reward states with relatively high levels of expenditures per pupil for public K-12 education compared to their level of personal income per capita. This factor is equal to the average per pupil expenditure (APPE) for public elementary and secondary education divided by state personal income per capita (PCI) for each state, divided by the national average of this ratio. In other words, it is the ratio of APPE to PCI for each state divided by the ratio of APPE to PCI for the nation. The effort factor is greater than 1.0 for states where the ratio of expenditures per pupil for public elementary and secondary education to personal income per capita is greater than average for the nation as a whole, and below 1.0 for states where the ratio is less than average for the nation as a whole. However, the range of the effort factor is limited to 0.95 to 1.05. The limited range, and therefore the limited impact on grant levels, of this factor is evident. Only 14 states fall within the narrow range between the minimum of 0.95 and the maximum of 1.05, while 18 states are at the minimum of 0.95 and the remaining 20 states are at the maximum of 1.05. If all other relevant factors are held constant, a state with a maximum effort factor (1.05) would receive an EFIG grant of 11% more than if its effort factor were at the minimum (0.95). As a result, the factor has a limited impact on actual grants. Finally, the EFIG equity multiplier is displayed in Table 16 and Figure 4 . As discussed above, this factor is intended to reward states with relatively equal levels of expenditures per pupil among their LEAs. The equity multiplier is equal to 1.3 minus the state's equity factor. The equity factor is the coefficient of variation for average per pupil expenditure among the state's LEAs. In the CV calculations for this formula, an extra weight (1.4 vs. 1.0) is applied to estimated counts of children from poor families. As a result, the lower a state's expenditure disparities among its LEAs, the lower is its CV and equity factor, and the higher is its multiplier. Conversely, the greater a state's expenditure disparities among its LEAs, the higher is its CV and equity factor, and the lower is its multiplier. Among the states, equity multipliers for FY2007 ranged from 1.0653 (Illinois) to 1.3 for the single-LEA entities of the District of Columbia, Hawaii, and Puerto Rico. Thus, all other relevant factors held constant, a state with a maximum multiplier would receive an EFIG Grant of approximately 22% more than if it had the lowest equity multiplier. States with the lowest equity multipliers (1.13 or below), in addition to Illinois, include Montana, Virginia, Massachusetts, Missouri, Wyoming, Vermont, and New York. States with the highest equity multipliers (1.21 or above), in addition to the 3 jurisdictions noted above, include West Virginia, Florida, Iowa, Washington, Delaware, and North Carolina. Table 17 and Figure 5 , below, provide state total ESEA formula grants per child for FY2007 calculated on the basis of total school-age children and school-age children in poor families. The states are sorted only on the basis of their total number of school-age children, from largest (California) to smallest (District of Columbia). As shown below, there is substantial variation in average grants per school-age child as well as grants per school-age child in a poor family among states in all population size ranges. For example, among the 5 smallest jurisdictions (Wyoming, Vermont, North Dakota, Alaska, and the District of Columbia), the average grant per school-age child ranges from $592 to $1,407, while the average grant per school-age child from a poor family varies from $3,957 to $10,935. This variation results largely from 3 factors: the varying impact of "caps" placed on state minimums under the Title I-A allocation formulas; variations in school-age child poverty rates (a higher poverty rate is associated with higher grants per school-age child but, at least in the smallest states, lower grants per school-age child from a poor family); and the eligibility of Alaska for substantial funds under Titles VII and VIII. Smaller, but still substantial, variation also may be seen among states in other size ranges. Nevertheless, overall the average grants per child are generally much higher for the smallest states than for the remaining states. The average for the 12 smallest jurisdictions (New Hampshire and smaller) is $644 per school-age child and $4,879 per school-age child from a poor family. Similarly, these jurisdictions received 5.18% of ESEA formula grants for FY2007, but have only 3.14% of the Nation's school-age children and 2.46% of the school-age children from poor families. In contrast, the average for all of the other states plus Puerto Rico is $386 per school-age child and $2,254 per school-age child from a poor family. Thus, the smallest states receive approximately 1.7 times as much as the remaining states per school-age child, and approximately 2.2 times as much per school-age child from a poor family. This results primarily from the state minimum grant provisions in many of the ESEA allocation formulas. While the differences in average grants per child between the smallest and other states are quite substantial, the small states receive a relatively modest share of total ESEA funds. The total share of funds received by the 12 smallest jurisdictions (11 smallest states plus the District of Columbia) for FY2007 was 5.2%. Even if these small states were to receive the same amount of ESEA funds per child as other states, the net increase in funds reallocated to the larger states would be relatively marginal. For example, if the share of funds going to the smallest states were reduced by half, the average increase for the remaining states would be approximately 2.7%. Table 18 and Figure 6 provide state total ESEA formula grants for FY2007 per child (both total school-age population and school-age population in poor families) with states sorted by their school-age child poverty rate, from lowest (New Hampshire) to highest (Puerto Rico). The states are divided into three groups based on their relative poverty rates. Differences among states are less obvious or large than in the state population size analysis above. However, especially if one focuses on groups of states according to their school-age child poverty rate, as in Figure 6 , two significant patterns appear. First, the average grant per school-age child increases as the state average poverty rate rises, from $309 per child for low poverty states to $363 for states in the middle range to $445 for high poverty states, 1.44 times as much as for low poverty states. This reflects the fact that most ESEA funds are allocated under, or in proportion to, the Title I-A allocation formulas, and estimated school-age children in poor families is the primary formula factor in those. At the same time, an opposite trend is found in average grants per school-age child in a poor family. This figure declines from $2,820 for low poverty states to $2,393 for states in the middle range and $2,182 for states with the highest poverty rates. This is a reflection of at least 3 factors. First, many of the states with the lowest poverty rates are small, and receive high grants per child as a result of state minimum provisions (e.g., New Hampshire, Wyoming, Vermont, North Dakota, and Delaware). Second, a large proportion of the low poverty rate states have high expenditure factors (e.g., Connecticut, New Jersey, Massachusetts, and others) while a large proportion of the highest poverty rate states have low expenditure factors (e.g., California, Arizona, Tennessee, North Carolina, Alabama, Arkansas, Mississippi, and others). And third, the targeting on high poverty areas under the Title I-A Concentration, Targeted, and Education Finance Incentive Grant formulas is carried out at the LEA, not the state, level. As was noted above, these formulas tend to favor LEAs with especially large numbers of school-age children in poor families. In many cases, LEAs with such high concentrations of poverty are found in states with low poverty rates overall (e.g., Baltimore City, Maryland or Boston, Massachusetts), while in several states with high poverty rates, poverty tends to be widely dispersed (e.g., West Virginia or Mississippi). | The Elementary and Secondary Education Act (ESEA) contains 45 separately authorized programs, plus approximately 20 specified sub-programs. The largest of these programs distribute funds by formulas that prescribe how funds are to be allocated among state educational agencies (SEAs) or local educational agencies (LEAs) nationwide. They take the form of mathematical equations through which the U.S. Department of Education (ED), and in many cases also SEAs, calculate grant amounts for each potential grantee meeting statutory eligibility criteria. They almost always include one or more population factors and may also include state or LEA minimum grant provisions, eligibility thresholds, expenditure factors, fiscal accountability provisions, and reservations of funds for a variety of purposes. The recipients of a majority of the funds under almost all ESEA formula grant programs are LEAs. Under most of these programs, grants are provided to LEAs via SEAs: that is, they are "state-administered formula grant" programs. Funds are allocated by ED directly to LEAs only under a limited number of ESEA programs. The most influential ESEA allocation formulas are those under the Title I-A program, both because this is the largest ESEA program and because there are five ESEA programs under which grants are made, in part or in full, in proportion to grants calculated under Title I, Part A. As a result, a majority of ESEA funds are allocated under formulas in which the primary population factor is school-age children in poor families, and state expenditure factors are applied. The share of all public K-12 education revenues that is provided under ESEA programs varies substantially among the states, although ESEA funding constitutes only approximately one-tenth or less of total public K-12 education revenues in all cases except Puerto Rico. The average ESEA program grant per school-age child (poor and non-poor) increases as the state average poverty rate rises, with the third of states having the highest poverty rates receiving 1.4 times as much as low poverty states. At the same time, an opposite trend is found in average ESEA grants per school-age child in a poor family, with low poverty states receiving 1.3 times as much as states with the highest poverty rates. Most ESEA allocation formulas include state or LEA minimum grant provisions. As a result, states with the smallest school-age population receive approximately 1.7 times as much as the remaining states per school-age child, and approximately 2.2 times as much per school-age child from a poor family. This report will be updated if substantial changes are made in one or more ESEA program allocation formulas. |
The electric utility industry operates as an integrated system of generation, transmission, and distribution facilities to deliver electric power to consumers. In the United States, this system consists of over 9,000 electric generating units connected to over 200,000 miles of high-voltage transmission lines strung between large towers and rated at 230 kilovolts (kV) or greater. This network is interspersed with hundreds of large electric power transformer substations whose function is to adjust electric voltage as needed to move power across the network ( Figure 1 ). High voltage (HV) transformer units make up less than 3% of transformers in U.S. power substations, but they carry 60% or more of the nation's electricity. Because they serve as vital transmission network nodes and carry bulk volumes of electricity, HV transformers are critical elements of the nation's electric power grid. The U.S. electric power grid has historically operated with such high reliability that any major disruption caused by weather, operational errors, or sabotage, makes news headlines. The various parts of the electric power system are all vulnerable to failure due to natural, operational, or manmade events. Such outages can have considerable negative impacts on business, government services, and daily life. Notwithstanding its high reliability overall, the U.S. power grid has periodically experienced major regional outages. Recent examples include the Northeast Blackout of 2003 (which affected 55 million customers in eight states and Canada) and extended outages in the New York/New Jersey area after Superstorm Sandy in 2012. For reasons discussed below, however, HV transformers are considered by many experts to be the most vulnerable to intentional damage from malicious acts. The physical security of HV transformers and associated policy issues are the subject of this report. Congress has long been concerned about grid security in general, but recent security exercises, together with a 2013 physical attack on transformers in Metcalf, CA, have focused congressional interest on the physical security of HV transformers, among other specific aspects of the grid. They have also prompted new grid security initiatives by utilities and federal regulators. Legislative proposals including the Enhanced Grid Security Act of 2015 ( S. 1241 ), the Critical Electric Infrastructure Protection Act ( H.R. 2271 ), the Terrorism Prevention and Critical Infrastructure Protection Act of 2015 ( H.R. 85 ), a House bill to establish a strategic transformer reserve program ( H.R. 2244 ), and the Grid Modernization Act of 2015 ( S. 1243 ) would expand these activities by strengthening federal efforts to prevent or recover from a physical attack on the U.S. grid. The main risk from a physical attack against the electric power grid—primarily towers and transformers—is a widespread power outage lasting for days or longer. Utilities regularly experience damage to transmission towers due to both weather and malicious activities; they are able to recover from this damage fairly rapidly. Thus, while occasionally causing blackouts, physical attacks on towers generally have not resulted in widespread or long-lasting outages. The power industry also has experienced mechanical failure of individual HV transformers within a single control area resulting in blackouts lasting hours. However, no region in the United States has experienced simultaneous failures of multiple HV transformers. Experts have long asserted that a coordinated and simultaneous attack on multiple HV transformers could have severe implications for reliable electric service over a large geographic area, crippling its electricity network and causing widespread, extended blackouts. Such an event would have serious economic and social consequences. This section discusses in more detail HV transformer characteristics and physical security risks associated with them. Utility transformers control the voltage of electricity so that it can be synchronized with other power supplies, transmitted long distances, and distributed to customers. Transformers range in size from small, pole-mounted units that may serve a dozen homes to transmission units that serve an entire city. The larger the transformer, the higher the voltage the transformer can handle. Utility transformers, regardless of size, fundamentally consist of copper wire wrapped around a metallic "core" within an insulated protective housing covered with a 5/8 to 3/4-inch mild steel tank. They are linked to the power grid by protruding metal and (usually) ceramic connectors called "bushings" which resemble giant spark plugs. Larger transformers generate waste heat during operation (like all transformers), so they are cooled by a system comprised of internally circulating oil and external radiators, analogous to the cooling system in a car engine. Large transformers are located in network substations along with transmission lines, associated electric equipment, and system controls. These substations may be found in remote locations or near urban centers, depending upon regional transmission needs. Many are located alongside electric generation plants, linking those plants to the grid. High-voltage transformers, especially units above 345 kV, are physically large and extraordinarily heavy. For example, Figure 3 shows a new 345 kV transformer many times larger than the pickup truck parked alongside. This transformer unit weighs 435 tons, including 29,000 gallons of cooling oil. (Note that the vertical bushings are not yet connected to transmission lines because the unit is being moved.) This is a three-phase unit, with one bushing for each of the three phases. Some substations alternatively employ separate single-phase transformers in sets of three. Generally, the higher the transformer's voltage, the larger the transformer. A three-phase 765kV transformer could be 45 feet tall and occupy a footprint of 2,200 square feet—about the size of an average new single-family house. Most HV transformers are unique—designed and manufactured to custom specifications for a specific network application. In 2010, the lead time between an HV transformer order and delivery ranged from 5 to 12 months for U.S. manufacturers and 6 to 16 months for foreign manufacturers, although lead times well over 20 months could be required in certain situations. This process may include three to four months for the engineering design alone. Since manufacturing generally occurs on a single production line with just-in-time component supplies, advanced production scheduling is important for managing delivery. Physical assembly is labor intensive, requiring manual winding of the copper wire around the transformer core and frequent engineering checks during manufacturing. Extensive testing of completed units also contributes to HV transformer manufacturing time. The installed cost for an HV transformer depends heavily on its configuration and specific design requirements. New HV transmission substations can cost well in excess of $10 million, including the cost of transformers and other station equipment. According to the U.S. Department of Energy (DOE), the factory prices for HV transformers typically range from $2 million for a 230 kV unit to $7.5 million for a 765 kV unit, before transportation and installation costs. From 1950 to 1970, utility construction of large generation plants and associated transmission networks fueled a robust U.S. manufacturing market for large transformers. During this period, the United States (and Canada) accounted for approximately 40% of global demand for such units. After 1970, however, utility investment in transmission infrastructure began falling off due to perceived overcapacity, public resistance to transmission siting, and greater regulatory scrutiny of capital expenditures. Beginning in the late 1980s, uncertainty about industry restructuring and the introduction of competition made grid owners even less willing to invest in new transmission. This decline in U.S. transmission investment greatly reduced domestic demand for large transformers, especially HV transformers. By the late 1990s, the United States and Canada accounted for only 20% of global large transformer sales. Demand in the United States has subsequently increased, however. For example, between 2005 and 2013, the total value of large transformers (including medium- and high-voltage units) imported to the United States more than doubled, from $284 million (363 units) to $676 million (496 units). At the same time, global demand for transformers continued to grow and more foreign manufacturers entered the market. According to U.S. industry representatives, many of these foreign manufacturers benefited from dramatically lower labor costs, so they could underbid U.S. transformer makers for the remaining U.S. demand. Some of these foreign manufacturers may have been protected by import barriers which effectively closed their home markets to U.S. transformer imports. Today, there is limited manufacturing capacity in the United States for HV transformers. Five U.S. facilities state that they can manufacture transformers rated 345 kV or above, although it is not clear how many units in this range they have actually produced. Canada and Mexico have five additional HV manufacturing plants. While limited domestic HV transformer manufacturing may increase delivery time, utilities have not reported difficulty in obtaining needed equipment. There are several thousand HV transformers operating in the United States. Approximately 2,100 are very large units rated 345 kV and above. Investor-owned utilities own most of these, although public utilities such as the Power Marketing Administrations (i.e., Bonneville Power Administration and Western Area Power Administration), Tennessee Valley Authority, and the Los Angeles Department of Water and Power own many HV transformers as well. HV transformer substations are distributed throughout the electric grid, as shown in Figure 1 , with the greatest number in the eastern part of the country. Because HV transformers carry so much electricity, the destruction of even a small number could seriously reduce the transmission capacity of a regional electric power grid and lead to extended blackouts. The impact of such a failure would depend on the electricity flows in that part of the grid, congestion from major network bottlenecks, and the status of other key facilities such as power plants, transmission lines, and other substations. Power grid planners generally anticipate the possible loss of a single HV transformer substation and are prepared to reroute power flows as necessary to maintain regional electric service. But the simultaneous loss of multiple HV transformers, especially in a constrained transmission area, could exceed the capability of a regional network to reroute power through secondary lines. Numerous publicly available studies have analyzed the risks from such a multiple failure. For example, the Congressional Office of Technology Assessment (OTA), in a 1990 report on the physical vulnerability of the electric power system, found that In most cases, the nearly simultaneous destruction of two or three transmission substations would cause a serious blackout of a region or utility, although of short duration where there is an approximate balance of load and supply.... The destruction of more than three transmission substations would cause long-term blackouts in many areas of the country. In such an emergency scenario, limited electric service could likely be restored in the short term by imposing "rolling" blackouts, rerouting transmission, and using portable transformers. Nonetheless, the loss of key HV substations would leave the regional network crippled and highly susceptible to further disturbance and cascading failure. According to power industry experts, certain parts of the U.S. transmission network are particularly vulnerable to HV substation disruption. These areas may have severely constrained transmission paths relying on a small number of HV transformers in extremely critical network locations. According to press accounts, a FERC power flow analysis in 2013 identified 30 such critical HV transformer substations across the continental United States; disabling as few as nine of these substations during a time of peak electricity demand reportedly could cause a "coast-to-coast blackout." Notwithstanding the FERC study and similar claims by security analysts, the actual risk to the U.S. grid of extended blackouts due to a deliberate attack on multiple HV transformers is the subject of ongoing debate. An investigation by the Department of Energy's Office of Inspector General (IG) appears to discredit FERC's risk analysis. According to the IG investigation, officials at the department previously concluded that FERC's study was based on "highly unlikely assumptions" and that "loss of the critical substations identified in the analysis would not result in the consequence described in the analysis or any other consequence that could be reasonably expected to result in damage to national security." Due to the complexity of HV transmission networks and uncertainties about potential physical threats, a range of differing conclusions may be reached by industry experts on the potential severity and duration of a blackout from a multi-transformer attack. However, most analysts acknowledge that severe regional, if not national, power outages may be technically possible under certain conditions. The Department of Energy's recent Quadrennial Energy Review identifies HV transformers as one of the electric grid's "most vulnerable components." All HV transformers are designed to withstand operational risks such as lightning strikes, hurricanes, and network power fluctuations—but they are vulnerable to intentional physical attacks. Despite their great size and internal complexity, HV transformers of conventional design can be readily disabled or destroyed. According to one manufacturer, "if someone were to intentionally try ... it is a surprisingly simple task and there are a large number of ways to conceivably damage a transformer beyond repair." Transformer experts have asserted that a bad actor with basic knowledge of transformer design could inflict irreparable damage. Such attacks can cause massive electrical short circuits and oil fires that would destroy an HV transformer and damage surrounding infrastructure. One fire at a 345 kV substation in Texas, for example, destroyed the transformer and burned for five hours, causing "plumes of smoke that could be seen for miles." In addition to direct attacks on the transformers themselves, HV substations can be further disabled by damaging associated transmission lines or control centers that may be located on site. Because HV transformers are so big and are connected to the largest overhead transmission towers, they are easily identified along major transmission corridors. High voltage transformers are usually housed in substations that are enclosed with a chain-link fence. Guards are not often stationed at these facilities under normal operating circumstances. Consequently, HV transformers are ordinarily easier to access than other critical electric facilities such as generation plants and control centers. Utilities use closed-circuit surveillance and other methods to detect intrusion. However, access to the substation may be achieved by either cutting or scaling the chain-link fence. Once inside, a saboteur could cause damage by accessing the control room or physically damaging the HV transformer. Penetrating the 5/8 to 3/4-inch steel tank with any device could short-circuit the windings and irreparably destroy the transformer. Alternatively, a saboteur could attempt to open a valve and drain the insulating oil. Igniting the oil might cause the transformer to arc and eventually explode. With a clear line of sight, an attacker could also disable transformers from a distance using conventional rifles. Other methods of disabling HV transformers have also been identified. The vulnerability of individual transformer substations has been demonstrated by successful attacks in recent years. In the most serious case, a rifle attack occurred in April 2013 at PG&E's 500 kV substation in Metcalf, CA. In this attack, multiple individuals outside the substation reportedly shot at the HV transformer radiators with .30 caliber rounds, causing them to leak cooling oil, overheat, and become inoperative. In October 2013, the U.S. Justice Department charged an individual with attacks on the transmission grid in Arkansas, including a deliberate fire at Entergy's 500 kV substation in Lonoke County. The fire consumed the substation control house but electrical service was not interrupted. In 2005, at a Progress Energy substation in Florida, a rifle attack ruptured a transformer oil tank, ultimately causing an explosion and local blackout. Other incidents at substations have been reported with some regularity, although most have been attributed to vandals or careless hunters. It is very difficult to restore a damaged HV transformer substation. As noted above, transmission experts assert that most HV transformers currently in service are custom designed and, therefore, cannot be generally interchanged. Furthermore, at $3-5 million per unit or more, maintaining large inventories of spare HV transformers solely as emergency replacements is prohibitively costly, so limited extras are on hand. The number of spares a utility maintains is increasingly sensitive information, but one regional transmission control area reported in 2007 that it maintained 29 spares for 188 transformers rated 500 kV on its system. Programs for the sharing of spare HV transformers among multiple utilities are discussed later in this report. Within the United States, transportation of HV transformers is difficult. Due to their size and weight, most HV transformers are transported on special railcars, each with up to 36 axles to distribute the load. There are fewer than 20 of these railcars in the Unites States rated to carry 500 tons or more, which can present a logistical problem if they are needed in a transformer emergency. In some cases involving older transformers, adjacent rail lines are no longer in service, so replacement transformers may need to be transported by other means. Specialized flatbed trucks can also carry heavy transformer loads over public roadways, but the few such trucks that exist have less carrying capacity and greater route restrictions than the railcars because HV transformers may exceed highway weight limits. Transporting HV transformers, especially in an emergency, can create other logistical challenges as well, including the coordination of movement through ports and road constraints (e.g., tunnels and overpasses), special transportation permits, and police escort requirements. Malicious individuals could, without significant training, identify critical HV transformer locations and time an attack for greatest effect. This could be accomplished with basic knowledge of transmission operations and regional network characteristics drawn from publicly available sources, including electric marketing data indicating constrained areas of the network. In 2014, a security services company published a summary of this kind of exercise, identifying 14 of the "most critical" transformer substations in the United States based on the company's criteria. As stated in a 2012 National Research Council report, "terrorists could selectively target key equipment, especially large transformers." The OTA report describes such a scenario: [One] example is a city served by eight transmission substations spread along a 250-mile line and located in five States. A knowledgeable saboteur would be needed to identify and find the eight transmission substations. A highly organized attack would also be required. However the damage would be enormous, blacking out a four-State region, with severe degradation of both reliability and economy for months. In 1997, the Irish Republican Army reportedly planned this kind of coordinated attack against six transmission substations in the United Kingdom. Although the attack was prevented, had it been successful it reportedly could have caused widespread power outages in London and the South East of England for months. It is relatively easy to learn about HV transformer vulnerabilities from engineers and operators experienced with this technology, either domestically or abroad, since the same technology is used in power grids throughout the world. In the past, transformer experts have provided CRS with detailed descriptions of numerous "simple" ways terrorists could destroy HV transformers. General transformer sabotage information is also available on the Internet. One sabotage manual associated with white supremacist groups available online includes the following discussion: The power generation and distribution systems of most major Western cities are surprisingly vulnerable.... Attacking during peak consumption times (Winter in cold climates and Summer in hot climates) will make power diversion impossible.... Arson, explosives or long-range rifle fire can be used to disable substations, transformers and suspension pylons. A simultaneous attack against a number of these targets can shut down power ... with the advantage that service cannot be quickly restored by diverting power from another source. Each broken link in the power grid must be repaired in order to fully restore service. An individual, equipped with a silenced rifle or pistol, could easily destroy dozens of power transformers in a very short period of time. Security analysts and other industry officials acknowledge that the vulnerability of HV transformers in general is widely known, although understanding the criticality of particular assets within the power grid would require more dedicated effort. Although HV transformers are relatively large and often exposed, frequently in rural areas, there are a number of measures available to help prevent an intentional physical attack against a transformer substation. Many of these measures are employed for public safety and to protect against theft, so they may serve multiple purposes. Although security measures appropriate for a particular substation vary depending upon its particular configuration and operating profile, such measures fall into a set of general categories: Protecting information about critical HV substations, such as engineering drawings, power flow modeling runs, and site security information, which could be useful to a potential attacker. Surveillance and monitoring through the use of video cameras, motion detectors, imaging, acoustical monitors, aerial drones, and periodic inspection by security employees. Restricting physical access , such as limiting entry only to necessary employees, installing electronic locks and other access controls, and erecting physical barriers and controls for vehicle entry. Posting full-time guards may also be an option in some circumstances. Shielding assets from offsite attacks using visual barriers such as opaque or hardened fencing, erecting taller fences, or erecting protective walls. Modifying substation designs to make them more resistant to physical damage, for example, by strengthening transformer cooling systems or bushings. Reconfiguring substation layouts to limit asset visibility or limit the spread of fire may also be options. Industry and federal efforts to promote the deployment of such physical security measures are discussed later in this report. In addition to these categories, other measures can help to mitigate the immediate effects of a successful attack ("resiliency"), or to speed full system recovery from such an attack. Measures to enhance the cybersecurity of substation information and control systems, especially supervisory control and data acquisition (SCADA) systems are an important component of power grid security and are usually coordinated with physical security measures. Over the last decade or so the electric utility industry and government agencies have engaged in a number of initiatives to secure HV transformers from physical attack and to improve recovery in the event of a successful attack. These initiatives include coordination and information sharing, spare equipment programs, security standards, grid security exercises, and other measures discussed below. The National Infrastructure Protection Plan (NIPP), initially published by the Department of Homeland Security in 2006, "outlines how government and private sector participants in the critical infrastructure community work together to manage risks and achieve security and resilience outcomes." The plan organizes critical infrastructure into distinct sectors, designating a federal department or agency as the lead coordinator for each sector—the Sector Specific Agency (SSA). Under the NIPP and Presidential Policy Directive 21 on Critical Infrastructure Security and Resilience, the Department of Energy (DOE) is designated as the SSA for the Energy Sector, which includes the electric utility industry (excluding nuclear power plants). As an SSA, the department is responsible for working with the Department of Homeland Security (DHS), other federal agencies, critical infrastructure owners, independent regulators, and other agencies to implement national policy on critical infrastructure security and resilience. The NIPP also established a sector partnership model including private and government coordinating councils: The Electricity Subsector Coordinating Council (ESCC) , initially established in 2004, was organized and administered by companies in the electric power industry. It meets regularly to coordinate policy-related activities designed to "improve the reliability and resilience of the electricity subsector, including physical and cyber infrastructure." Through August 15, 2013, the ESCC was chaired by the North American Electric Reliability Corporation (NERC), the not-for-profit organization responsible for ensuring the reliability of the North American grid. The ESCC has since transitioned to a new structure led by electric utility industry executives, although NERC's chief executive officer remains on the ESCC steering committee. The Energy Sector Government Coordinating Council (EGCC), also established in 2004, is the government counterpart to the ESCC. The EGCC is chaired by the DOE and DHS, incorporating other agencies at all levels of government with interest in energy security. The EGCC plays a key role in implementing the Sector-Specific Plan (discussed below), collaborating with the ESCC to develop and prioritize security programs and initiatives. In addition to these councils, other organizations have been established with more specific responsibilities related to grid security. The Electricity Sector Information Sharing and Analysis Center (ES-ISAC), established in 1998, is the electricity sector's primary communications channel for security-related information, situational awareness, incident management, and coordination. The ES-ISAC is operated by NERC in collaboration with the DOE and ESCC. Members may anonymously share security-related incident information with the ES-ISAC by means of a secure Internet portal. Registered users receive information on security threats and alerts, remediation, task forces, events, and other security-specific resources. NERC's Critical Infrastructure Protection Committee (CIPC) coordinates NERC's security initiatives and advises NERC's Board of Trustees, its standing physical and cybersecurity committees, and the ES-ISAC. One of the CIPC's key functions is developing, reviewing, and revising security guidelines; and assisting in the development and implementation of NERC standards. In January 2015, NERC chartered the Physical Security Advisory Group (PSAG) —consisting of representatives from the electric power industry, DOE, DHS, and informed observers—to assist the ES-ISAC in the analysis of physical security threats. The PSAG is intended to offer advice on security plans, policy and procedure, security technology, training, incident response, and threat mitigation strategy to enhance grid physical security and reliability. The 2006 National Infrastructure Protection Plan required each critical infrastructure sector to develop a Sector-Specific Plan (SSP) that describes strategies to protect its critical infrastructure, outlines a coordinated approach to strengthen its security efforts, and determines appropriate funding for these activities. The section of the DOE's Energy Sector-Specific Plan addressing electricity was developed in collaboration with the ESCC and EGCC. The plan identifies high-voltage transformers as an electric sector vulnerability due to their criticality to the power grid and the difficulty of replacing them in the event of a successful attack. Among other measures, the SSP established a goal of implementing "agreements that require participants to maintain transformers for possible sharing in the event of a terrorist act." The plan also identified the "need for a new type of emergency spare (recovery/mobile) high-voltage transformer that can be deployed and energized quickly to rapidly recover from outages caused by natural disasters and deliberate attacks." In November 2010, the Electricity Subsector Coordinating Council published its Critical Infrastructure Strategic Roadmap report, to provide a framework for identifying risks that could seriously disrupt the grid and for promoting actions to enhance grid reliability and resilience. The report paid particular attention to "severe-impact risks with the potential to impact large portions of the grid, or disrupt service for an extended period of time." The report considered three principal risk scenarios, the first of which relates to physical attacks: Scenario 1: Physical Attack on Significant Electricity System Equipment A coordinated physical attack on key nodes of the bulk power system critically disables difficult to replace equipment in multiple generating stations or substations and could have a significant affect [sic] on the remainder of the system. A prolonged period of time is required to fully restore the bulk power system to normal operation. The report recommended an assessment of current capability to prevent and respond to such a scenario as a "high priority." The report also recommended as "important" both a study of "options and practices to enhance physical protection of critical equipment requiring long recovery times (e.g., large high-voltage transformers)" and an initiative to "enhance the availability of critical spare equipment ... starting with high voltage transformers." In 2011, the Edison Electric Institute (EEI), the main trade association for U.S. investor-owned electric utilities, initiated its Threat Scenario Project to identify security threats and practices utilities could take to mitigate these threats. While the project examined a wide range of potential threats, it included consideration of coordinated physical and cyberattacks. According to EEI, "the project established common elements for each threat scenario, including a description, likely targets, potential threat actors, specific attack paths, and likely impacts of a successful attack." The project is ongoing, with the goal of helping electric utilities "quickly identify areas where security measures are sufficient and where gaps may exist, and begin the dialogue about additional measures that can be taken to help detect, protect against, respond to, and recover from a range of potential threat scenarios." As stated above, in April 2015, the DOE released its first Quadrennial Energy Review (QER), focusing on energy infrastructure, including "resilience, reliability, safety, and asset security for the electric grid." Among its considerations related to the electric grid, the report focuses specifically on the security of HV transformers. The Administration has made it a priority to work with industry to identify challenges and create solutions for increasing the security and resilience of the electric grid, including the development of an integrated national plan to mitigate challenges pertaining to aging power transformers, the cyber and physical security of transformers, and the vulnerabilities of large power transformers. The Administration is working with trade association leadership and the private sector to improve the coordination of existing and planned transformer-sharing programs and to identify solutions for transformer replacement capabilities as part of its efforts to enhance the resilience of the Nation's electric grid. The QER also specifically recommended that DOE should lead a multi-agency (federal and state) and industry initiative to mitigate the risks of HV transformer losses, including the development of additional transformer reserves as discussed below. Consistent with the recommendations of the studies above, several programs have been instituted within the electric power sector to address the operational issues that could emerge due to the scarcity of spare HV transformers and associated equipment in the event of a physical attack or other grid emergency. In 2008, the Department of Homeland Security (DHS) initiated a program to develop a prototype "Recovery Transformer" (RecX) which could enable recovery from transformer failure within days rather than months or longer. The RecX transformer was intended to be adaptable to a range of common grid specifications as well as being smaller, lighter, easier to transport, and quicker to install than conventional HV transformers. The RecX prototype was designed to replace the most common HV transformers (345 kV) used in the U.S. grid. This design reportedly could be used to replace approximately one quarter of the 2,100 transformers in this voltage class currently deployed. In 2012, the only three single-phase RecX prototype units were installed in an operating 345 kV substation in Texas during a simulated emergency drill, where they remain in regular operation, having met or exceeded their service requirements. The RecX transformers have reliability and efficiency characteristics comparable to other 345 kV transformers, and are also comparably priced ($7.5 million each). Although t he manufacturer has received no orders for commercial production of these units as of May 2015, a few utilities have expressed interest in leveraging the concepts demonstrated by the RecX program for their own applications. Having successfully demonstrated the RecX concept, the DHS is no longer funding the RecX program, but the manufacturer has discussed continued development of the concept including higher kV ratings and "hardened" designs. In 2006, the Edison Electric Institute initiated its Spare Transformer Equipment Program (STEP) to strengthen "the sector's ability to restore the nation's transmission system more quickly in the event of a terrorist attack." The STEP program requires participating utilities to maintain (or acquire) a specific number of transformers up to 500 kV to be made available to other utilities in case of a critical substation failure. Sharing of transformers is mandatory based on a binding contract subject to a "triggering event"—a coordinated act of deliberate, documented terrorism resulting in the destruction or disabling of a transmission substation and the declaration of a state of emergency by the President. FERC granted blanket authorization for the transfer and cost recovery of transmission equipment under the STEP program in September 2006. State regulators with jurisdiction over participating utilities have also granted pre-approval for STEP transfers. The program is designed to deal with terrorist events, but it also provides a mechanism for voluntary sharing of transformers in other emergencies, although these may require additional regulatory approvals. EEI requires annual recertification and conducts a STEP program drill every summer to ensure the program and its members will be fully prepared to respond in the event of an actual triggering event. In 2012, NERC initiated its Spare Equipment Database (SED) program intended to serve as a tool to "facilitate timely communications between those needing long-lead time equipment damaged in a [high impact, low frequency] event and those equipment owners who may be able to share existing equipment being held as spares by their organization." The SED program is a confidential web-based catalog of spare transformers rated at 100 kV or higher. Only NERC and the equipment owners can see their spares data (although NERC can make high-level reports to FERC); requests for equipment disclose neither the requester nor provider (double-blind). Participation is voluntary and requires no commitment or mandatory sharing of spares. Unlike EEI's STEP program, however, the SED program has not been granted pre-approval from FERC or state regulators for equipment transfers. Thus, the ability to transfer the ownership of transformers from one company to another may require additional approvals, even during an emergency. The DOE's Quadrennial Energy Review states that the inventory of HV transformers under EEI's STEP program is too small to respond to a large, coordinated attack against critical substations, and that transformer design variations and logistics further limit the effectiveness of EEI's program. Accordingly, the QER recommends a DOE-led effort to develop one or more HV transformer reserves through a staged process involving: assessment of technical specifications for reserve transformers, where to locate transformers, how many would be needed, how they would be secured and maintained, how they might be transported, and whether new federal authorities or cost sharing would be necessary. Consistent with this recommendation, a House bill to establish a Strategic Transformer Reserve program ( H.R. 2244 ) introduced on May 8, 2015, would require the Secretary of Energy to submit to Congress "a plan to establish a Strategic Transformer Reserve for the storage, in strategically located facilities, of spare large power transformers in sufficient numbers to temporarily replace critically damaged large power transformers" (Sec. 1(c)(1)). Implementation and funding of such a plan would be subject to congressional approval. On June 10, 2015, a group of eight electric utilities and energy companies announced a new private sector joint venture company called Grid Assurance "to provide improved responses to major events affecting the electric transmission grid by giving transmission-owning entities access to domestically warehoused long lead-time critical equipment," including HV transformers. Grid Assurance would function as a service company open to other transmission companies via a standardized subscriber agreement. Subscription would be voluntary. In an associated filing with FERC, Grid Assurance states that it will (1) maintain an optimized inventory of critical spare transformers, circuit breakers and related transmission equipment, (2) provide secure domestic warehousing of the inventory of spares in strategic locations, and (3) release spare equipment to utility subscribers as needed to respond to emergencies. The company believes its services will be complementary to, but significantly broader than, EEI's Spare Transformer Equipment Program. It will offer transformers in a wider range of voltage classes, other long-lead time equipment (e.g., circuit breakers, phase angle regulators, temporary towers), and greater logistical support, among other services. Grid Assurance has petitioned FERC for a declaratory order affirming that contracting with the company would be permissible as part of a physical security plan under NERC physical security regulations (discussed below), and that acquisition of equipment by utility subscribers from Grid Assurance would not require authorization under Section 203 of the Federal Power Act. NERC and FERC have conducted grid security computer simulations and exercises specifically incorporating hypothetical attacks on HV transformer substations. In 2011, NERC conducted GridEx 2011, its first electric sector-wide grid security exercise. The exercise assessed the readiness of utilities to respond to a cyberattack, strengthened their crisis response, and provided input for internal security program improvements. Although the exercise was focused on a cyberattack, it did involve physical incursions into power grid substations as well as aspects of grid monitoring and recovery that would be relevant to an attack on HV transformers. Among other findings, the exercise determined that "utilities took appropriate steps to secure the grid." Nonetheless, NERC recommended that "entities should ensure their response protocols address a coordinated threat," and that it would "facilitate and support the development of updated physical security guidance." After the Metcalf attack in 2013, NERC conducted a second, more expansive grid security exercise, GridEx II. The exercise scenario, developed using open-source techniques, included a cyberattack on the grid coupled with a coordinated physical attack against a subset of transmission and generation assets—including HV transformer substations. Among other conclusions, NERC's after-action report stated: While the electricity industry has experienced occasional acts of sabotage or vandalism, a well-coordinated physical attack also presents particular challenges for how the industry restores power.... The extreme challenges posed by the Severe Event scenario provided an opportunity for participants to discuss how the electricity industry's mutual aid arrangements and inventories of critical spare equipment may need to be enhanced. NERC did not publicly report details about the overall impacts to the grid or outages in particular regions due to the sensitive nature of such information. Utilities and other agencies participating in the exercise viewed it a useful tool for utilities to test their readiness and preparedness for attacks on the grid. NERC is in the process of preparing for GridExIII to be conducted in November 2015. In early 2013, prior to the Metcalf attack, then-FERC Chairman John Wellinghoff directed FERC staff to prepare an analysis identifying critical HV substations in the North American power grid. Using power flow analysis software to model the impacts to the transmission system from the loss of specific grid assets, FERC staff compiled a list of "Electrically Significant Locations (ESLs)" within the grid. Neither details of the ESL study methodology nor its results have been released publicly by FERC or other agencies, although some findings have been reported in the press and discussed publicly by federal officials. According to the Wall Street Journal , the FERC analysis identified 30 critical transformer substations; in FERC's simulation, losing nine of these substations (in various combinations) as the result of a coordinated attack reportedly was found to cause a nationwide blackout for an extended time. As noted above, however, DOE officials have questioned the validity of FERC's analysis. Members of Congress were highly critical of both the Wall Street Journal and FERC officials for inappropriately releasing what was perceived to be highly sensitive information about power grid physical vulnerability. The study was not initially designated as security sensitive by commission staff. A subsequent investigation by the Department of Energy's Inspector General concluded that FERC's handling of the ESL study findings was improper. The protection of information about grid security is further discussed in a later section of this report. Several grid security guidelines or standards have been developed or proposed to address the physical security of the grid, including HV transformers. These standards have been promulgated by NERC as voluntary best practices since at least 2002, with subsequent revisions. However, in the wake of the Metcalf incident, FERC ordered the imposition of mandatory physical security standards in 2014. Current industry-wide standards are discussed in the following sections. In 2000, the Institute of Electrical and Electronics Engineers (IEEE), a technical professional society, published its first standards for electric power substation physical and electronic security. The voluntary standard addressed "security issues related to human intrusion upon electric power supply substations" and various methods to mitigate them. The original standard, and subsequent revisions, call for the development of security assessments and, for "high-risk areas," increased security measures such as motion detectors, perimeter/area detection systems, security cameras, physical barriers, and posted guards. However, according to the IEEE, the standard is intended to address security issues related to unauthorized access, theft, and vandalism. The IEEE states that "attacks against the substation for the purpose of destroying its capability to operate, such as explosives, projectiles, vehicles, etc. are beyond the scope of this standard." In June 2002, NERC published its initial guidance for physical response to security alerts from the federal government. This alert system was revised in October 2002 to correspond to DHS's new color-coded threat level system. NERC's guidance was voluntary, intended to provide "examples of security measures that electric utility organizations may consider taking, based on the Alerts issued." NERC's guidance included 35 specific security measures for the five threat DHS levels. These measures ranged from "occasional" workforce awareness programs and annual security plan reviews during times of low threat (green) to continuous monitoring of critical facilities, potentially with armed guards, during times of highest threat (red). Along with this guidance, NERC published initial guidelines for vulnerability and risk assessment to help identify critical facilities and countermeasures to mitigate threats. In November 2005, NERC published a third version of its physical security guidelines, to provide "examples of security measures that other electricity sector organizations should consider when responding to threat level alerts" [emphasis added]. Thus, while still voluntary, these measures appear to have been intended as recommendations rather than considerations as stated in the earlier versions. The 2005 document included 55 measures, including new measures and existing measures expanded or described more specifically. New measures during times of low threat included, for example, annual audits of critical facility access programs and identifying critical facility long-term and short-term security measures (e.g., vulnerability assessments and security barriers). The Energy Policy Act of 2005 ( P.L. 109-58 ) mandated the implementation of electric grid reliability standards under new authority granted to the Federal Energy Regulatory Commission. FERC subsequently designated NERC as the Electric Reliability Organization certified by the commission to establish and enforce reliability standards for the U.S. electric transmission grid, subject to commission review. In 2008, FERC approved NERC's initial reliability standards for critical infrastructure; however, these standards were developed primarily to address transmission grid cybersecurity, not physical security. Subsequent NERC standards have expanded these cybersecurity requirements. In October 2013, NERC published its most recent revision to its physical security guidance, Security Guideline for the Electricity Sub-sector: Physical Security Response , providing to electricity sector members "actions they should consider when responding to the threat alerts" issued by the DHS. Continuing its voluntary (rather than regulatory) approach to physical security, NERC's guidance states that "each organization decides the risk it can accept and the practices it deems appropriate to manage its risk." This version of NERC's guidance lays out 77 distinct security measures corresponding to three levels of threat: (1) Normal Operations/Best Practices, (2) Elevated, and (3) Imminent. In 2013, FERC staff along with staff from the Federal Bureau of Investigation (FBI), DOE, DHS, and NERC participated in a number of meetings with utilities and law enforcement agencies to discuss immediate findings and recommendations stemming from the Metcalf substation attack. As part of these meetings, FERC staff shared with utilities a list of best practices for physical security. Although the list has not been made public, it reportedly included prescriptive security measures (e.g., outward-facing video surveillance) focused on security threats similar to that experienced at the Metcalf substation. In 2014, DHS, in coordination with FERC, the ES-ISAC, NERC, the FBI, and industry experts, convened another series of regional briefings across North America with utilities and law enforcement officials to follow up on the initial outreach regarding substation physical security. On March 7, 2014, FERC ordered NERC to submit to the commission within 90 days proposed reliability standards requiring certain transmission owners "to take steps or demonstrate that they have taken steps to address physical security risks and vulnerabilities related to the reliable operation" of the power grid. In its order FERC stated that physical security standards were necessary because "the current Reliability Standards do not specifically require entities to take steps to reasonably protect against physical security attacks." According to FERC's order, the new reliability standards were to require transmission owners or operators to perform a risk assessment of their systems to identify their "critical facilities," evaluate the potential threats and vulnerabilities to those identified facilities, and develop and implement a security plan designed to protect against attacks to those identified critical facilities. The order required that each of these steps be verified by NERC or another third party qualified to review them. On May 23, 2014, NERC filed with FERC its proposal for mandatory physical security standards. On November 20, 2014, FERC approved the proposed standard, with minor changes, as NERC's new Physical Security Reliability Standard (CIP-014-1). The standard applies to transmission owners with assets operating at 500 kV or higher as well as owners with substations operating between 200 kV and 499 kV if they meet certain interconnection or load-carrying criteria. The standard consists of six principal requirements (R1-R6), summarized as follows: R1. Risk assessments by transmission owners to identify critical transmission facilities; R2. Independent third party verification of risk assessments conducted under R1; R3. Requirement for transmission owners with critical facilities identified under R1 but not under their operational control to notify the transmission operator of these facilities; R4. Mandatory threat and vulnerability assessments for critical facilities conducted by transmission owners and operators; R5. Development, documentation, and implementation of physical security plans to protect critical facilities; and R6. Independent third party review of the threat and vulnerability assessments performed under R4 and security plans developed under R5. The standard also lays out a process for compliance monitoring and assessment including audits, self-certifications, spot checking, violation investigations, self-reporting, and handling complaints. The new standard will be enforced by NERC or another Regional Entity under a penalty review policy for mandatory reliability standards approved by FERC subject to the Commission's enforcement authority and oversight under P.L. 109-58 . According to NERC, the CIP-014-1 physical security standard has staggered enforcement dates with compliance obligations beginning on October 1, 2015. Electric utilities have long had an ongoing responsibility to ensure grid reliability, in part through operating practices and investments related to grid safety and security. As the standards discussed in the previous section suggest, there has been some level of physical security investment and an increasing refinement of grid security practices across the electric power sector for at least the last 15 years. Nonetheless, several major transmission owners have announced significant new investment initiatives specifically to improve the physical security of critical transformer substations in light of the Metcalf attack. Other utilities have included new substation security investments in broader initiatives for company security. The following examples illustrate the types of security changes announced by these grid owners. Note that other major utilities have not publicly announced similar new security initiatives, or have kept the details of their security initiatives confidential. A comprehensive review or comparison of physical security plans among all major grid owners in the United States is beyond the scope of this report. In February 2012, the Tennessee Valley Authority (TVA) announced that it was "realigning its operations and structure to enhance security at TVA's non-nuclear power facilities ... focusing more of our non-nuclear security resources on our critical infrastructure," including HV substations. The realignment included ending uniformed patrols in favor of installing more security technology, and the stationing of contract guards 24 hours a day at critical facilities. Together with local law enforcement cooperation, the shift to contract guards was intended to provide a more persistent security presence and faster incident response at key locations. Among the security technologies reportedly deployed by TVA are "surveillance, infrared cameras, video analytics for alarm verification and assessment, virtual perimeters, card readers, [and] automated gates." TVA's security initiatives in 2012 appear to have been motivated primarily by security concerns such as copper theft, but would be applicable to more serious security risks such as terror attacks. In February 2014, after the Metcalf incident, TVA reportedly stated that it was "intensifying efforts" to educate local law enforcement about the importance of substations, including taking police on site visits to see substations during normal operations. The utility also began canvassing residents near TVA property asking them to report unusual activity around grid facilities. TVA officials have not publicly released details of the authority's physical security program, but the authority reportedly "takes significant steps, both physically and procedurally, to protect its transmission infrastructure," employing "several layers of protection." TVA's Budget Proposal and Management Agenda for FY2016 discusses $25 million to $35 million in cybersecurity investments but does not discuss investments specifically for physical security. The authority's quarterly report states that "TVA continues to evaluate measures that may be required for compliance" with FERC's new physical security standard "but costs cannot be estimated at this time." In February 2014, in response to the attack on its Metcalf substation, PG&E announced that it would be investing approximately $100 million over three years to improve substation security. Physical security measures mentioned by the company included new perimeter barriers, shielding for certain equipment, more cameras (inside and outside the fence), and clearing vegetation. For its most critical facilities, the company was "studying advanced detection technology such as night vision and thermal imaging." Other security measures mentioned in news reports about PG&E included enhanced lighting, 24-hour security guards, and increased patrols by local law enforcement agencies. Initial implementation of these measures was inadequate, however, as the Metcalf substation experienced another significant security incident in August 2014, during which thieves breached a perimeter fence and stole several pieces of construction equipment. According to PG&E, human error was a factor because "fence detection alarms received in security operations were not appropriately addressed." In February 2014, Dominion Virginia Power, an operating company of Dominion, announced plans to spend up to $500 million over five to seven years "to harden its transmission substations and other critical infrastructure against man-made physical threats and natural disasters, as well as stockpile crucial equipment for major damage recovery." Dominion reportedly began to increase substation security efforts in 2013, focusing first on substations at greatest risk. Among the security measures identified by the utility are physical barriers, additional access control, equipment design/hardening, polymer bushing installation, additional spare equipment, and relocation of spare equipment to off-site storage areas. Other measures reportedly include dual-perimeter "no man zones" around substations and installing systems for key-card access to substation yards. As of February 2015, Dominion had begun implementing a series of new physical measures including new risk assessment models, modifications to substation equipment, and improved off-site monitoring. In its 2014 draft Security Asset Management Strategy , the Bonneville Power Administration (BPA) proposed approximately $37 million in additional capital spending through FY2020 for physical security measures at approximately 60 critical transformer substations. BPA's Strategy stated that, over the prior 13 years, the utility had "conducted hundreds of security and risk assessments using several industry accepted methodologies," and began implementing security improvements based on these risk assessments beginning in 2001. The administration's 2015 "2 nd Quarter Capital Project Status Report" includes $49.9 million in capital spending to acquire five 500 kV spares and relocate two existing transformers to be used as spares placed strategically across the BPA system. BPA has 105 single-phase transformers (35 banks) rated at 500kV in service. The New York Power Authority (NYPA) in January 2015 requested authorization from its trustees for $42.5 million in capital expenditures primarily for physical security upgrades at critical substation in its transmission system. Planned upgrades include fence intrusion detection systems, modification of physical security perimeters, installing key card access systems, surveillance cameras, laser detection systems, and associated control and monitoring systems, among other measures. In May 2014, Pepco Holdings reportedly announced a $40 million project to upgrade physical security at various substations in the company's transmission system. The company states that it has established a physical security working group, has conducted on-site physical security assessments, and has been collaborating with other entities to focus on the best security improvement opportunities. Pepco's physical security measures include guarded facilities for spare equipment, enclosing substations, improving communications connectivity, maintaining spare equipment, and considering physical security when evaluating new facilities. The recent transformer substation incidents, together with federal grid security exercises, have focused attention on the vulnerability of HV transformer substations to organized physical attacks. As the electric power industry and federal agencies continue their efforts to improve the physical security of critical HV transformer substations, Congress may consider several key issues as part of its oversight of the sector. A fundamental consideration regarding HV transformer security is a clear and stable understanding of which transformers are "critical." The USA PATRIOT Act of 2001 defines "critical infrastructure" in the most general sense as "systems and assets ... so vital to the United States that the incapacity or destruction of such systems and assets would have a debilitating impact on security, national economic security, national public health or safety, or any combination of those matters." In its 2009 guidelines for identifying critical assets specifically in the electricity sector, NERC defines critical assets as those "that if destroyed, degraded, compromised (e.g., misused) or otherwise rendered unavailable would unacceptably affect the reliability or operability of the [bulk-power system] as a whole.... " FERC's 2014 order mandating physical security standards for the grid defines a "critical facility" as "one that, if rendered inoperable or damaged, could have a critical impact on the operation of the interconnection through instability, uncontrolled separation or cascading failures on the Bulk-Power System." All three definitions associate "criticality" with a failure event of national significance, although none provides a more prescriptive basis for identifying such assets. In its physical security order, FERC does not require that a "mandatory" number of critical facilities be identified under the standards. Determination of whether a specific HV transformer is "critical" will be based on each individual asset owner's "objective analysis, technical expertise, and experienced judgment." In its physical security standards, NERC requires transmission owners with HV assets meeting prescriptive criteria to examine whether they may have critical transformers, but it is up to the owners to determine themselves if any of their assets are critical through a periodic risk assessment based on their own respective transmission analyses, subject to independent validation. Thus, grid owners could have considerable latitude in determining which of their transformer substations (if any) are critical and therefore subject to the requirements of the new standard. Although there are many candidate transformer substations in the grid, relatively few are likely to be of national significance. As discussed above, of the numerous HV transformer substations in the United States, FERC's 2013 power flow analysis identified only 30 as being critical to the national grid (although each of these substations may contain multiple HV transformers). Whether the number of critical transformer substations under FERC's definition above turns out to be higher or lower than 30, it will likely be only a small fraction of the total asset base. This conclusion is consistent with FERC's expectation that under NERC's new standard "the number of facilities identified as critical will be relatively small.... For example, of the many substations on the Bulk-Power System, our preliminary view is that most of these would not be 'critical' as the term is used in this order." Consistent with this view, the NERC working group responsible for drafting the proposed physical security standard likewise expected the number of critical facilities to be "small and that many Transmission Owners that meet the applicability of this standard will not actually identify any such Facilities." Although the new NERC physical security standards were approved by FERC after extensive utility and public comments, some stakeholders take issue with specific requirements and methodology in the standards. For example, some analysts have objected to NERC's standards as focusing too narrowly on a limited number of substations evaluated individually. They argue this approach fails to adequately consider potential impacts from a planned, multi-substation attack. They assert that NERC's approach may overlook transformers that are "critical" in the context of such an attack. FERC has rejected these arguments (for the time being) arguing that "by protecting individual critical facilities, responsible entities will necessarily protect critical facilities against simultaneous attacks." FERC states that it is not prepared "to expand the scope of covered facilities to include those not individually critical ... at this early stage of industry experience with the new requirements. Our priority at this time is to have responsible entities protect the most critical facilities." However, the commission also states that it remains "open to a different approach in the future as industry continues to gain experience in this area and as risks may evolve." Properly identifying which HV transformer substations are critical is a key issue. Otherwise, the electricity sector risks the possibility of hardening too many substations, hardening the wrong substations, or both. Either outcome could increase ultimate costs to electricity consumers without commensurate security benefits, and could potentially divert limited security resources from other important grid priorities (e.g., cybersecurity). Hardening too few substations could leave the grid exposed to unacceptable levels of risk. Independent verification is intended to validate utility assessments of substation criticality, but the standard's reliance on company-by-company assessments may still allow for important differences in analytic methodology or assumptions, and thus inconsistent conclusions about transformer criticality. Furthermore, company-specific studies may not align with a "top down" assessment of asset criticality like that performed by FERC in its Electrically Significant Location (ESL) analysis. Congress may examine whether company-specific assessments of transformer criticality could differ from national-level assessments or assessments using other analytic approaches, and what implications, if any, such differences might have on overall grid security and company efforts to protect particular substations. Ensuring the confidentially of critical infrastructure information has been a long-standing concern across all critical infrastructure sectors. It is a key reason for the establishment of sector Information Sharing and Analysis Centers (ISACs), including the Electricity Sector ISAC, discussed above. Confidentiality also factors into the administration of the industry's spare transformer programs and other activities related to critical infrastructure. FERC has established policies for the protection of critical energy infrastructure information (CEII) through a series of orders, beginning with Order 630, issued February 21, 2003. The order (§27) defines CEII as information that "must relate to critical infrastructure, be potentially useful to terrorists, and be exempt from disclosure under the Freedom of Information Act [FOIA]." It also establishes procedures and responsibilities for determining what information qualifies as CEII and handling CEII requests. FERC's 2014 order mandating physical security standards also requires procedures to ensure confidential treatment of sensitive information. Press articles in the wake of the Metcalf attacks, notably in the Wall Street Journal , cited specific details about FERC's 2013 ESL analysis, reportedly from a copy of a FERC presentation obtained by the paper. Notwithstanding FERC's orders on CEII, Members of Congress and FERC officials have expressed concern that the release of the presentation by FERC staff and the publication of details in the press potentially compromised grid security. Others reportedly have disputed this concern, including the former FERC Commissioner responsible for commissioning and presenting the ESL study findings at industry meetings. In April 2014, the DOE Inspector General issued a management alert which concluded that the FERC presentation in question "should have been classified and protected from release" and "that the Commission may not possess adequate controls for identifying and handling classified national security information." The Acting Chairman of FERC testified at the time that the commission was adopting the Inspector General's recommendations to improve its handling of CEII and requested additional authority from Congress for exemption from FOIA. On January 30, 2015, the DOE Inspector General released a follow up inspection report related to the IG's earlier examination of CEII handling by FERC. The report concluded that the Commission's controls, processes and procedures for protecting nonpublic information were severely lacking. Specifically, we found that staff inconsistently handled and shared Commission-created analyses that identified vulnerability of the Nation's electric grid without ensuring that the data was adequately evaluated for sensitivity and classification. The IG report noted that FERC's actions to remediate its CEII lapses since the IG's earlier Management Alert were "a good start," but that additional measures were recommended. According to the IG, FERC's comments and additional plans in response to the new report were generally responsive to the report's findings and recommendations. FERC staff may be taking steps to improve the way CEII is safeguarded in response to the Inspector General's reports, but securing CEII may continue to be an issue if NERC's new physical security regulations are approved by the commission. NERC's regulations would require independent risk assessments by multiple grid owners and 3 rd party validation of those assessments. This process, by construction, would cause considerable new CEII to be created (e.g., multiple Midwest power flow models) and shared among utilities, RTOs, and consultants in ways that may be new to the industry. Ensuring that CEII generated and transferred among these entities remains secure could require special attention. As FERC's improper management of the ESL study information shows, having strong CEII policies in the context of NERC's new physical security regulations may not guarantee that those policies will be correctly and uniformly followed—even by the agency that created them. The Critical Electric Infrastructure Protection Act ( H.R. 2271 §2(a)) would strengthen federal protections for critical electric infrastructure information. Among other provisions, the bill would exempt such information from disclosure under the Freedom of Information Act or any state, tribal, or local law requiring such disclosure. The bill would also require FERC to promulgate regulations, issue orders, provide standards, and specify sanctions to ensure appropriate sharing of critical electric infrastructure information and prevent its unauthorized release. The bill would allow federal officials to grant temporary access to classified information to key personnel of entities subject to grid security emergency measures, further discussed below. The electric power sector has had physical security guidelines in place for well over a decade, as discussed above. These voluntary guidelines have been updated and expanded periodically to reflect industry experience, changes in the security environment, and new technologies. Prior to 2014, however, it appears that the physical security initiatives among grid owners were focused primarily on preventing vandalism and theft (of copper wire) rather than a terrorist attack. As the recent substation attacks in California, Arkansas, and Florida have shown, many other security measures available to grid owners were not implemented—even at critical HV substations. A grid owner's focus on vandalism and theft may be understandable because such incidents have occurred frequently and their associated costs are tangible and well-understood. Investing in security against a terrorist attack presents a greater challenge in terms of costs and benefits. As a 2006 report from the Electric Power Research Institute states, Security measures, in themselves, are cost items, with no direct monetary return. The benefits are in the avoided costs of potential attacks whose probability is generally not known. This makes cost-justification very difficult. Note that cost-justification requires not only the approval of utility management, but also of FERC and potentially state public utility commissions which regulate the rates grid owners may charge for electric transmission and distribution service. Regulators are responsible for ensuring that electricity rates are just and reasonable. They must be convinced that any new grid security capital costs and expenses are necessary and prudent before they will allow them to be passed through to ratepayers. The Metcalf incident and GridEx exercises have provided the electric sector with valuable new information about the potential threat, vulnerability, and consequence of a coordinated attack on HV transformers. Risk assessments incorporating this information presumably would justify (with or without a new NERC standard) increased security investments at critical substations to prevent intentional attacks. The spending plans announced in 2014-2015 at PG&E, Dominion, BPA, and other utilities for HV substation security appear to reflect such risk and cost-benefit reassessments. Nonetheless, there continues to be considerable uncertainty about the risk of terror attacks on the power grid, and what measures are economically justified in addressing them. PG&E, BPA, and the other utilities announcing large security investments have already decided to make such investments. Other major owners of critical HV transformers have not publicly announced similar plans, in some cases because they have not yet completed security evaluations under NERC's new standards, so they are unsure what new measures they will require. For example, based upon a security gap analysis after the Metcalf incident, Florida Power and Light (FPL) identified multiple potential security enhancements, but has only implemented some of them; other measures have been delayed for comparison to requirements under NERC's new standards. NERC's proposed standards for power grid physical security would ensure considerable consistency in the analytic process utilities must undertake to identify critical substations and develop plans to secure them. However, the standard may not ensure consistency among the various security plans nor in the specific measures the individual asset owners will choose to implement to reduce the risk of intentional attacks. Apart from the physical aspects of their assets, a number of factors may lead to differences in security implementation among grid owners, including differences in organization, ratemaking, accounting, and management capability. In particular, how physical security is managed within a corporate structure can influence the effectiveness of physical security programs. For example, a 2014 corporate memo from PG&E leaked to the press states that "due to the existing structure and limited authority of CSD [Corporate Security Division], little has changed relative CSD's abilities to make significant and intended security improvements." How capital is allocated and accounted for can also be a barrier to physical security implementation and verification. In a 2014 report to Florida regulators, FPL stated that not all security costs are contained within the Corporate Security budget. Some physical security costs are shared with appropriate operational business units. For example, the cost of security equipment for new substations is rolled into the cost of the substation. Not all physical security costs are budgeted and tracked in separate line items. Therefore, difficulties exist estimating total costs of FPL's physical security efforts. As FERC continues to implement its policy of regulating physical security of the power grid, Congress may examine whether company-specific security initiatives appropriately reflect the risk profiles of their particular assets, and whether additional security measures across the grid uniformly reflect terrorism risk from a national perspective. Examining the extent to which the corporate structures and accounting functions support company-specific physical security programs may be of particular interest as grid owners adapt to evolving threats and physical security requirements. The power industry's physical security risk assessments rely upon information about security threats provided by the federal government, among other sources, communicated through the ISAC, during DHS and other agency briefings, or through other channels. The quality and timeliness of this threat information is a key determinant of what grid owners need to be protecting against and what security measures to take. Incomplete or ambiguous threat information—especially from the federal government—may lead to inconsistency in physical security among grid owners, inefficient spending of limited security resources at facilities (e.g., that may not really be under threat), or deployment of security measures against the wrong threat. For example, prior to FERC's physical security order, the head of NERC, which initially opposed mandatory physical security standards, stated? I am concerned that a rule-based approach for physical security would not provide the flexibility needed to deal with the widely varying risk profiles and circumstances across the North American grid and would instead create unnecessary and inefficient regulatory burdens and compliance obligations. Differences in the interpretation or application of threat information, as discussed in the previous section, may be a reason why some large utilities have announced major new substation security initiatives while others have not. Concerns about the quality and specificity of federal threat information have long been an issue across all critical infrastructure sectors. Threat information continues to be an uncertainty in the case of power grid physical security. For example, the PJM regional transmission organization employs probabilistic models to assess risks to the grid due to equipment malfunction and severe weather, but its model has not incorporated an assessment of a physical attack due to insufficient data. Some federal officials reportedly have characterized the Metcalf incident as a domestic terrorist attack, potentially a "dry run" for a more destructive attack on multiple HV transformer substations, while the Federal Bureau of Investigation has stated that it does not believe Metcalf was a terrorist incident. Because the perpetrators have not been identified, it is impossible to know for certain, but the ambiguity has significant implications for HV substation security going forward. Although there is wide consensus that the Metcalf attack was extremely serious, some industry analysts have opined that FERC's physical security order may be an "overreaction" to Metcalf. By contrast, former DHS Secretary Michael Chertoff has predicted that "the sophistication and resulting damage of the Metcalf attack will ... be exceeded" in a future attack. Still others have expressed concern that FERC's physical security concerns may be too heavily focused on another Metcalf-type scenario (the last threat) rather than a wider range of potential future threats (the next threat). There is widespread agreement among government, utilities, and manufacturers that HV transformers in the United States are vulnerable to terrorist attack, and that such an attack potentially could have catastrophic consequences. But the most serious, multi-transformer attacks could require acquiring operational information and a certain level of sophistication on the part of potential attackers. Consequently, despite the technical arguments, without more specific information about potential targets and attacker capabilities, the true vulnerability of the grid to a multi-HV transformer attack remains an open question. As Congress seeks to establish the best policies to address HV transformer vulnerability relative to other infrastructure security priorities, understanding this vulnerability in the context of specific demonstrable threats may become increasingly important. To this end Congress may examine how federal threat information is developed and used by grid owners, and how limitations and uncertainty of this information may affect the HV transformer physical security among electric utilities. Physical security for HV transformer substations has the primary purpose of preventing successful attacks against these critical assets within the power grid. However, in the event of a successful attack, measures to minimize its effect on the overall grid are equally important so that the loss of any particular transformer remains a local event. To this end the electric power industry emphasizes its strategy of "defense-in-depth," which includes incident response and recovery in addition to preparation and prevention. Industry initiatives to enhance grid resiliency, including incident recovery programs such as the DHS recovery transformer program and EEI's spare transformer program, contribute to the power grid's ability to sustain a terrorist attack without widespread grid failure. Indeed, some analysts have pointed to the Metcalf incident as a successful demonstration of grid resiliency; electric service was not interrupted despite the loss of a critical substation in the San Francisco Bay area. Nonetheless, some policymakers have proposed additional federal authorities to respond to physical incidents affecting grid critical infrastructure, including HV transformers. Some stakeholders, including FERC officials, have asserted that the commission's current grid reliability authority under the Federal Power Act (§215) does not provide FERC with adequate authority for emergency action in the event of an attack on the grid. A House bill to amend the Federal Power Act with respect to critical electric infrastructure security ( H.R. 2271 ) would allow the President to authorize the Secretary of Energy to order emergency measures to protect grid reliability during a "grid security emergency" (§(b)(1)). The director of FERC's electric reliability office has testified in support of the bill that FERC's existing "procedures ... for the development and approval of reliability standards do not provide an effective and timely means of addressing urgent cyber or other national security risks to the bulk power system." NERC's president likewise has testified that he generally supports legislation clarifying federal authority during grid emergencies, as long as they focus clearly on "national, catastrophic instances" and do not conflict with the existing system of ongoing measures in place to protect the grid. Utility industry representatives also support facilitation of industry-government coordination in the event of an attack on the grid. As consideration of H.R. 2271 or similar legislation continues, Congress may focus on specific language related to consultation, duration of emergency measures, grid recovery activities, and other details to ensure that they align with a complex industry structure while achieving the bill's objectives in the event of a future security incident. As discussed above, the DOE's Quadrennial Energy Review calls for federal efforts to develop one or more critical HV transformer reserves. H.R. 2244 would mandate a DOE plan for how such a reserve program could be carried out. Some in the utility industry support the policy intentions of such a reserve, as already demonstrated by the industry's own spare HV transformer programs and planned expansion of those programs, but they believe stakeholders "will be better served by allowing the industry to create the structure, cost responsibility and pricing for [transformer] sparing services as opposed to a top-down government solution." They believe federal assistance would be most helpful if limited to funding the startup of a transformer reserve program administered by the asset owners themselves. The Grid Assurance sparing service appears consistent with a private sector-driven approach to expand existing spare transformer initiatives. Others have questioned the cost-effectiveness of a new national HV transformer reserve program, asserting that—had it been in place—the reserve program envisioned by H.R. 2244 would not have been called upon by any grid incident over the last ten years. As Congress considers any plans for a federally administered strategic transformer reserve, it may consider the relationship of such a program to ongoing industry efforts to maintain HV transformer spares, the relationship between federal and state administrators of such a program, its cost-effectiveness, and its practical requirements (e.g., size, location, and transportation). In addition to measures focused on the protection of critical HV transformers from physical attack, analysts have advocated policies to reduce the criticality of individual HV assets by enhancing the overall "resiliency" of the electric power grid. As a report from the Executive Office of the President states, Grid resilience ... includes hardening, advanced capabilities, and recovery/reconstitution. Although most attention is placed on best practices for hardening, resilience strategies must also consider options to improve grid flexibility and control. Resilience includes reconstitution and general readiness such as pole maintenance, vegetation management, use of mobile transformers and substations, and participation in mutual assistance groups. A number of federal, state, and industry initiatives exist to address various aspects of electric power grid resiliency. While many of these initiatives have been motivated by weather-related events such as the Northeast Blackout of 2003 and electric grid failure during Superstorm Sandy, policies to improve grid resilience also have benefits in the context of intentional physical attacks. For example, an official from PJM has reportedly stated, You can only harden a substation so much. If someone wants to attack a substation, they will.... That leads us to the resilience piece. Maybe the best way to make a substation less critical is to build more transmission. A substation is critical basically because we're pushing too much power through it. Grid scale energy storage, distributed generation, smart grid technology, and other measures to redistribute or optimize transmission system power flows may also increase grid resiliency and reduce vulnerability to physical security threats. The Enhanced Grid Security Act of 2015 ( S. 1241 ) would require the Secretary of Energy develop an advanced energy security program to increase the "functional preservation" of the electric grid in the face of both natural and human-made threats and hazards (§7(b)). The objectives of the program would explicitly include both "security and resiliency" through vulnerability assessment, modeling, exercises, research, and technical assistance (§7(c)). The Grid Modernization Act of 2015 ( S. 1243 ) would likewise encourage greater grid resilience, including modelling, research, and investment in grid modernization and new technologies—including tools to increase physical security (§101(3)(E)). Other legislation related to power grid resilience or efficiency would also likely have physical security implications. As Congress continues its examination of physical security policy, maintaining an integrated perspective on prevention, recovery, and resilience may help to promote an effective balance among industry investment, regulatory requirements, and federal oversight. | The U.S. electric power grid consists of over 200,000 miles of high-voltage transmission lines and hundreds of large transformer substations. High voltage (HV) transformer units make up less than 3% of U.S. transformers, but they carry 60%-70% of the nation's electricity. Because they serve as vital nodes, HV transformers are critical to the nation's electric grid. HV transformers are also the most vulnerable to damage from malicious acts. For more than 10 years, the electric utility industry and government agencies have engaged in activities to secure HV transformers from physical attack and to improve recovery in the event of a successful attack. These activities include coordination and information sharing, spare equipment programs, security standards, security exercises, and other measures. There has been some level of physical security investment and an increasing refinement of voluntary security practices across the electric power sector for at least the last 15 years. However, recent grid security exercises, together with a 2013 physical attack on transformers in Metcalf, CA, have changed the way grid security is viewed and have focused congressional interest on the physical security of HV transformers. They have also prompted new grid security efforts by utilities and regulators. On November 20, 2014, the Federal Energy Regulatory Commission (FERC) approved a new mandatory Physical Security Reliability Standard (CIP-014-1) proposed by the North American Electric Reliability Corporation (NERC). The new standards require certain transmission owners "to address physical security risks and vulnerabilities related to the reliable operation" of the power grid by performing risk assessments to identify their critical facilities, evaluate potential threats and vulnerabilities, and implement security plans to protect against attacks. Legislative proposals would expand federal efforts to prevent or recover from a physical attack on the U.S. grid. These include the Enhanced Grid Security Act of 2015 (S. 1241), the Critical Electric Infrastructure Protection Act (H.R. 2271), the Terrorism Prevention and Critical Infrastructure Protection Act of 2015 (H.R. 85), a House bill to establish a strategic transformer reserve program (H.R. 2244), and the Grid Modernization Act of 2015 (S. 1243). There is widespread agreement among government agencies, utilities, and manufacturers that HV transformers in the United States are vulnerable to terrorist attack, and that such an attack potentially could have catastrophic consequences. But the most serious, multi-transformer attacks could require acquiring operational information and a certain level of sophistication on the part of potential attackers. Consequently, despite the technical arguments, without more specific information about potential targets and attacker capabilities, the actual risk of a multi-HV transformer attack remains an open question. As the electric power industry and federal agencies continue their efforts to improve the physical security of critical HV transformer substations, Congress may consider several issues as part of its oversight of the sector: identifying critical transformers, confidentiality of critical transformer information, adequacy of HV transformer protection, quality of federal threat information, recovery from HV transformer attacks, and the overall resiliency of the grid. Maintaining an integrated perspective on prevention, recovery, and resilience may help to promote an effective balance among industry investment, regulatory requirements, and federal oversight. |
The Federal Bureau of Investigation (FBI, the Bureau) is the lead agency for investigating the federal crime of terrorism, which is defined under law as "an offense that is calculated to influence or affect the conduct of government by intimidation or coercion, or to retaliate against government conduct." This includes terrorist acts committed within and outside U.S. national boundaries. This report provides background on some of the key elements of the FBI terrorism investigative process based on publicly available information. The September 11, 2001 (9/11) terrorist attacks have been called a major security, law enforcement, and intelligence failure. Prior to 9/11, the FBI was largely a reactive law enforcement agency—pursuing suspects after they had allegedly committed crimes. Since 9/11, the Bureau has arguably taken a much more proactive posture, particularly regarding counterterrorism. It now views its role as both "predicting and preventing" the threats facing the nation, drawing upon enhanced resources. A few basic measures suggest this: Post-9/11 legislation—notably the USA PATRIOT Act ( P.L. 107-56 )—dismantled "the Wall" between intelligence and criminal investigation and expanded the U.S. government's ability to monitor terrorist suspects, among other changes. Changes in the Attorney General's Guidelines for Domestic FBI Operations and the FBI Domestic Investigations and Operations Guidelines give the FBI more leeway to engage in proactive investigative work that does not depend on criminal predication (i.e., a nexus to past or future criminal activity). Since 9/11, a widening of the Bureau's counterterrorism operations has occurred as well as closer liaison with agencies outside the Department of Justice (DOJ). This is most evident domestically in the increased number of its Joint Terrorism Task Forces (JTTF). These are multi-agency investigative units led by DOJ and the FBI and are designed to combine the resources of federal, state, and local law enforcement. They are locally based and comprised of investigators, analysts, linguists, Special Weapons and Tactics (SWAT) experts, and other specialists from dozens of U.S. law enforcement and intelligence agencies. In 1999, there were 26 JTTFs throughout the United States. As of January 2014, there were over 100. Evidence of growth within the FBI's counterterrorism operations can also be seen in the Bureau's increased allocation of agents to terrorism matters. In April 2011 testimony to Congress, then FBI Director Robert Mueller "estimated that before 9/11, there were 10,000 FBI agents on the streets, with 30 percent engaged in national security issues and the rest focused on criminal activity. Since then, Mueller said, he has gained 4,000 more agents and the FBI's focus is a 50-50 split between terrorism and other criminal activity like mortgage fraud." To further its proactive intelligence-driven counterterrorism mission, the FBI established a National Security Branch (NSB) and a Directorate of Intelligence (DI) within the NSB. Moreover, the FBI has reportedly increased its intelligence analyst workforce from approximately 1,100 in October 2001 to more than 3,000 by September 2011. The FBI is an intelligence agency as well as a law enforcement agency. Since 9/11, the Bureau has taken what it describes as a more forward-leaning, intelligence-driven posture in its terrorism investigations in order to prevent or disrupt terrorist acts, not merely investigate them after they have occurred. Shortly after the attacks, the FBI Director wrote a memo to Special Agents in Charge of FBI Field Offices saying, "while every office will have different crime problems that will require varying levels of resources, the FBI has just one set of priorities: Stop the next attack ." Then-Deputy Attorney General Paul McNulty described the DOJ's aggressive, proactive, and preventative approach as the only acceptable response from a department of government charged with enforcing our laws and protecting the American people. Awaiting an attack is not an option. That is why the Department of Justice is doing everything in its power to identify risks to our Nation's security at the earliest stage possible and to respond with forward-leaning – preventative – prosecutions. The FBI's post-9/11 transformation is particularly evident in four areas: The USA PATRIOT Act provided the FBI additional authorities and enhanced investigative tools. The FBI and DOJ altered the way the Bureau investigated terrorism with the 2008 revision of The Attorney General's Guidelines for Domestic FBI Operations . The FBI expanded operationally via a proliferation of JTTFs across the United States. In so doing, it also increased its cooperation with state, local, and federal agencies. Finally, watershed changes were made in the Bureau's intelligence program. Shortly after the 9/11 attacks, Congress provided the FBI with several additional investigative tools and expanded its authority to monitor and search suspects in terrorism-related and other investigations. Many of these tools and authorities were contained in the USA PATRIOT Act ( P.L. 107-56 ) signed by President George W. Bush on October 26, 2001. The act amended several existing statutes, such as the Foreign Intelligence Surveillance Act (FISA) of 1978 ( P.L. 95-511 ), the Electronic Communications Privacy Act of 1986 ( P.L. 99-508 ), and the various National Security Letter (NSL) statutes. Additional tools and authorities include dismantling "the Wall" that inhibited the sharing of information between intelligence and criminal investigators, roving wiretaps, expanded use of devices that record the sources of incoming and outgoing communications, "Sneak and Peek" search warrants, increased access to business records, and expanded use of National Security Letters. Historically, there have been differences between electronic surveillance (wiretaps) conducted for intelligence and for law enforcement purposes. Among these is the protection of the constitutional rights of persons under criminal investigation. A former government official describes the differences: Law enforcement wiretaps are heavily regulated … they can only be carried out for a limited time. They require constant supervision and review…. They are approved for only specific types of crime…. And once a crime begins the defendant can see transcripts of the wiretaps and challenge their legality…. Intelligence wiretaps are different … they aren't triggered by suspected criminal activity. Any representative of a foreign government is fair game for an intelligence tap. The rules that apply to law enforcement taps just aren't appropriate for intelligence wiretaps. FISA regulates intelligence collection directed at foreign powers and agents of foreign powers in the United States to include those engaged in international terrorism. FISA required the government to certify that "the purpose" of surveillance was to gather foreign intelligence information. Prior to the USA PATRIOT Act, DOJ turned the "primary purpose" standard into written policy that had the effect of limiting the coordination between intelligence and criminal investigators. This came to be known as "the Wall" between intelligence and law enforcement and the "unfortunate consequences" of this barrier to information sharing were noted by the 9/11 Commission in its report on the 9/11 attacks. Section 218 of the USA PATRIOT Act amended FISA to replace the phrase "the purpose" with the phrase "a significant purpose." According to Senator Dianne Feinstein, these changes were necessary to make it easier to collect foreign intelligence information under … FISA. Under current law, authorities can proceed with surveillance under FISA only if the primary purpose of the investigation is to collect foreign intelligence. But in today's world things are not so simple. In many cases, surveillance will have two key goals—the gathering of foreign intelligence, and the gathering of evidence for a criminal prosecution. Determining which purpose is the "primary" purpose of the investigation can be difficult, and will only become more so as we coordinate our intelligence and law enforcement efforts in the war against terror. As one legal scholar described it, by moving the FISA requirement from the purpose to a significant purpose , the USA PATRIOT Act "knocked out the foundation for 'the Wall.'" This removed impediments to the exchange of information about terrorism or other national security threats between intelligence and law enforcement personnel. Other provisions of the USA PATRIOT Act also sought to increase intelligence information sharing. Section 504 amended FISA by adding provisions allowing federal officers who conduct electronic surveillance to acquire foreign intelligence information to consult with federal law enforcement officers to coordinate efforts to investigate or protect against (among other issues) sabotage or international terrorism by a foreign power or an agent of a foreign power. And Section 203 amended the Federal Rules of Criminal Procedure to allow disclosure of grand jury information in certain circumstances, including if that information is related to sabotage or international terrorism by a foreign power or an agent of a foreign power. Federal law enforcement officers have the authority, subject to court approval, to conduct wiretaps and electronic surveillance on persons suspected of committing federal crimes. A "roving" wiretap allows law enforcement officers to "follow" a subject and lawfully intercept that person's communications with a single court order even if the target attempts to evade surveillance by changing telephones or other communications devices. According to an Assistant U.S. Attorney, "Prior to roving wiretaps, law enforcement agents and federal prosecutors had to invest substantial time and resources in obtaining a separate wiretap order for each additional telephone used by a subject during an investigation … [Q]uite often this resulted in a loss of valuable evidence through missed wiretap conversations relating to the criminal activity being monitored." Before the USA PATRIOT Act, the concept behind roving wiretaps did not apply to FISA. The USA PATRIOT Act amended the electronic surveillance portion of FISA to allow government agents to continue surveillance when "the target of the surveillance switches from a facility (e.g., a telephone) associated with one service provider (e.g., a telephone company) to a different facility associated with a different provider." A trap and trace device shows all incoming phone numbers to a particular telephone. A pen register shows all outgoing phone numbers a particular telephone has called. Prior to 2001, FISA allowed law enforcement officers to collect incoming and outgoing numbers on a telephone line. The USA PATRIOT Act expanded the law to permit the capture of comparable information related to other forms of communication including the Internet, electronic mail, web surfing, and all other forms of electronic communications. In general, police officers serving a warrant must "knock and announce"—that is, give the subject notice that they are the police and are serving a warrant. They may enter and search even if the subject is not present at the premises to be searched, but they must leave a copy of the warrant and an inventory of what was seized, giving notice that the premises was searched. The USA PATRIOT Act amended Title 18 to allow federal law enforcement officers to request from the courts a delayed-notice (so-called "sneak and peek") search warrant allowing officers to enter and search a premises without immediately notifying the owner when such notice may have an adverse result (e.g., tipping off a suspect or co-conspirators). This authority has been used rarely in terrorism cases. The USA PATRIOT Act amended FISA to authorize the FBI to seek an order from the FISA Court for the production of any tangible things (including books, records, papers, documents, and other items) in a terrorism or counterintelligence investigation provided that such investigation of a United States person is not conducted solely upon the basis of activities protected by the First Amendment. National Security Letters (NSLs) are regularly used in FBI counterterrorism investigations and are roughly comparable to administrative subpoenas. They have been described as "form letters signed by an FBI agent" used to request and collect non-content consumer records and related information from "telephone companies, Internet service providers, consumer credit reporting agencies, banks, and other financial institutions." The FBI has described NSLs as "indispensable investigative tools that serve as building blocks in many counterterrorism and counterintelligence investigations." FBI Director James Comey reiterated the importance of NSLs for FBI investigations in 2014. In 2012, the FBI made 15,299 NSL requests. These requests asked for information related to 6,223 individuals. NSLs predate the USA PATRIOT Act, but the act increased their use by the FBI. For one thing, the USA PATRIOT Act allowed the FBI to issue NSLs for full consumer credit reports. Additionally, it widened the number of FBI officials who could issue NSLs. It also expanded the circumstances under which the letters could be issued by eliminating requirements that NSLs contain specific and articulable facts demonstrating a nexus to a foreign power or its agents. Currently, the information sought via an NSL "must only be relevant to protecting against international terrorism or clandestine intelligence activities." However, an NSL-related investigation of an American citizen or legal permanent resident cannot be based solely on First Amendment-protected activities. The implementation of the post-USA PATRIOT Act NSL regimen at the FBI has not been seamless. For example, the unease that some telecommunications companies had with NSLs as well as revelations made by Edward Snowden regarding foreign intelligence gathering by the National Security Agency (NSA) have spurred changes. In March 2013, in a suit involving a telecommunications company, a federal judge ruled that the federal government must stop using NSLs, because, among other things, the indefinite nondisclosure orders that are part of most NSLs "significantly infringe on speech regarding controversial government powers." The judge also mandated that the federal government had to stop enforcing the nondisclosure orders already in place with existing NSLs. The nondisclosure agreements—applied in 97% of NSLs—are "strict secrecy orders, barring the recipient from acknowledging the case to anyone but attorneys." The judge stayed the order for 90 days so the federal government could appeal it. Snowden's actions have also likely pushed the Obama Administration to alter some NSL procedures. Snowden, a former contractor at the NSA, reportedly illegally accessed and removed from the NSA top secret documents about sensitive U.S. intelligence collection efforts. These documents have been publicly released via a number of press outlets. Disclosure of this information began in June 2013. In January 2014, President Obama delivered a speech focused on U.S. intelligence surveillance programs. Among changes suggested in his comments, the President indicated a loosening of the nondisclosure stipulations, and soon after the speech, communications providers were allowed to publish some information about the volume of FISA court orders they receive. This change may seem incremental when compared to suggestions made in a December 2013 report to President Obama on intelligence and communications technologies, which was developed in response to Snowden's disclosures. While the report did suggest relaxing nondisclosure in the NSL process, among other things, it also recommended prior judicial review of NSL orders. Other NSL-related issues have cropped up in the years after 9/11. In 2007 the DOJ Inspector General initially reported that "the FBI used NSLs in violation of applicable NSL statutes, the Attorney General Guidelines, and internal FBI policies," although no evidence was found of criminal misconduct. In a subsequent report in 2008, the Inspector General concluded that DOJ and the FBI "have made significant progress in addressing the need to improve compliance in the FBI's use," but "it is too early to definitively state whether the new systems and controls developed by the FBI and the Department will eliminate fully the problems with NSLs that we identified." Moreover, between 2003 and 2006 some FBI personnel circumvented the NSL process, using crisis conditions as a justification. Namely, in that time period one FBI headquarters unit issued 722 "exigent letters" to obtain telephone toll records for approximately 4,400 telephone numbers in lieu of NSLs. The unit included representatives from three communications service providers. These representatives typically received the exigent letters from FBI employees working alongside them. None of the 722 exigent letters actually described the specific crises that supposedly made them necessary, and in some cases there were no emergencies. The FBI General Counsel at the time, Valerie E. Caproni, stated in congressional testimony that the exigent letters were borne out of a misunderstanding of the import of the USA PATRIOT Act's amendments to ECPA [Electronic Communications Privacy Act (18 U.S.C. § 2709)]. For reasons lost in the fog of history—but no doubt partially the result of the intense pace of activity in the months following the 9/11 attacks—the FBI did not adequately educate our workforce that Congress had provided clear mechanisms to obtain records in emergency situations. Although guidance was eventually provided in August 2005, the employees who had been using exigent letters for several years simply did not recognize the applicability of that guidance to their situation. In March 2007, the FBI ended the use of exigent letters. Regardless, they have played into congressional debate regarding the extension of key provisions within the PATRIOT Act. When the USA PATRIOT Act was signed into law, then-Attorney General John Ashcroft said Law enforcement is now empowered with new tools and resources necessary to disrupt, weaken, and eliminate the infrastructure of terrorist organizations, to prevent or thwart terrorist attacks, and to punish the perpetrators of terrorist acts.... The American people can be assured law enforcement will use these new tools to protect our nation while upholding the sacred liberties expressed in the Constitution. And the FBI Director testified to Congress that "the USA PATRIOT Act has changed the way the FBI operates. Many of our counterterrorism successes are the direct result of the provisions of the Act." But others were concerned about the constitutional implications of the USA PATRIOT Act. Law Professor Susan Herman notes that four of the provisions described above "exemplify several different ways in which the USA PATRIOT Act allow the executive branch to deviate from the presumptive Fourth Amendment model requiring: (1) some form of individualized suspicion (presumptively probable cause), (2) antecedent judicial review where feasible, and (3) notice of any search." After passage of the act, the Electronic Freedom Foundation worried that "the civil liberties of ordinary Americans have taken a tremendous blow with this law, especially the right to privacy in our online communications and activities." The Rutherford Institute argued that while the USA PATRIOT Act "may not have been designed to restrict American citizens' civil liberties, its unintended consequences threaten the fundamental constitutional rights of people who have absolutely no involvement with terrorism." And the American Civil Liberties Union (ACLU) charges that "the mammoth USA PATRIOT Act expanded government powers in ways that will diminish liberty for years to come." They specifically note that the wiretapping and intelligence provisions of the act "minimize the role of a judge in ensuring that law enforcement wiretapping is conducted legally and with proper justification, and they permit use of intelligence investigative authority to by-pass normal criminal procedures that protect privacy." In 2005, debate over the USA PATRIOT Act resumed when Congress deliberated extension of certain provisions of the act that were scheduled to expire (sunset). Eventually, Congress passed, and on March 9, 2006, President George W. Bush signed into law, an extension of several of the USA PATRIOT Act provisions that provided the FBI with additional authorities. In its legislation, Congress added new civil liberties protections. For example, in the case of requests to the FISA Court for an order to obtain business records, government agents are now required to present the court with data proving how the evidence sought will apply to the relevant investigation. The reauthorizing legislation also afforded greater protections for library, medical, and educational records and provides the party forced to disclose the business information the right to seek the advice of an attorney. In 2011, Congress again considered the extension of three expiring amendments to FISA. Two of these were enacted as part of the USA PATRIOT Act—the "roving wiretap" and "business records" provisions. The third amendment was enacted in 2004 as part of the Intelligence Reform and Terrorism Prevention Act ( P.L. 108-458 ). Known as the "lone wolf" provision, it permits surveillance of non-U.S. persons engaged in, or preparing to engage in, international terrorism without requiring evidence linking those persons to an identifiable foreign power or terrorist organization. In arguing for extension of these provisions before the House of Representatives, law professor Nathan Sales testified that "they simply let counterintelligence agents use some of the same techniques that ordinary criminal investigators have been using for decades – techniques that federal courts repeatedly have upheld." At the same hearing, then Acting Assistant Attorney General Todd Hinnen added, "Robust substantive standards and procedural protections are in place to ensure that these tools are used responsibly and in a manner that safeguards Americans' privacy and civil liberties." Congress passed legislation, S. 990 , to extend the provisions until June 1, 2015, and President Barack H. Obama signed the legislation ( P.L. 112-14 ) on May 26, 2011. The FBI and DOJ also emphasized their forward-leaning approach with the September 29, 2008, revision of the Attorney General's Guidelines for Domestic FBI Operations , which they claim "make the FBI's operations in the United States more effective by providing simpler, clearer, and more uniform standards and procedures." Referred to as the "Mukasey Guidelines" after Michael B. Mukasey, who was Attorney General at the time of their release, this is the latest in a series of guidelines stretching back to 1976 that govern the FBI's investigative activities. The Mukasey Guidelines went into effect on December 1, 2008. In large part, these guidelines sprang from the post-9/11 national security context, in which the FBI surmised that it could not simply react to crimes. It had to preemptively search for criminal, counterintelligence, and terrorist threats to the homeland. As the FBI's General Counsel stated in congressional testimony: We believe that this will allow the FBI to take additional necessary steps to becoming a more proactive organization. One of the key issues that we think the FBI needs to be able to do is assess potential risks and vulnerabilities. Having these additional techniques available at the assessment level, we think, will be key to the FBI's ability to efficiently and effectively answer those questions and assess risks. The 2008 revision to the guidelines represents a consolidation of several other previously stand-alone documents that had governed FBI investigations. The 2008 Domestic Investigations and Operations Guide (DIOG)—the FBI's document governing the Bureau's implementation of the Mukasey Guidelines, which the FBI modified in 2011—reflects these changes as well. The most prominent changes in the Mukasey Guidelines and the DIOG concern "assessments." Agents and analysts may now use assessments outside of the more traditional preliminary and full investigations, which require some level of factual predication. Preliminary investigations can be opened with "any 'allegation or information' indicative of possible criminal activity or threats to the national security." Opening a full investigation requires an "'articulable factual basis' of possible criminal or national threat activity." On the other hand, opening an assessment does not require particular factual predication. Instead, assessments are to follow specifically articulated purposes, of which there are five: Seek information, proactively or in response to investigative leads, relating to activities—or the involvement or role of individuals, groups, or organizations relating to those activities—constituting violations of federal criminal law or threats to the national security; Identify, obtain, and utilize information about actual or potential national security threats or federal criminal activities, or the vulnerability to such threats or activities; Obtain and retain information to inform or facilitate intelligence analysis and planning; Seek information to identify potential human sources, assess their suitability, credibility, or value of individuals as human sources; and Seek information, proactively or in response to investigative leads, relating to matters of foreign intelligence interest responsive to foreign intelligence requirements. Assessments are not to be "pursued for frivolous or improper purposes and are not based solely on First Amendment activity or on the race, ethnicity, national origin, or religion of the subject of the assessment, or a combination of only such factors." Assessments offer terrorism investigators a variety of techniques, including public surveillance and the use of confidential informants to penetrate conspiracies. The Bureau has incorporated assessments into its investigative processes. According to numbers made publicly available in March 2011, the FBI initiated 11,667 assessments to check leads on individuals, activities, groups, or organizations between December 2008 and March 2009. These, in turn, led to 427 preliminary or full investigations. Officials noted that about one-third of the assessments resulted from vague tips. Reportedly, between March 2009 and March 2011, the Bureau opened 82,325 assessments. About half of the assessments from this time frame focused on determining whether specific groups or individuals were spies or terrorists. This pool of 42,888 assessments produced just under 2,000 full or preliminary investigations. Critics have voiced broad concerns about the Mukasey Guidelines. One detailed study has noted that they "tip the scales too far in favor of relatively unchecked government power, allowing the FBI to sweep too much information about too many innocent people into the government's view. In so doing, they pose significant threats to Americans' civil liberties and risk undermining the very counterterrorism efforts they are meant to further." According to media reports, Farhad Khera, executive director of the nonprofit Muslim Advocates, has suggested that the Attorney General Guidelines are invasive and based on "generalized suspicion and fear on the part of law enforcement, not on individualized evidence of criminal activity." The ACLU also criticized the large number of assessments the FBI appears to be initiating. A policy counsel with the civil liberties group noted that the large number of assessments that did not lead to preliminary or full investigations are "against completely innocent people that are now bound up within the FBI's intelligence system forever." The FBI's General Counsel viewed the numbers from a more proactive investigative posture: "Recognize that the FBI's policy—that I think the American people would support—is that any terrorism lead has to be followed up." As written, the guidelines allow for the collection of information about ethnic or racial communities and justify the gathering of such information for proactive purposes. The DIOG states that it should be done if it "will reasonably aid the analysis of potential threats and vulnerabilities, and, overall, assist domain awareness for the purpose of performing intelligence analysis." JTTFs are locally based, multi-agency teams of investigators, analysts, linguists, SWAT experts, and other specialists who investigate terrorism and terrorism-related crimes. Seventy-one of the more than 100 JTTFs operated by DOJ and the FBI were created since 9/11. Over 4,400 federal, state, and local law enforcement officers and agents—more than four times the pre-9/11 total—work in them. These officers and agents come from more than 600 state and local agencies and 50 federal agencies. The FBI considers the JTTFs "the nation's front line on terrorism." They "investigate acts of terrorism that affect the U.S., its interests, property and citizens, including those employed by the U.S. and military personnel overseas." As this suggests, their operations are highly tactical and focus on investigations, developing human sources (informants), and gathering intelligence to thwart terrorist plots. JTTFs also offer an important conduit for the sharing of intelligence developed from FBI-led counterterrorism investigations with outside agencies and state and local law enforcement. To help facilitate this, especially as the threat of homegrown jihadists has emerged, the number of top-secret security clearances issued to local police working on JTTFs has increased from 125 to 878 between 2007 and 2009. There is also a National JTTF, which was established in July 2002 to serve as a coordinating mechanism with the FBI's partners. Some 40 agencies are now represented in the National JTTF, which has become a focal point for information sharing and the management of large-scale projects that involve multiple partners. The 9/11 terrorist attacks have been called a major intelligence failure. In response to criticisms of its intelligence capabilities in the aftermath of 9/11, the FBI has introduced a series of reforms intended to transform the Bureau from a largely reactive law enforcement agency focused on criminal investigations into a more proactive, agile, flexible, and intelligence-driven agency that can prevent acts of terrorism. Robert Mueller, who became the FBI Director just prior to 9/11 and served until September 2013, vowed to assert headquarters' control over the FBI's historically fragmented and much-criticized intelligence program. He signaled his intention to improve the FBI's intelligence program by consolidating and centralizing control over intelligence capabilities, both at FBI Headquarters and in the FBI's largely autonomous field offices. He contended that intelligence had always been one of the FBI's core competencies, organic to the FBI's investigative mission, and he asserted that the organization's intelligence efforts had been and would continue to be disciplined by the intelligence cycle (i.e., the development and conduct of intelligence collection requirements, collection, analysis, and dissemination). Mueller instituted a number of reforms. He created a new Directorate of Intelligence (DI) at headquarters. He also acted on a recommendation by the Weapons of Mass Destruction Commission and established a National Security Branch at headquarters which integrated the FBI's Counterterrorism and Counterintelligence Divisions with the DI, the Weapons of Mass Destruction Directorate, and the Terrorist Screening Center. More fundamentally, perhaps, Mueller established Field Intelligence Groups (FIGs), which could be viewed as a cornerstone of his reforms, at each of the FBI's 56 field offices in an effort to improve the Bureau's intelligence capacity by combining its intelligence and investigative capabilities. FIGs are comprised of agents, analysts, linguists, and surveillance specialists. A FIG's principal mission is to identify intelligence gaps, obtain and analyze raw intelligence from FBI investigations and sources, and generate intelligence products and disseminate them to the intelligence and law enforcement communities in order to help guide investigations, programs, and policy. Arguably, the mission of the FIGs is nothing less than to "drive," or inform the direction of, the FBI's counterterrorism effort by identifying, assessing, and attacking emerging threats "before they flourish." Intelligence Information Reports (IIRs) are a primary component of the FBI's post-9/11 transformation. FIGs disseminate IIRs. These reports are formatted as teletype messages and shared electronically with the law enforcement and intelligence communities. They contain "raw" intelligence—"unevaluated intelligence information, generally from a single source, that has not fully been evaluated, integrated with other information, or interpreted and analyzed." These reports include information "extracted" from FBI case files. The Bureau emphasizes that the information in IIRs must not be "based solely on the exercise of First Amendment protected activities, or on the race, ethnicity, national origin, or religion of the subject." In 2010, the FBI produced over 25,000 IIRs, which included counterintelligence, counterterrorism, and criminal information as well as information related to cyber issues and weapons of mass destruction. In making intelligence a priority, Mueller also adopted a Strategy Management System, establishing a Strategic Execution Team (SET) to execute organizational changes and to build support and momentum for institutional change across the Bureau. Mueller testified in 2008, "we established Strategic Execution Teams to help us assess our intelligence program, evaluate best practices, decide what works and what does not work, and to standardize it throughout the FBI. The purpose of the SET is to accelerate improvements to our intelligence capabilities, to ensure we are an intelligence-driven organization and to drive a change in mindsets throughout the FBI." More specifically, the FBI acted on SET recommendations and restructured the FIGs in each of its field offices to conform to one model, based on best practices from the field, and adapted to the size and complexity of each office. As a result, according to Mueller, FIG-Headquarter coordination has improved. In 2008, Mueller told Congress that another result of the single-model standardized FIG approach is that special agents and analysts are now able to transition more easily and quickly from one field office FIG to another. According to one expert, as of 2013, the transformation of the FBI into an intelligence-driven agency is still a work in progress: The FBI still hasn't fully made the transition to an intelligence analytic entity. The Bureau has a long history primarily focused on law enforcement, and the transition to a more intelligence-based organization has been difficult and is still incomplete. A structural, organizational, and cultural shift is needed, and is still underway. Post-9/11 intelligence reform at the FBI has also been critiqued by the Senate Committee on Homeland Security and Governmental Affairs (HSGAC). Its bipartisan February 2011 report, A Ticking Time Bomb: Counterterrorism Lessons from the U.S. Government's Failure to Prevent the Fort Hood Attack , paints a mixed picture regarding FBI efforts to integrate intelligence with investigative operations. According to the committee's report, which focuses on the counterterrorism lessons derived from the U.S. government's failure to prevent the November 2009 shootings at Fort Hood, there is no question that the FBI has made substantial progress since 9/11 and has achieved many successes in countering terrorism as a result of Mueller's leadership. However, it remains unclear whether the FBI has truly transformed into an "intelligence-driven" organization, meaning that the analysis, production, and exploitation of intelligence is not simply yoked to the process of investigating cases en route to prosecution. In essence, in an intelligence-driven organization, "intelligence is a preeminent objective separate from whether a prosecution occurs." Questions persist regarding the place of intelligence in the Bureau's institutional culture. Namely, has the Bureau—particularly its population of agents—embraced the intelligence aspects of its mission? Some observers have doubted this. In 2012, one noted that arrests and criminal convictions remain the standard of success at the FBI, "not the value of intelligence collected and disseminated to its customers." This same commentator has suggested that a fundamental gulf may exist between agents and analysts. Agents favor investigation and arrest over writing and analysis, "a petty chore, best left to others." And FBI agents far outnumber analysts (about 4.5 to 1). In 2013, the FBI employed almost 13,600 agents and likely just above 3,000 analysts. In 2013, another critic argued that a "silent killer" imperils intelligence innovation at the Bureau. This killer is a century-old law enforcement culture that glorifies catching perps on a street rather than connecting dots behind a desk, that prizes agents above intelligence analysts, and that views job number one as gathering evidence of a past or ongoing crime for a day in court instead of preventing the next attack. Others have echoed A Ticking Time Bomb's bipartisan assessment. In an April 2011 letter to Attorney General Eric H. Holder and Director of National Intelligence James R. Clapper, Jr., the FBI Intelligence Analysts Association (FBI IAA) criticized the efforts the Bureau has made toward becoming "intelligence-driven." The letter stated that the Bureau has not yet fully established intelligence analysis as a core mission of the organization. Rather than being a driver of operational activity, intelligence is still typically seen as an enabler to the law enforcement mission. Intelligence is often viewed as an operational asset, an additional tool that can be used much in the same way that technology can be used to help investigate cases. But to be "intelligence-driven" in the FBI cannot mean intelligence should be a surrogate or a component of the law enforcement mission. America's security requires that FBI operations be guided by the best possible assessment of the threat. Intelligence must drive operations by identifying threats and vulnerabilities based on our nation's criminal and national security concerns. As late as 2010, the FBI IAA stated that analysts at the FBI continued to be relegated to "support" roles (i.e., they react to direction from special agents rather than being full partners in an intelligence-driven investigative operation). They argued that intelligence analysts should have professional parity with special agents to rapidly reform the FBI's institutional culture. The FBI IAA's indictments of the Bureau's efforts came from insiders working on intelligence matters within the FBI. However, it must be kept in mind that these same individuals publicly lobby on behalf of FBI intelligence analysts. A Ticking Time Bomb also emphasized that the necessary transformation of the FBI is incomplete, and "we must be impatient for progress." Specifically, the committee cited the Fort Hood shootings as a warning that the FBI's transformation remains a work in progress and that the FBI must accelerate efforts—especially given the growing complexity and diversity of the homegrown terrorist threat. Among its findings, the committee said that the FBI's Hassan inquiry was impeded by division among the Bureau's field offices, insufficient use of intelligence analysis, outdated tradecraft, and poor coordination within the JTTFs and between the JTTFs and headquarters. As a counterpoint, the HSGAC report cited the case of the terrorist plot by Najibullah Zazi to attack the New York City subway system in September 2009 as an FBI success, noting that the coordination across federal, state, and local departments, led by two JTTFs, was excellent and unprecedented. In the wake of the Fort Hood shooting, the Bureau developed its "Fusion Cell Concept," to combine intelligence and investigative activities. In the Bureau's Counterterrorism Division, the concept appears to feature intelligence as a component of the law enforcement mission by blending interagency information sharing with targeting. As described by a senior FBI counterterrorism official, the Fusion Cell Concept "take[s] a target-centric [emphasis added] approach to the threat by combining FBI and Intelligence Community tactical analysis, strategic analysis, and operational capabilities to identify and mitigate the priority threats." The FBI uses "intelligence generated from these Fusion Cells to strategically select targets posing the greatest threat." The FBI's public rhetoric about "Fusion Cells" stresses proactivity, but it remains unclear how this substantially differs from the type of work that is supposed to occur in task force settings such as JTTFs. It is also unclear whether this effort at "fusion" involves a true blending of intelligence and investigative efforts. In the processes involved, does intelligence drive investigations or vice versa? It appears that these recent changes as well as the overall culture of the Bureau may receive high-level scrutiny. In P.L. 113-6 and P.L. 113-76 , Congress required a review of "the implementation of the recommendations related to the Federal Bureau of Investigation that were proposed in the report issued by the National Commission on Terrorist Attacks upon the United States [the 9/11 commission]." In January 2014, three members of the commission charged with conducting the review were named. This review will likely examine the state of intelligence analysis and its place in the Bureau's culture, particularly because of one of the 9/11 Commission's recommendations: A specialized and integrated national security workforce should be established at the FBI consisting of agents, analysts, linguists, and surveillance specialists who are recruited, trained, rewarded, and retained to ensure the development of an institutional culture imbued with a deep expertise in intelligence and national security. One observer has described intelligence gathering by the FBI in the post-9/11 context as "driven by a theory of preventive policing: in order to anticipate the next terror attack, authorities need to track legal activities…. It focuses not on crime, but on the possibility that a crime might be committed at some future date." This preventative stance can be seen in a domestic intelligence-gathering operation related to events in Libya leading to the fall of Muammar al Qadhafi. In 2011, the FBI interviewed more than 800 Libyans residing in the United States to determine if there was any threat of terror attacks against American targets because of U.S. military action in Libya. This proactive posture also involves challenges for the Bureau—especially in determining when individuals move from radical activity involving First Amendment-protected behavior to violent extremism. Because not all terrorist suspects follow a single radicalization roadmap on their way to executing plots, U.S. law enforcement also faces the task of discerning exactly when radicalized individuals become real threats. As suggested, timing is everything. To preemptively stop terrorists, law enforcement requires accurate and timely intelligence. The FBI generates terrorism cases from a number of sources. Information about terrorist threats or suspicious incidents is brought to the attention of the FBI by the public; other government agencies (particularly those in the intelligence community); state and local law enforcement; ongoing FBI investigations (including sources, surveillance, financial analysis, and tactical analysis); and FBI Legal Attachés stationed abroad. Most FBI investigations develop from information or leads generated by pre-existing FBI investigations, or casework and liaison with other federal agencies or international counterparts. A handful of leads stem from information generated by local or state law enforcement and filtered up to the FBI via intelligence fusion centers. To counter violent plots, U.S. law enforcement has employed two tactics that have been described by one scholar as the "Al Capone" approach and the use of "agent provocateurs." The Capone approach involves apprehending individuals linked to terrorist plots on lesser, non-terrorism-related offenses such as immigration violations. In agent provocateur cases—often called sting operations—government undercover operatives befriend suspects and offer to facilitate their activities. As the "Al Capone" moniker suggests, historically these tactics have been employed against many types of targets such as mafia bosses, white-collar criminals, and corrupt public servants. While these techniques combined with the cultivation of informants as well as surveillance (especially in and around mosques) may be effective in stymieing rapidly developing terrorist plots, their use has fostered concern within U.S. Muslim communities. As mentioned, the Capone approach involves apprehending individuals linked to terrorist plots on lesser, non-terrorism-related offenses such as immigration violations. This approach fits within a preventative mode of counterterrorism prosecution. Experts have noted that immediately after 9/11, DOJ often leveled lesser charges against terrorist suspects to preemptively squelch potential attacks. The author of a 2011 book about the FBI and counterterrorism reported, "of the 417 terrorism indictments in the five years after 9/11 … only 143 of the individuals were actually indicted on specific terrorism charges; the rest were the result of what then-Attorney General Ashcroft called the 'spitting-on-the-sidewalks' approach: driver's license fraud, marriage fraud, wire fraud, immigration violations, and the myriad of other lesser charges that served to disrupt potential plots and get suspects off the streets." However, according to the Center on Law and Security at New York University School of Law, DOJ has moved toward trying suspected terrorists as terrorists instead of leaning heavily on lesser charges: "77% of cases [between September 11, 2009, and September 11, 2010] carried terrorism or national security charges, an increase of nearly 50% compared to the average over the previous eight years." Regardless, the Capone approach is still used in terrorism cases. Lying to an FBI Special Agent is a charge reminiscent of the Capone approach. An example from 2010 stands out. On July 21, 2010, Paul Rockwood, Jr., a U.S. citizen and Muslim convert, pled guilty to making false statements to the FBI. Rockwood's wife, Nadia Rockwood, also pled guilty to making false statements related to her husband's case. By early 2010, while living in King Salmon, AK, Paul Rockwood had developed a list of 15 people he planned to kill, believing that they had desecrated Islam. He had also researched explosives and shared with others ideas about mail bombs or using firearms to kill his targets. It appears that prosecutors did not pursue a case based on more substantive terrorism charges and opted to neutralize a threat—someone apparently preparing to kill people—by using a false statement charge. Lesser charges against a suspect in a terrorism case may also act as a placeholder until evidence to support a more serious charge is gathered. The utility of this preventative technique coupled with actual terrorism charges was exhibited by the FBI in its case against Najibullah Zazi. He arrived in New York on September 10, 2009, with explosive material and plans to detonate bombs in New York's subway system. Zazi feared authorities had caught up with him and returned to Denver on September 12. Between September 10 and 19, the FBI monitored his activities and bolstered its case with searches of a vehicle and locations linked to him in New York and Denver. Zazi also agreed to interviews with the FBI in Denver. Then, on September 19 FBI special agents arrested Zazi in Aurora, CO, for knowingly and willfully lying to the FBI. Presumably this was done because he might flee. Four days later, a grand jury returned a more substantive one-count indictment against him on weapons of mass destruction charges. Agent provocateur cases—sting operations—rely on expert determination by law enforcement that a specific individual or group is likely to move beyond radicalized talk and engage in violence or terrorist plotting. The ultimate goal is to catch a suspect committing an overt criminal act such as pulling the proverbial trigger but on a dud weapon. By engaging in such strategy, investigators hope to obtain ironclad evidence against suspects. Although an official count of terrorist sting operations is not publicly available, the FBI has said that of all the terrorist plots disrupted between 9/11 and the September 2009 Zazi plot to bomb the New York City subway, only two plotters were "prepared to move ahead with their plots without the benefit or knowledge of government informants or U.S. officials." From 2009 through early 2011, according to the Center for Law and Security at the New York University School of Law, the FBI had arrested 41 people on terrorism charges through sting operations. An FBI investigation exemplifies this approach. On November 26, 2010, Mohamed Osman Mohamud was arrested after he attempted to set off what he believed was a vehicle bomb at an annual Christmas tree lighting ceremony in Portland, OR. Mohamud thought he had plotted with terrorists to detonate the bomb. In actuality, the device was a dud assembled by his co-conspirators, who were FBI undercover operatives. Mohamud offered the target for the strike, provided components for assembly of the device, gave instructions for the operation, and mailed passport photographs for his getaway plan to FBI undercover operatives. What specifically caused the FBI to begin its sting operation against Mohamud is unclear from publicly available sources. At some point, someone from the local Muslim community alerted the FBI to Mohamud, a 19-year-old Somali-born naturalized U.S. citizen. Media reports have suggested that a family member, perhaps Mohamud's father, relayed concerns about the young man to officials. In a number of FBI terrorism sting operations, defense attorneys have alleged that the FBI had entrapped defendants. Ten defendants charged with terrorism-related crimes formally argued the entrapment defense in six trials between 9/11 and early December 2011. However, since 9/11 this defense has been unsuccessful in federal courts. Former FBI Director Mueller and Attorney General Holder have described the use of sting operations as "essential" to terrorism prevention. Mueller emphasized that the FBI is careful in its undercover investigative work, arguing that the Bureau performs "substantial oversight" of the techniques used in these cases. In at least some investigations, FBI undercover employees test suspects to ascertain the depth of their intent to do harm. For example, the FBI evaluated Mohamud's resolve on a number of occasions. Two stand out. Mohamud's first meeting with an undercover FBI operative entailed a discussion in which the would-be violent jihadist was told that he could help "the cause" in "a number of ways … ranging from simply praying five times a day to becoming a martyr." The young man responded, saying that he wanted to become "operational" and needed help in staging an attack. When Mohamud suggested the Christmas tree lighting ceremony as his intended target in a following meeting, an FBI undercover employee noted that children attend such events. Mohamud responded by saying that he wanted a large crowd "that will … be attacked in their own element with their families celebrating the holidays." As discussed, the FBI's DIOG articulates a need to proactively gather intelligence in counterterrorism investigations and establishes the assessment as a technique to do so. Balancing civil liberties against the need for preventative policing to combat terrorism is a key policy challenge. The notion of balancing civil liberties against security requirements is not new. In 1976, the United States Senate Select Committee to Study Governmental Operations with Respect to Intelligence Activities (commonly referred to as the Church Committee after its chair, Senator Frank Church) noted as much in its investigation of domestic intelligence abuses: A tension between order and liberty is inevitable in any society. A Government must protect its citizens from those bent on engaging in violence and criminal behavior, or in espionage and other hostile foreign intelligence activity.… Intelligence work has, at times, successfully prevented dangerous and abhorrent acts, such as bombings and foreign spying, and aided in the prosecution of those responsible for such acts. But intelligence activity in the past decades has, all too often, exceeded the restraints on the exercise of governmental power that are imposed by our country's Constitution, laws, and traditions. Figure 1 suggests how competing elements influence the balance between civil liberties and security—largely defined today in terms of terrorism prevention efforts. As a historical example, the FBI had developed intrusive domestic intelligence collection measures and counter-radical operations stretching from the late 1930s through the 1960s. Of course, the focus of the FBI's efforts in this period was not counterterrorism. These decades featured domestic security concerns during World War II and fears of espionage and communist infiltration of American institutions during the Cold War. The FBI worked to prevent this activity. For much of this period, a national consensus suggested that serious threats were posed by foreign agents, revolutionaries, or outside agitators operating in the United States. Within this context, the FBI had broad authority for investigation of and intelligence collection regarding domestic subversive activity from Presidents Harry S. Truman and Dwight D. Eisenhower and Attorney General Robert F. Kennedy. The Bureau developed a number of programs to combat what it saw as internal threats. During this period, the FBI engaged in what can be described as preventive, covert, intelligence-based efforts to target and contain people, groups, or movements suspected by the Bureau to be '"rabble rousers,' 'agitators,' 'key activists,' or 'key black extremists.'" A hallmark was the FBI's Counterintelligence Program (COINTELPRO), which lasted from 1956 to 1971. Subjects investigated by the FBI under its domestic intelligence programs did not have to be suspected of criminal activity. Instead of bringing criminal cases to court, the Bureau acted outside of legal processes and relied on illegal means to curb constitutionally protected activity it deemed threatening to national security. By the 1970s, as Cold War fears ebbed, the balance between civil liberties and prevention tipped in the other direction—favoring concerns over civil liberties. This is highlighted by the development of the original set of Attorney General guidelines. Issued in 1976 and known as the Domestic Security Investigation Guidelines , these responded to FBI abuses embodied in programs such as COINTELPRO. These first guidelines were intended to prevent the FBI's monitoring of groups that had unpopular or controversial public views and greatly circumscribed the Bureau's domestic intelligence gathering capabilities and investigations related to national security-related issues. Since the 1976 guidelines, and especially after 9/11, the balance has shifted in favor of security and terrorism prevention efforts. As suggested, the Mukasey Guidelines and FBI DIOG offer more investigative flexibility to proactively counter terrorist actors. Critics have stated that subsequent guidelines have excessively loosened the constraints on FBI intelligence collection and investigation. In essence, these critics suggest that concerns over terrorism and security have outweighed fears of systemic abuse by investigators. Philadelphia Inquirer reporter and author Stephan Salisbury describes post 9/11 efforts at striking this balance as the "bind" the FBI finds itself in. "On one hand it is being charged by the Justice Department to go out and stop this stuff [terrorism] before it happens. But on the other, it is getting criticized for the techniques it is using to do that." The Mukasey Guidelines and FBI DIOG address the same competing forces, and, as mentioned, their implementation has spurred concerns among civil liberties groups. Since 9/11, the FBI has been given substantially greater resources to enhance its counterterrorism activities—particularly its intelligence operations. The Bureau over the last decade has also introduced a series of reforms intended to transform it from a largely reactive law enforcement agency focused on criminal investigations into a more proactive, agile, flexible, and intelligence-driven organization. In its oversight role, Congress may wish to examine the extent to which intelligence has been integrated into FBI operations and culture to support its counterterrorism mission and the progress the Bureau has made on its intelligence reform initiatives. Congress may also wish to explore the extent to which the FBI has enhanced its collaboration with the Department of Homeland Security, other federal partners, and state and local law enforcement elements. This is not just an issue of information sharing, but of how the Bureau has institutionalized its collaboration in order to tackle complex threats. Finally, Congress might ask how the FBI uses strategic intelligence to develop a true understanding of security threats and how they are evolving. In other words, has the Bureau developed effective predictive capacity? FBI intelligence reforms since 9/11 have met with a mixed response. Among its intelligence initiatives since 9/11, the FBI has increased its intelligence focus by creating a Directorate of Intelligence and hiring thousands of new and better-qualified analysts. Another innovation was the establishment of Field Intelligence Groups (FIGs) that are embedded into each of the FBI's 56 field offices. The FBI says that the FIGs are responsible for coordinating, managing, and executing all the functions of the intelligence cycle. In April 2011, then FBI Director Mueller testified that "the FBI recently restructured its FIGs, where each group now has clearly defined requirements for intelligence collection, use, and production. With this new structure, each office can better identify, assess, and attack emerging threats." Yet, as the bipartisan Senate Homeland Security and Governmental Affairs Committee (HSGAC) investigation into the Fort Hood shootings highlighted, questions remain about the extent to which intelligence has been effectively integrated into FBI investigative operations. According to the Senate HSGAC's report, A Ticking Time Bomb: In the Hasan case, the FBI did not effectively utilize intelligence analysts who could have provided a different perspective given the evidence that it had. The FBI 's inquiry focused narrowly on whether Hasan was engaged in terrorist activity - as opposed to whether he was radicalizing to violent Islamist extremism and whether this radicalization might pose counterintelligence or other threats (e.g., Hasan might spy for the Taliban if he was deployed to Afghanistan). This critical mistake may have been avoided if intelligence analysts were appropriately engaged in the inquiry. Congress may wish to examine the extent to which analysts at the FIGs have access to case information about specific Joint Terrorism Task Force (JTTF) investigations and the opportunity to provide relevant intelligence to help steer those investigations. In 2010, the FBI Intelligence Analysts Association stated that analysts at the FBI continues to be relegated to "support" roles (i.e., they react to direction from special agents rather than being full partners in an intelligence-driven investigative operation). They argued that intelligence analysts should have professional parity with special agents to rapidly reform the FBI's institutional culture. The FBI publicly asserts that "intelligence is an integral part of the FBI's investigative mission. It is embedded in the day-to-day work of the FBI, from the initiation of preliminary investigations to the development of FBI-wide investigative strategies." Has the FBI developed a concept of operations that institutionalizes when and how intelligence analysts and intelligence analysis directly influence investigations? Congress may also wish to explore the extent to which intelligence analysts outside the FIGs, such as those at FBI headquarters, impact specific JTTF investigations and have the opportunity to provide relevant intelligence for those investigations. Uncovering the impact of the Bureau's recent adoption of the "fusion cell" concept for its headquarters intelligence elements may be of interest. According to the Senate HSGAC report: In the Hasan case, two JTTFs (each located in a different field office) disputed the significance of Hasan's communications with the Suspected Terrorist and how vigorously he should be investigated. The JTTF that was less concerned about Hasan controlled the inquiry and ended it prematurely after an insufficient examination. Two key headquarters units - the Counterterrorism Division, the "National JTTF" (which was created specifically to be the hub among JTTFs), and the Directorate of Intelligence were not made aware of the dispute. This unresolved conflict raises concerns that, despite the more assertive role that FBI headquarters now plays, especially since 9/11 in what historically has been a decentralized organization, field offices still prize and protect their autonomy from headquarters. FBI headquarters also does not have a written plan that articulates the division of labor and hierarchy of command-and-control authorities among its headquarters units, field offices, and the JTTFs. Finally, the FBI has greatly increased its production of intelligence products. As noted earlier, in 2010 the Bureau produced over 25,000 intelligence reports on counterintelligence, counterterrorism, and criminal topics as well as information related to cyber issues and weapons of mass destruction. It may be of oversight interest to Congress to examine the value of these reports, their accessibility within the intelligence and law enforcement communities, and the views of various consumers about them. | The Federal Bureau of Investigation (FBI, the Bureau) is the lead federal law enforcement agency charged with counterterrorism investigations. Since the September 11, 2001 (9/11) attacks, the FBI has implemented a series of reforms intended to transform itself from a largely reactive law enforcement agency focused on investigations of criminal activity into a more proactive, agile, flexible, and intelligence-driven agency that can prevent acts of terrorism. This report provides background information on key elements of the FBI terrorism investigative process based on publicly available information. It discusses several enhanced investigative tools, authorities, and capabilities provided to the FBI through post-9/11 legislation, such as the USA PATRIOT Act of 2001; the 2008 revision to the Attorney General's Guidelines for Domestic FBI Operations (Mukasey Guidelines); and the expansion of Joint Terrorism Task Forces (JTTF) throughout the country; intelligence reform within the FBI and concerns about the progress of those reform initiatives; the FBI's proactive, intelligence-driven posture in its terrorism investigations using preventative policing techniques such as the "Al Capone" approach and the use of agent provocateurs; and the implications for privacy and civil liberties inherent in the use of preventative policing techniques to combat terrorism. This report sets forth possible considerations for Congress as it executes its oversight role. These issues include the extent to which intelligence has been integrated into FBI operations to support its counterterrorism mission and the progress the Bureau has made on its intelligence reform initiatives. |
The JOBS and Investor Confidence Act ( S. 488 ) is a capital markets package consisting of 32 titles that have mostly already passed the House with bipartisan support as standalone bills. Originally a relatively narrow bill, the earlier version of S. 488 was referred to as the Encouraging Employee Ownership Act and was passed by the Senate on September 11, 2017. The original bill's content was incorporated into Section 507 of S. 2155 , which was signed into law on May 24, 2018 ( P.L. 115-174 ). A substitute amendment to S. 488 was passed by the House on July 17, 2018, in a 406-4 vote (hereinafter, all discussion of S. 488 refers to the House-amended version of the bill). The package has been referred to as JOBS Act 3.0, following after the initial Jumpstart Our Business Startups Act (JOBS Act; P.L. 112-106 ) in 2012 and the financial services provisions signed into law as part of the Fixing America's Surface Transportation Act ( P.L. 114-94 ), which are referred to as JOBS Act 2.0. Some of the provisions in S. 488 are part of a long-running debate about financial market regulation. In response to the 2007-2008 financial crisis, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act; P.L. 111-203 ) on July 21, 2010. The Dodd-Frank Act is generally regarded as a regulatory overhaul that broadly tightened the U.S. financial regulatory landscape. Since the Dodd-Frank Act, there have been multiple attempts to provide regulatory relief through either repeals to sections of the Dodd-Frank Act or new proposals. Two of these legislative attempts to provide regulatory relief are the Financial CHOICE Act (FCA; H.R. 10 ) and the Economic Growth, Regulatory Relief, and Consumer Protection Act ( S. 2155 , P.L. 115-174 ). H.R. 10 is a wide-ranging financial reform bill that was passed by the House on June 8, 2017. P.L. 115-174 is a narrower proposal that was passed by the Senate on March 14, 2018, and then passed by the House and signed into law in May 2018. Several of the provisions in H.R. 10 that were not included in P.L. 115-174 , many of which are related to capital markets, are included in S. 488 . S. 488 passed the House with close to unanimous support. In addition, many S. 488 provisions were included in a House-passed appropriations bill ( H.R. 6147 ). Table A-1 highlights these provisions. Although S. 488 is generally referred to as a capital markets package, it addresses various other topics; for example, insurance and human trafficking financing (see Table A-1 for a full list of the 32 titles). S. 488 's capital markets provisions are largely focused on smaller companies' access to capital. In addition, several of the titles are oriented toward studies, some of which include recommendations for regulatory action. This report summarizes the 18 capital markets provisions in S. 488 , as amended and passed by the House. Capital markets, for purposes of this report, refer to the segments of the financial system under Securities and Exchange Commission (SEC) oversight and in which funding is raised through equity or debt securities. The report divides the 18 provisions into four general categories: (1) expand investor access, (2) reduce compliance costs, (3) promote financial intermediation, and (4) increase investor protection. These categories may not be mutually exclusive. For example, the proposed changes to Regulation Crowdfunding (see " Title XXXII–Crowdfunding Amendments " section below) could be interpreted as expanding investor access through the amendments to the SEC registration threshold; promoting financial intermediation through the use of pooled investment vehicles; and increasing investor protection through the investment adviser registration requirements. In such case, one primary category is chosen according to the provision's principal functions. The expansion of investor access is one method to increase funding for issuers (companies looking to raise money) and generate additional investment opportunities for investors. There are two types of securities offerings. One type is called public offerings , which are available to all types of investors and have more rigorous disclosure requirements. By contrast, securities offerings that are exempt from SEC registration are referred to as private offerings and are mainly available to more sophisticated investors. Because public offerings are already accessible by all investors, the discussions of expanding investor access often revolve around private offerings. For purposes of investor protection, private offerings are often limited in the kinds of investors to which they can be offered. Two common approaches to expanding capital access are to expand the investor pool or enhance investor communication for private offerings. Some of the S. 488 provisions propose to expand (1) the type of eligible investors by widening the accredited investor definition, as seen in Titles IV and X; and (2) the communication to eligible investors by allowing broader outreach, as seen in Title I. Title I would require the SEC to issue a rule that exempts promotional events for private corporate securities offerings called demo days from general solicitation rules in federal securities law under certain conditions. Prospective corporate issuers often find it useful to market their private offerings at promotional events known alternatively as demo days, venture fairs, or pitch days (generically referred to as demo days). The events are often sponsored by angel investors (early-stage investors, mostly high-net-worth individuals), venture capital associations, nonprofits, or universities and are used to communicate that a company is interested in, if not actively seeking, investor financing. Rule 506 of Regulation D (Reg D) under the Securities Act of 1933 permits companies to offer privately placed (through private markets) equity or debt securities offerings to any number of accredited investors (financial institutions and individual investors who meet certain asset or income thresholds) and up to 35 nonaccredited investors without being subject to state and federal securities registration requirements. Popular with emerging companies, Rule 506 offerings have no size limits but were historically subject to a general solicitation ban (a prohibition on their general promotion or advertising). Responding to concerns that the ban was unduly burdensome, the JOBS Act amended Rule 506 by creating an offering category under Reg D called Rule 506(c), wherein issuers can engage in general solicitations to accredited investors while taking "reasonable steps" to verify that status. After the rule's adoption, whether an issuer was still subject to the general solicitation ban during demo days remained a question for many. The SEC's 2015 question and answer guidance document attempted to provide more clarity. It states that if prospective investors were invited to a demo day by an issuer or a person acting on its behalf via a general solicitation, the issuer can then use Rule 506(c) if it takes reasonable steps to verify that a purchaser is an accredited investor and that the offering is limited to such investors. Notwithstanding the SEC guidance, uncertainty over the applicability of the general solicitation ban at demo days has persisted. Moreover, there are other concerns that even if the general solicitation ban was clearly not being enforced at demo days, the demands of the accredited investor verification process would discourage investor interest. Title I attempts to address the aforementioned concerns related to demo days. It would require the SEC to revise Rule 506 to clarify that the limits on general solicitation are not applicable to presentations, communications, or events conducted on behalf of an issuer at an event sponsored by certain organizations, including (1) the United States or any territory, the District of Columbia, or any state; (2) a college, university, or other institution of higher education; (3) a nonprofit organization; (4) an angel investor group; (5) a venture forum, venture capital association, or venture capital trade association; or (6) any other group, person, or entity that the SEC designates. Analyzing similar legislation in the 114 th Congress ( H.R. 4498 ), the Congressional Budget Office (CBO) estimated that the cost of the SEC's implementation would be less than $1 million. Titles IV and X would broaden the definition of accredited investors to include more investors with technical expertise. The purpose of the accredited investor concept is to identify entities and persons who can bear the economic risk of investing in unregistered securities and to protect ordinary investors from excess risk and potential fraud. Qualifying as an accredited investor is significant because accredited investors may participate in investment opportunities that are generally not available to nonaccredited investors, such as investments in private companies and offerings by hedge funds, private equity funds, and venture capital funds. According to the SEC's current definition, an accredited investor, in the context of an individual, is defined using a number of income and net worth measures: (1) earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and can reasonably be expected to be the same for the current year; or (2) net worth more than $1 million, either alone or together with a spouse (excluding the value of the person's primary residence). An accredited investor, in the context of an institution, includes certain entities with more than $5 million in assets, as well as regulated entities such as banks and registered investment companies that are not subject to the assets test. The income- and net-worth-based definition of an accredited investor has generated criticism, as it arguably suggests that higher net worth equates to investing sophistication. The definition also generates concerns about its sufficiency in capturing those who need investor protection. Some question, for example, whether a senior citizen, who relies on his or her existing net worth as the sole source of financial security, should be eligible for higher-risk investing. In addition, the effects of inflation adjustments could be significant in the long run. For example, the current accredited investor thresholds are not inflation adjusted. According to a SEC study, although 10% of overall U.S. households qualified as accredited investors in 2013, the percentage would be 4%, after inflation adjustments from 1982 to 2013. In particular, Title IV would amend the Securities Act of 1933 accredited investor definition by including certain nonaccredited investors who could demonstrate relevant financial education and experience. The provision would adjust income and net worth limits for inflation every five years and change the accredited investor definition to include those with qualifying license and education or experience. Title X would specify that family offices and family clients are accredited investors. Family offices are entities established by wealthy families to manage their wealth and provide other services to family members, such as tax and estate planning services. CBO estimates that implementing similar bills ( H.R. 1585 and H.R. 3972 ) would cost the SEC less than $500,000. The costs would be offset by fee collections. Title XI would formally incorporate a focus on rural small businesses into the mission of the SEC Office of the Advocate for Small Business Capital Formation. In 2014, according to research conducted by the Economic Innovative Group (EIG), a research and policy advocacy group, more than 355,000 new firms were formed in U.S. metropolitan areas. By contrast, firm startups in nonmetropolitan areas, commonly defined as rural, reportedly dropped below 50,000, to 49,100, a historical first. Citing these rural economic trends, some observers have looked to the SEC's Office of the Advocate for Small Business Capital Formation, which has a mission to advocate for small business interests and small business investors, as a helpful resource. More specifically, there is interest in formally incorporating a rural dimension into the unit's mission of small business advocacy. Title XI would amend the Securities Exchange Act of 1934, which established the Office of the Small Business Advocate, to broaden the office's formal focus to include rural small businesses. It would also require the annual reports issued by the office to report on the challenges confronting small rural enterprises. CBO estimates that the cost of implementing a similar bill ( H.R. 4821 ) between 2018 and 2022 would be less than $500,000. The number of publicly listed U.S. companies has declined by half over the past two decades, and small- to medium-sized companies are said to have more difficulty accessing capital relative to larger companies. Numerous factors contributed to this trend, but one of the most debated factors is the compliance costs for companies to go and stay public. Some believe the compliance costs associated with capital markets regulation could potentially outweigh the benefits of being a public company and are disproportionately burdensome for small and medium-sized businesses. The compliance costs include external auditing, legal fees, and financial reporting fees. According to the IPO Task Force, public companies in 2011 faced a onetime initial regulatory compliance cost of around $2.5 million and annual ongoing compliance costs of $1.5 million. The key benefits of compliance often include investor protection and risk mitigation. In response to these concerns, certain S. 488 provisions aim to reduce (Titles V and IX) or better understand (Titles XXII and XXXI) compliance costs for publicly listed companies. Title V would enable public companies that graduate out of Emerging Growth Company (EGC) status to continue to take advantage of the exemption from required outside auditor attestation of their internal financial controls for several years. The JOBS Act aims to stimulate corporate capital formation and the number of initial public offerings (IPOs) particularly for emerging and smaller firms. To help boost IPOs, the act creates a new kind of securities issuer called an EGC that is entitled to various forms of regulatory relief. EGCs were first launched after the enactment of the JOBS Act in 2012. To qualify as an EGC, which can be held by a company for five years, a firm must have had less than $1.07 billion in gross revenues in the most recent fiscal year. One of the areas of regulatory relief that an EGC may receive is related to the Sarbanes-Oxley Act (SOX). Under Section 404(a) of SOX, public companies are required to provide the SEC a top management-prepared report assessing the effectiveness of their internal controls over their financial reporting (processes aimed at ensuring the integrity of financial and accounting disclosures), which may help reduce financial fraud. Section 404(b) of SOX requires a company's outside auditors to attest to that managerial assessment. The requirement may help reduce corporate financial fraud, but is widely seen to be disproportionately costly to smaller-sized firms. EGCs lose that status after five years, which means the end of the regulatory relief they are entitled to, including the Section 404(b) exemption. Title V would amend SOX to provide for an additional five-year exemption from 404(b) for EGCs with average annual gross revenues of less than $50 million and with less than $700 million in public float. A 2011 SEC staff study mandated by the Dodd-Frank Act estimated the expense for Section 404(b) to be about $1 million annually; other studies estimated that the cost for some smaller companies can be multiples of that. Many EGCs are biotechnology firms, and officials at a biotechnology trade group, BIO, have argued that Section 404(b) diverts capital from critical research and development. They have praised the legislation's five-year extension as critical protection against Section 404(b) expenses for several years, which is seen by BIO to be especially meaningful as many biotechnology EGCs are still said to be in the pre-revenue stage. By contrast, concerns over the general expansion of the Section 404(b) exemption can be found in the SEC's 2011 staff study. It recommended against extending the 404(b) exemption to firms with market valuation between $75 million and $250 million, arguing that it improves the reliability of internal control disclosures and financial reporting, and benefits investors. The Dodd-Frank Act exempts firms with public floats of less than $75 million from Section 404(b). CBO estimates that implementation of a similar bill ( H.R. 1645 ) would have no significant effect on the SEC's costs. Title IX would allow all issuers making an IPO to be able to (1) test-the-waters, meaning to communicate with certain potential investors to gauge their interests in a potential offering during the registration process; and (2) conduct confidential review, meaning to file confidential draft registration statements with the SEC. These benefits were previously available only to EGC status companies. In response to declining IPOs over the past two decades and in an effort to reduce barriers for smaller companies accessing public offerings, Title I of the JOBS Act established streamlined compliance options for companies that meet the definition of a new type of issuer, called an emerging growth company, to scale down compliance requirements and facilitate IPOs. Because of the rapid adoption of the EGC status by companies going public, some have proposed extending certain EGC benefits to other IPOs. Two of the key EGC benefits discussed in Title IX are test-the-waters and confidential review. The expansion of these two EGC benefits has received agency support. Effective on July 10, 2017, the SEC expanded the EGC confidential review benefit to all companies. It is also reportedly studying a move to expand the test-the-waters benefits to all issuers. CBO estimates that implementing a similar bill ( H.R. 3903 ) would cost the SEC less than $500,000 to update its guidance. The costs would be offset by fee collections. For more on EGCs, see CRS In Focus IF10855, Capital Access: IPO and "IPO On-Ramp" , by Eva Su. Title XXII would direct the SEC to conduct a cost-benefit analysis of Form 10-Q, including the costs and benefits to certain small companies and alternative formats for reporting, and deliver the results as well as recommendations no later than 180 days after the enactment of the act. Publicly traded companies are required to provide ongoing disclosures through annual reports (10-K), quarterly reports (10-Q), and current reports (8-K). Form 10-Q provides information on unaudited quarterly financial statements, risk factors, sales of securities and use of proceeds, among other disclosures. Some in Congress are concerned about disclosure-related costs to issuers, especially smaller issuers. Proponents of 10-Q reduction also argue that quarterly reporting is a distraction to companies' longer-term strategies, whereas opponents of the reduction are concerned about its destruction to financial transparency and investor protection. The President reportedly stated that he has made a separate request to the SEC to study shifting from quarterly reporting to semi-annual reporting. CBO estimates that implementing a similar bill ( H.R. 5970 ) would cost the SEC around $2 million to conduct the analysis. The costs would be offset by fee collections. Title XXXI would require the SEC to study the costs associated with small and medium-sized companies when they undertake an IPO. Companies seeking to do an IPO generally contract with an underwriter to intermediate between the issuing firm and potential investors. Among other things, underwriters (1) assist in the preparation of the IPO; (2) help determine the amount of capital to be raised through the IPO; (3) assist with the company's road show and other promotional activities; and (4) provide various kinds of post-IPO support, including arranging research coverage for the securities. In exchange for these services, underwriters often receive a "gross spread" as compensation, the difference between the price that the underwriter buys an IPO share at and the share price that it then offers to the public. For middle-market firm IPOs (commonly described as IPOs between $25 million and $100 million), research has found that during the current century, firms generally had gross spreads of around 7%. That cost has reportedly remained largely unchanged since at least the 1990s and generally contrasts with much lower gross spreads for large IPOs (typically described as IPOs above $100 million), which may be a function of the greater negotiating leverage that comes with their size. To better understand cost discrepancies between mid-market and large IPOs, Title XXXI would require the SEC in consultation with the Financial Industry Regulatory Authority (FINRA, the self-regulatory organization that is the principal regulator of SEC-registered broker-dealers) to study "the costs associated with small and medium-sized companies to undertake initial public offering." FINRA does not define small or medium-sized companies and IPOs. CBO estimates that SEC implementation of a similar bill ( H.R. 6324 ) would entail a gross cost of about $1 million. Capital markets consist of numerous players. Between investors and company issuers, who are the end contributors and recipients of funding, there are financial intermediaries that serve to channel funding or execute trades. Financial intermediaries generally include brokers, dealers, exchanges, investment companies, investment advisors, research firms, and rating agencies, to name a few. The most notable financial intermediation trend during the past 70 years has been the shifting of investment activities from individuals to delegated fund management firms. Whereas investors used to buy and sell stocks and bonds directly, they now predominately invest through pooled investment vehicles like mutual funds, exchange-traded funds, and private equity funds. Some provisions in S. 488 , for example, Titles XXVI and XXXII, promote the use of pooled investment vehicles to channel funding from investors to issuers. In addition, the trading of small company stocks is widely regarded as less efficient than the trading of larger companies' stocks. SEC research shows that smaller company stocks have less research coverage, less market quality, and lower liquidity, which adversely affect the stock performance and pricing. Some S. 488 provisions specifically address these challenges. For example, Title XXIV would promote investment research of small issuers, and Title XX would create a designated new marketplace, called venture exchange, for smaller issuer stock trading. Title III would remove requirements that merger and acquisition (M&A) brokers, who facilitate sales of privately held small and medium-sized firms, register as brokers under federal securities law. M&A brokers are also known as Main Street brokers. They are intermediaries who conduct privately negotiated sales of privately held small and mid-sized companies by facilitating securities transactions that transfer ownership and control of such firms to a buyer who intends to operate the firm. The Securities Exchange Act of 1934, a major federal securities law which authorized the creation of the Securities and Exchange Commission, broadly defines a broker as "a firm or individual who effects transactions in securities on behalf of others." Dealers are defined as "firms or individuals who trade their own securities for profit," called trading for its own account . Being a registered M&A broker can be relatively costly compared with an unregistered broker. Historically, there has been some uncertainty over whether M&A brokers, many of whom self-identify as finders, meet the definition of a broker under the Securities Exchange Act. Some have argued that broker-dealer regulations were originally meant to prevent "high pressure selling tactics" and the "third party custody" of securities trade-related funds, roles no longer said to be applicable. In 1985, the Supreme Court held in a pair of cases that the sale of all of, or a controlling interest in, a firm constitutes a securities transaction. As a result of these decisions, persons involved in facilitating the sale of an operational business could arguably qualify as "brokers" under the Securities Exchange Act. In January 2014, the SEC issued a no-action letter on unregistered broker liability. A no-action letter is an agency response to an individual or entity suggesting that the SEC staff would not recommend enforcement actions against certain products, services, or actions with regards to the uncertainty of the violation of federal securities law. In the letter, SEC stated that subject to various stipulations, it would not recommend SEC enforcement action in the event that an intermediary were to facilitate a securities transaction connected to the transfer of ownership of a privately held firm. The letter received generally favorable responses from stakeholders. Broadly consistent with the SEC's no-action letter, Title III would amend the Securities Exchange Act to exempt from registration requirements merger-and-acquisition brokers who provide intermediate ownership transfers of privately held companies with annual earnings of less than $25 million or annual revenues of less than $250 million. However, there are a number of stipulations; among them, a broker cannot (1) receive, hold, transmit, or have custody of funds or securities to be exchanged by parties to an ownership transfer; (2) engage on behalf of an issuer in a public offering of registered securities; (3) engage on behalf of any party in a transaction involving specified shell companies; (4) provide financing related to the transfer of ownership; and (5) be a "bad actor," including being a broker who has had their SEC registration suspended or revoked. CBO estimates that implementation of a similar bill ( H.R. 477 ) would cost the SEC less than $500,000. Title VIII states that "over time, national exchanges have expanded their businesses beyond listings and trading to include the sale of additional products and services to their members and listed companies." To more clearly identify the business lines that should be overseen by the SEC, the provision would direct the SEC to clarify what constitutes a securities exchange facility in Section 3(a) of the Securities Exchange Act of 1934 within 360 days of the enactment of the act. The SEC broadened the national exchanges' business lines beyond their traditional trading functions in 1998, when it confirmed that the exchanges could structure as for-profit entities. Title VIII aims to provide clarification regarding the regulation of these business lines; namely, if and how these business lines would qualify as facilities of an exchange, thus subject to certain SEC regulatory scrutiny. The SEC oversees 21 national securities exchanges as of August 2018. CBO estimates that implementing a similar bill ( H.R. 3555 ) would cost the SEC around $1 million to conduct required studies and rulemaking. Title XX would allow national exchanges to create and register venture exchanges with the SEC that would provide an additional trading venue for smaller and emerging companies. Only venture securities would be allowed to trade on venture exchanges. Venture securities refer to securities of (1) an early stage growth company that are exempt from certain registration; (2) an emerging growth company issuer; (3) certain other issuers below pre-specified public float and average daily trading volume thresholds. To consolidate liquidity, venture exchanges would carry out auctions instead of continuous trading and the venture securities could trade only on the exchange it is listed. The SEC would be required to provide venture security disclosure standards and consider establishing an Office of Venture Exchange within its Division of Trading and Markets. The idea of a venture exchange was first proposed by the SEC Advisory Committee on Small and Emerging Companies in 2013 to address liquidity challenges for smaller and emerging companies by establishing a new and separate equity market for them. Smaller issuers were said to operate in different equity market structures and face greater liquidity challenges. The venture exchanges are meant to provide a marketplace with different regulatory requirements to foster trading for the smaller and emerging issuers. This could be especially helpful for some of the more recently enacted securities offering regimes to expand liquidity for small issuers. However, concerns still exist regarding venture exchange execution viability, given failures of similar previous attempts, and retail investor protection concerns. CBO estimates that implementing a similar bill ( H.R. 5877 ) would cost the SEC around $1 million a year. The costs would be offset by fee collections. Title XXIV would direct the SEC to conduct a study on the investment research coverage for small issuers, including EGCs and other companies considering going public. The required study would have seven components, including research providers, incentives, challenges, and impacts. The SEC would submit the results and recommendations no later than 180 days after the enactment of the act. Low investment research coverage often corresponds to lower stock liquidity and less efficient price performance. More than half (61%) of the publicly traded firms listed on a major U.S. exchange with market capitalization of less than $100 million do not receive research coverage. For over-the-counter companies, based on a recent survey, 68% of them do not receive research coverage. Many reasons were said to have contributed to research coverage conditions; for example, economic incentives, regulatory environment, and market structure. CBO estimates that implementing a similar bill ( H.R. 6139 ) would cost the SEC $1 million to conduct the study. The costs would be offset by fee collections. Title XXV would broaden the definition of a venture capital fund under federal securities law. The reform would enable the funds to increase the amount of secondary market securities they can acquire from the companies they invest in without triggering the requirement that their advisers register with the SEC under the Investment Advisers Act of 1940 (P.L. 76-768). The Dodd-Frank Act requires advisers to private funds, such as hedge funds and private equity funds, to register with the SEC under P.L. 76-768. A venture capital fund (VC fund) is another type of private fund that is generically defined as an investment fund that manages investor assets through the acquisition of private equity stakes in startup and small to medium-sized firms. Unlike advisers to hedge funds and private equity funds, the Dodd-Frank Act exempted advisers to venture capital funds from having to register with the SEC as advisers. Under the act, the SEC had to define a VC fund, which it did. Among other things, a VC fund is defined as an entity that (1) represents itself as pursuing a venture capital strategy to its investors and prospective investors; and (2) has no more than 20% of its total assets invested in assets that are not "qualifying investments," equity securities acquired directly from a company that it has invested in (e.g., primary market securities). If a VC fund no longer meets this definition, its adviser must then register with the SEC as a nonexempt private fund adviser under the Investment Adviser Act often at a significant expense. VC funds are often portrayed as engines of economic development. There are concerns, however, over the existence of certain perceived hurdles to their ability to fully play that role. One concern is that VC funds are increasingly challenged because their portfolios of nonqualifying investment, primarily in the form of secondary market shares of their portfolio companies, are nearing the aforementioned 20% limit. As such, VC fund advocates such as the VC fund trade group, the National Venture Capital Association, argue that the secondary market equity 20% limit often causes funds to forgo general investment opportunities. Title XXV would require the SEC to issue rules revising the definition of a VC fund's qualifying investments to include primary market or secondary market equity securities issued by a company that a fund is investing in, expanding the size of a fund's potential portfolio of a company's secondary market securities. SEC-issued rules would also have to provide that a VC fund's qualifying investments must be predominantly primary market securities issued by a firm that it is investing in, an attempt to ensure that a VC fund's corporate acquisitions would have to entail slightly more primary shares than secondary shares. Although praised by the VC fund industry, a concern of some critics, including the Consumer Federation of America, a consumer and investor advocate, is that by permitting an expanded VC fund investment presence in secondary market shares, the legislation would shift VC fund activity away from direct primary investment stakes in startup firms. CBO estimates that SEC implementation of a similar bill ( H.R. 6177 ) would entail a gross cost of about $1 million. Title XXVI would direct the SEC to study the 10% threshold limitation for "diversified company" qualification under the Investment Company Act of 1940 (P.L. 76-768). The threshold specifies that to qualify for the diversified company status, the investment company shall not invest in more than 10% of any single issuer's outstanding voting shares (among other requirements). The provision would direct the SEC to study the impact of the threshold and report on findings and recommendations no later than 180 days after the enactment of the act. A fund is required to disclose whether it is a diversified or a nondiversified fund. To be diversified, a fund must meet several requirements, including that it is not investing in more than 10% of any single issuer's outstanding voting shares. Some believe that the threshold limits investment companies' ability to take meaningful positions in small-cap companies because a relatively small dollar amount could potentially exceed the threshold for a small-cap company. Some argue this limitation could hinder the capital provision of funds to smaller companies. Others believe that the idea is plausible, but in practice, investment companies would not likely take a large position in a portfolio company anyway, given the risks of selling such positions. CBO estimates that implementing a similar bill ( H.R. 6319 ) would cost the SEC around $1 million to produce the report. Crowdfunding is a fundraising method of pooling small individual investments from a large number of investors. Title XXXII would allow special purpose vehicles (SPVs) to invest in crowdfunding offerings by pooling money into a fund advised by a registered investment advisor. The provision would clarify the existing crowdfunding regulation through adding the definitions of crowdfunding vehicle , crowdfunding vehicle adviser , and the amendments to SEC registration exemption requirements. The provision would define crowdfunding vehicle as a company or SPV that (1) has purposes limited to acquiring, holding, and disposing securities issued by a single company in transactions made pursuant to crowdfunding exemption requirements; (2) issues only one class of securities; (3) receives no compensation for such activities; (4) is a co-issuer with the company whose securities it holds; and (5) meets certain disclosure obligations and the use of investment adviser requirements. Crowdfunding vehicle adviser refers to an investment adviser who solely advises crowdfunding vehicles and would be required to register with the SEC. The provision would also modify certain crowdfunding transaction exemptions from SEC registration requirements. Specifically, it would modify the current issuer registration threshold from $25 million in assets, among other conditions, to (1) a public float of less than $75 million and (2) annual revenues of less than $50 million. The SEC promulgated Regulation Crowdfunding pursuant to Title III of the JOBS Act in October 2015. Some believe that the use of Regulation Crowdfunding could increase with the modifications to the SEC's current treatment of SPVs and the thresholds maintained in the Exchange Act that once crossed, trigger SEC registration. The basic concept of using a SPV (in the form of a crowdfunding vehicle) is to pool money from many individual investments into a single entity, with the SPV organizer to be a single point of contact for all of the SPV's investors. The use of SPVs could expand financial intermediation and promote capital access, whereas the required crowdfunding vehicle adviser registration is a method to mitigate certain investor protection concerns. The provision is similar to H.R. 6380 from the 115 th Congress and is a modified version of H.R. 4855 from the 114 th Congress. CBO has not provided cost estimates for H.R. 6380 . It estimated H.R. 4855 would have had no significant effects on the SEC's costs and operations. The policy debate about capital markets often revolves around the perceived tradeoffs between expanding capital formation and protecting investors, two of the SEC's core missions. Expanding capital formation allows for greater access of investment opportunities for more investors and increased funding for businesses. But expanded capital formation also involves investor protection challenges, including the challenge to ensure that investors, such as less sophisticated retail investors, comprehend the risks they are bearing. For example, proposals that reduce the regulatory compliance that a securities issuer or a market intermediary must comply with can decrease these market participants' compliance costs and increase the speed and efficiency of capital formation. However, this reduced regulation may also expose investors to additional risks. In addition, investor protection can help contribute to healthy and efficient capital markets because investors may be more willing to provide capital, and even at a lower cost, if they have faith in the integrity and transparency of the underlying markets. There are multiple titles in S. 488 that would create investor protection safeguards as part of a capital formation oriented provision. For example, Title XX aims to facilitate trading activities, but it would also direct the SEC to issue disclosure requirements. These requirements could help investors understand the distinct features and risks of certain investment products and activities. There are also S. 488 provisions that center on investor protection. For example, Titles XXVII and XXIX would provide protection to general investors against corporate insiders and Title XXX would provide targeted protection to senior investors who are victims of financial exploitation. Title XXVII would direct the SEC to study whether Rule 10b5-1, a rule that allows corporate insiders to trade for legitimate reasons without running afoul of insider trading inquiries, should be amended. The SEC would issue the report no later than a year following the enactment of the act. It would also carry out related rulemaking consistent with the study results. Federal law bans insider trading, which is the buying or selling of a security on the basis of material nonpublic information that provides unfair advantages to corporate insiders over other investors. But public company executives often receive compensation in the form of company stock or stock options. Insider trading restrictions could pose challenges for them to legitimately liquidate stocks. The SEC enacted Rule 10b5-1 in 2000 to allow executives to make prearranged trades at a time when they are not in possession of insider information to avoid insider trading inquiries. Yet studies repeatedly show that the Rule may have been abused, evidenced by corporate insider trades within 10b5-1 plans that earned abnormal returns. For example, a Wall Street Journal investigation found 1,418 executives, including some with 10b5-1 plans, had made beneficial trades. CBO estimates that implementing a similar bill ( H.R. 6320 ) would cost the SEC around $1 million. Title XXIX would amend the federal securities law so public companies who have issued multi-class shares of stock would be required to provide more comprehensive disclosure on the stock holdings of corporate officials and other individuals with significant holdings of company stock. Common equity shares of publicly traded companies are typically composed of one share class wherein anyone who holds a share has voting rights equal to that of other shareholders. Voting rights typically give shareholders the right to vote on certain matters of corporate policy, including the right to vote in elections for a company's board of directors and on proposals that would significantly alter corporate goals, or that would result in major structural changes. By contrast, the issuance of multi-class common equity shares typically involves (1) one share class with limited voting power being offered to the public at large, and (2) another share class with relatively more voting power that is often held by the company's founders or current executives. Having superior voting shares may give their holders majority control of a firm. The 1980s saw a proliferation in the adaption of multi-class share structures as increasingly competitive major stock exchanges relaxed previous listing restrictions on multi-class stock. The last decade or so has seen renewed interest in the issuance of multi-class shares with the number of such companies, including Google and Facebook, reportedly significantly expanding. In March 2017, the SEC Investor Advisory Committee, a SEC-based committee of investor-related stakeholders, which makes policy recommendations to the agency, criticized multi-class share structures for resulting in corporate insiders' voting power outstripping their actual ownership interest. Among other things, it recommended that companies with multi-class shares clearly disclose the numerical relationship that exists between stock ownership and the attendant voting rights. Similar concerns over multi-class shares undermining corporate governance have been raised by others, including the Council of Investors, an institutional investor trade group. Although criticized from a corporate governance standpoint, multi-class shares may have a number of potential benefits for some, including preventing investors from coercing management into decisions that might enhance short-term stock performance at the expense of longer-term growth. Title XXIX would require the SEC to issue rules amending the Securities Exchange Act of 1934 that would require issuers with multi-class share structures to report the following data regarding their corporate executives and the holders of more than 5% of the company's voting power: (1) their percentage of the total number of outstanding securities entitled to vote; and (2) their percentage of the aggregate voting power of all classes of securities entitled to vote. CBO estimates that the gross cost of SEC implementation of a similar bill ( H.R. 6322 ) would be about $1 million. Title XXX would direct the SEC to establish a Senior Investor Taskforce to identify challenges and potential regulatory solutions for senior investors over the age of 65. The provision directs the taskforce to coordinate and consult with other internal and external authorities and report every two years on senior investor-related trends, issues, and best practices, among other topics. The taskforce would terminate at the end of the 10-year period starting from the enactment of the act, with the option of reestablishment by the SEC Chairman. The provision also would direct the Government Accountability Office (GAO) to study the financial exploitation of senior citizens and issue a report within one year of enactment of the act. Senior citizens aged 65 and over are projected to reach 18% of the U.S. population by 2030. This population holds significant amounts of investable assets and is increasingly subject to financial scams and abuses. More than 6.8 million senior citizens, or 17% of Americans aged 65 or older, have reportedly fallen victims of financial exploitation. In addition, the senior financial exploitation cases are vastly under reported; for example, only one in 44 cases were said to ever have been reported. CBO estimates that implementing a similar bill ( H.R. 6323 ) would cost the SEC $7 million over the 2019-2023 period and less than $500,000 for GAO. As discussed in the introduction, several provisions in S. 488 were included in H.R. 10 , the Financial Services and General Government appropriations bill ( H.R. 6147 ), and stand-alone legislation, as shown in Table A-1 . | Capital markets provide financing for businesses to fund their growth that would facilitate innovation and jobs creation, and enhance the society's overall standard of living. They are segments of the financial system in which funding is raised through issuing and trading equity or debt securities, which are forms of financial assets representing ownership or indebtedness of a firm. They are considered the largest source of financing for U.S. nonfinancial companies, significantly larger than bank loans and other forms of financing. The Securities and Exchange Commission (SEC) is the principal regulator of U.S. capital markets. In recent years, Congress and the SEC began to increasingly direct capital markets regulation away from its traditional "one size fits all" approach. Starting in 2012, the bipartisan Jumpstart Our Business Startups Act (JOBS Act; P.L. 112-106) has scaled regulation for smaller companies and reduced regulations in general for certain types of capital formation. It established a number of new options to expand capital access, including a new provision for crowdfunding. Starting in 2015, parts of the Fixing America's Surface Transportation Act (P.L. 114-94)—referred to as JOBS Act 2.0—provided additional scaled disclosure and reporting related regulatory relief for smaller companies. Following the JOBS Act and JOBS Act 2.0, capital markets regulation has become even more tailored to suit companies of different sizes and with different needs. However, concerns over capital formation persisted, given that smaller companies continue to face challenges to accessing capital, and the number of initial public offerings (IPOs) remained at far below long-term average levels post-JOBS Act. To address these concerns, Congress has considered numerous legislative proposals to further expand the scaled approach, with some proposals building on existing JOBS Act provisions. The most notable of these proposals is the JOBS and Investor Confidence Act of 2018 (House-amended S. 488), a capital markets package referred to as JOBS Act 3.0. The House replaced the content of the original S. 488 and passed the amended measure by a 406-4 vote on July 17, 2018. The package includes 32 titles, many of which have previously passed the House with bipartisan support as standalone bills. Of the 32 titles, 18 are more capital markets related. They can be grouped under four general categories: Expand Investor Access. One approach to expand capital access is to expand the investor pool or enhance investor communications. Some of the provisions propose to expand (1) the type of eligible investors by widening certain eligible investor definitions, as seen in Titles IV and X; (2) the number of eligible investors allowed to participate in certain offerings, as seen in Title XXXII; and (3) the communication to eligible investors by allowing broader outreach, as seen in Title I. Reduce Compliance Costs. Some believe compliance costs could potentially outweigh benefits and are disproportionately burdensome for small and medium-sized businesses. In response to these concerns, certain provisions aim to reduce (Titles V and IX) or better understand (required studies in Titles XXII and XXXI) compliance costs for publicly listed companies. Promote Financial Intermediation. Capital markets consist of numerous players. Between investors and company issuers, who are the end contributors and recipients of funding, there are financial intermediaries that serve to channel funding or execute trades. Titles XXVI (a required study) and XXXII would promote the use of pooled investment vehicles to channel funding from investors to issuers. Title XXIV would require a study on investment research of small issuers, and Title XX would create a designated new marketplace for smaller issuer stock trading. Increase Investor Protection. Multiple S. 488 titles would create investor protection safeguards as part of a provision related to capital formation. Other provisions center on investor protection. For example, Titles XXVII (a required study) and XXIX would provide protection to general investors against corporate insiders, and Title XXX would provide targeted protection to senior investors who are victims of financial exploitation. |
After a flood event, people are often uncertain about what types of federal assistance they are eligible for, and if their eligibility for federal disaster assistance is linked in any way to whether or not they have flood insurance. Because much of the other disaster assistance that is available to individuals comes from the Federal Emergency Management Agency (FEMA), there may be confusion between possible claims provided through the National Flood Insurance Program (NFIP, which is also managed by FEMA) and other disaster assistance programs. This report provides an overview of the assistance available to individuals and households following a flood and provides links to more comprehensive guidance on both flood insurance and disaster assistance. The NFIP is described in detail in CRS Report R44593, Introduction to the National Flood Insurance Program (NFIP) . The National Flood Insurance Program (NFIP) is the main program intended to provide federal assistance to homeowners and renters recovering from flood losses. The NFIP was established by the National Flood Insurance Act of 1968 (NFIA, 42 U.S.C. §4001 et seq.). The general purpose of the NFIP is both to offer primary flood insurance to properties with significant flood risk, and to reduce flood risk through the adoption of floodplain management standards. As of May 2018, the NFIP had over 5 million flood insurance policies providing over $1.28 trillion in coverage. Nationally, as of July 2018, about 22,322 communities in 56 states and jurisdictions participated in the NFIP. According to FEMA, the program saves the nation an estimated $1.87 billion annually in flood losses avoided because of the NFIP's building and floodplain management regulations. In addition to NFIP claims payments to policyholders, homeowners and renters may also access a number of other federal programs aimed at mitigating the impact on individuals and households. As described below, Congress established certain limits on the availability of federal disaster assistance dependent on whether individuals had flood insurance, as set out by the Flood Disaster Protection Act of 1973 (FDPA, P.L. 93-234 , 87 Stat 985). In addition to requiring property owners with federally backed mortgages to have flood insurance, the FDPA restricts access to federal financial assistance for acquisition or construction purposes for use in any area that has been identified as having special flood hazards (i.e., what is known as a Special Flood Hazard Area, or SFHA), and in which the sale of flood insurance has been made available under the NFIP, unless covered by flood insurance (i.e., the community participates in the NFIP). The Robert T. Stafford Disaster Relief and Emergency Assistance Act ( P.L. 93-288 , as amended, Stafford Act) also sets restrictions to flood disaster assistance, stating that notwithstanding any other provision of law, no federal disaster relief assistance made available in a flood disaster area may be used to make a payment (including any loan assistance payment) to a person for repair, replacement, or flood disaster assistance that was conditional on the person first having obtained flood insurance under applicable federal law and subsequently having failed to obtain and maintain flood insurance as required under applicable federal law on such property. A core design feature of the NFIP is that communities are not required to participate in the program by any law or regulation. Rather, communities in the United States voluntarily participate in the NFIP generally as a means of securing access to the primary flood insurance offered by the NFIP. Essentially, the NFIP is structured so that the availability of primary flood insurance through the NFIP is tied to the adoption and enforcement of floodplain management standards by participating communities. FEMA is only allowed to provide flood insurance to "those States or areas (or subdivisions thereof)" where "adequate land use and control measures" have been adopted that "are consistent with the comprehensive criteria for land management and use developed" by the NFIP. Thus, communities that participate in the NFIP, and therefore whose residents may access the NFIP's primary flood insurance, also must adopt, through local or state laws, minimum floodplain management standards that are described in FEMA regulations. Communities are required to adopt these minimum floodplain management standards in order to participate in the NFIP. FEMA has set forth the minimum standards it requires for participation in the NFIP in federal regulations. Though the standards appear in federal regulations, the standards only have the force of law because they are adopted and enforced by a state or local government. A community that has been found failing to enforce the floodplain management standards may be placed on probation and ultimately suspended from the NFIP. However, a community cannot be removed from the NFIP because of increased or excess flood insurance claims and losses. Rather, probation and suspension only occur if the community fails to uphold its obligations related to floodplain management. Communities that have been suspended or those communities that do not participate in the NFIP can face significant consequences. Most importantly, residents of these communities are not able to purchase primary flood insurance through the NFIP, which may result in significant uninsured property risk in that community. In addition, if a community does not participate in, or has been suspended from, the NFIP but has been previously mapped by FEMA for flood hazards, it is difficult for the community and policyholders to access some other forms of federal assistance for areas in the floodplain. For example, by law, no federal assistance may be provided for acquisition or construction purposes in an area that has been identified as having special flood hazards unless the property is covered by flood insurance. Likewise, as federally backed mortgages require flood insurance for properties in the Special Flood Hazard Area (SFHA), these property owners would be required to obtain such insurance in the private market. A community is allowed to leave the NFIP at its will, but the potential consequences of that decision are similar to those if the community has been suspended. In some other special cases NFIP flood insurance may not be available; for example, no new NFIP flood insurance coverage may be provided for new construction or structures with substantial improvements which are located on any coastal barrier within the John H. Chafee Coastal Barrier Resources System (CBRS). The CBRS contains two types of units: System units and Otherwise Protected Areas (OPAs). System units are generally comprised of private lands that were relatively undeveloped at the time of their designation within the CBRS. The boundaries of system units are generally intended to follow geomorphic, development, or cultural features. OPAs are generally comprised of lands held by a qualified organization primarily for wildlife refuge, sanctuary, recreational, or natural resource conservation purposes. The boundaries of OPAs are generally intended to coincide with the boundaries of conservation or recreation areas such as state parks and national wildlife refuges. FEMA develops, in coordination with participating communities, flood maps called Flood Insurance Rate Maps (FIRMs) that depict the community's floodplain and flood risk. A key aspect of this flood mapping is the identification of the Special Flood Hazard Area (SFHA). The SFHA is intended to distinguish the flood risk zones that have a chance of flooding during a "1 in 100 year flood" or greater frequency. This means that properties have a risk of 1% or greater of flooding every year if located in a SFHA. In a community that participates or has participated in the NFIP, owners of properties in the mapped SFHA are required to purchase flood insurance as a condition of receiving a federally backed mortgage. By law and regulation, federal agencies, federally regulated lending institutions, and government-sponsored enterprises must require these property owners to purchase flood insurance as a condition of any mortgage that these entities make, guarantee, or purchase. Property owners falling under this mandate may purchase flood insurance through the NFIP or through a private company, so long as the private flood insurance "provides flood insurance coverage which is at least as broad as the coverage" of the NFIP, among other conditions. Not all mortgages in the SFHA are affected by this mandatory purchase requirement. For example, a personal mortgage loan between two private parties (such as between family members), or a mortgage issued by a private mortgage company that is not then sold on the secondary market to a bank or entity like Fannie Mae, may not require flood insurance. Even if they are not technically required to mandate flood insurance by federal law, the issuing party may still require it as a means of financially securing the property. Flood insurance is optional for properties outside the SFHA regardless of whether they have a federally backed mortgage. However, as there is still a risk of flooding outside the SFHA, residents of NFIP participating communities with property located outside the SFHA may voluntarily purchase a lower-cost Preferred Risk Policy (PRP). Rates for PRPs are lower than for properties in SFHAs in accordance with their lower risk profile; however, unlike properties in the SFHA, an individual may be denied a PRP if there is significant loss history for the property. FEMA encourages the purchase of PRPs both to reduce the financial flood risk of a broader group of individuals, and to expand the number of NFIP policyholders, thus improving the fiscal soundness of the NFIP portfolio. FEMA has considerable discretion under the law to craft the details of the flood insurance policies it sells through the NFIP. Currently, there are three policies that the NFIP uses to sell primary flood insurance—the Dwelling, the General Property, and the Residential Condominium Building Association policy (RCBAP) forms. Collectively, these Standard Flood Insurance Policies (SFIPs) appear in regulations, and coverage qualifications are generally equivalent. Within the SFIPs sold by the NFIP, there are numerous policy exclusions that are often not understood by policyholders. For example, SFIPs have limited coverage of basements or crawlspaces. Because SFIP coverage limits are often less than the value of a structure or the value of the property's contents, policyholders can obtain excess flood insurance to cover losses beyond the coverage limit. However, such excess coverage is not sold by the NFIP, and can only be purchased through the private insurance market. The maximum coverage limits available from the NFIP are determined by occupancy type and location in or out of a SFHA (see Table 1 ). The NFIP defines three main occupancy types: Single Family Dwelling, Other Residential Building, and Business Building. The distinction between residential and nonresidential is determined by the percentage of the floor space which is devoted to commercial uses. Policyholders are able to elect coverage for both their building property and separate coverage for contents. Renters may obtain a contents-only coverage. The maximum coverage with either a SFIP or a PRP for single-family dwellings (which also includes single-family residential units within a 2-4 family building) is $100,000 for contents and up to $250,000 for buildings coverage. For Other Residential Buildings which are not covered by a Residential Condominium Building Association Policy (RCBAP), the maximum available coverage limit is $250,000 for building coverage and $100,000 for contents coverage. These limits apply to all single condominium units and all other buildings not in a condominium form of ownership, including cooperatives, timeshares, apartment buildings, dormitories, and assisted-living facilities. The Other Residential Building category also includes hotels, motels, tourist homes, and rooming houses which have more than four units where the normal guest occupancy is six months or more. An individual dwelling unit in a condominium not covered by the RCBAP may be separately insured under the Dwelling form, in the name of the unit owner, up to the limits of insurance coverage for a single-family dwelling (up to $100,000 for contents, up to $250,000 for building elements). A residential condominium association may purchase insurance coverage under the RCBAP on behalf of the association and the unit owners to cover the building and, if desired, coverage of commonly owned contents. In this case, the maximum limit for the building is the replacement cost, or the total number of units multiplied by $250,000, whichever is less. While FEMA provides the overarching management and oversight of the NFIP, the bulk of the day-to-day operation of the NFIP, including claims made after a flood, is handled by private companies. This arrangement between the NFIP and private industry is authorized by statute and guided by regulation. There are two different arrangements that FEMA has established with private industry. The first is the Direct Servicing Agent (DSA), which operates as a private contractor on behalf of FEMA for individuals seeking to purchase flood insurance policies directly from the NFIP. The second arrangement is called the Write-Your-Own (WYO) Program, where private insurance companies are paid to directly write and service the policies themselves. With either the DSA or WYO Program, the NFIP retains the actual financial risk of paying claims for the policy (i.e., underwrites the policy), and the policy terms and premiums are the same. Following a flood, NFIP policyholders are advised to contact their agent or insurance company to file a claim. This is either one of the WYO companies or the DSA, who will provide an adjuster to assist the policyholder to make a claim. The adjuster will normally take measurements and photographs to assess the damage, provide an estimate of the covered flood damage, and provide a proof of loss form for the policyholder to sign. The estimate, proof of loss form, and other supporting documentation provide the Proof of Loss, which is required before the claim can be paid. The complete Proof of Loss, signed and sworn to by the policyholder, along with documentation to support the amount requested initially and any requests for additional payment, must be sent to the DSA or WYO company within 60 days after the date of loss or within the extension. In severe events, FEMA may authorize an extension of the 60-day period to send the proof of loss to the NFIP adjuster. For example, following both the Louisiana floods in August 2016 and Hurricane Sandy in 2012, FEMA authorized multiple extensions which ultimately gave policyholders 330 days to submit their proof of loss after the Louisiana floods and a full two years to submit their proofs of loss after Sandy. So far, policyholders have been given one year from the date of loss to file claims for Hurricane Harvey, Hurricane Irma, and Hurricane Maria. In some circumstances, FEMA has authorized a conditional waiver to allow insurers (either WYO companies or the NFIP Direct Servicing Agent) to make advance payments to policyholders. These advance payments have been made in two ways. (1) Pre-inspection: Once a policyholder provides notice of loss, an insurer may offer an advance payment for building and/or personal property damages up to a total of $5000 after confirming coverage and validating that the insured property has flooded. The insurer may offer a total advance payment of up to $20,000 if the policyholder provides photographs depicting flood damage to the covered property and either documentation such as receipts verifying out-of-pocket expenses related to the repair or replacement of covered property, or a contractor's itemized damage estimate. (2) Payment for Significant Damage: If the insurer receives a general contractor's estimate of necessary repairs to the insured property and a flood insurance inspector retained by the insurer has inspected the insured property, an advance payment may be authorized, not to exceed 50% of the general contractor's estimate of necessary repairs. In both cases, the advance payment cannot be used for Additional Living Expenses, and after the claim is settled, the insurer will reduce the final payment by the amount of the advance. If the loss is determined not to be a covered loss, or if the advance payment exceeds the amount of the actual covered loss, the insured will be required to repay the advanced payment (or portion thereof). When the President declares a major disaster under the Stafford Act, the President's action contains a designation for the types of assistance FEMA will provide for victims of that disaster. Individual Assistance (IA) may be provided for certain declared disaster areas, but not others. IA provides help to individuals and families and can include several programs, depending on whether the governor of the affected state or the tribal leader has requested that specific help. The principal IA program to offer assistance to individuals and families is the Individuals and Households Program (IHP). The IHP has two broad categories that assist families and individuals who have been impacted by disaster damage: housing assistance and other needs assistance. The total of all assistance to one household cannot exceed $34,000. Each household is considered a single applicant regardless of the number of household members. In all instances, this help is intended to supplement, but not substitute for, existing insurance coverage. If applicants have insurance, any assistance provided by FEMA for losses covered by insurance should be considered an advance and must be repaid to FEMA upon receipt of an insurance payment settlement. Under IHP, housing costs can be assumed by the federal government for up to 18 months. Unlike other Stafford Act programs, housing is not cost shared with the state, but is all federal assistance. The types of housing assistance include monetary assistance, direct assistance, repairs, and replacement. Monetary Assistance is provided to individuals and families to address the costs to rent temporary housing while repairs are being made to their predisaster primary residence or while they transition to permanent housing. The amount of rental assistance available is calibrated to include housing and utility costs in the affected area. Direct Assistance provides temporary housing units to disaster survivors that are purchased or leased by the federal government. The IHP cost per household limit does not apply to Direct Assistance. The use of Direct Assistance, such as mobile homes and trailers, is rare and is generally considered a last resort to be employed only when other housing options are not available in the immediate disaster area. The great majority of disaster housing help comes in the form of temporary rental assistance and repairs to a home which is not insured in order to make it habitable. This repair assistance does not include new utilities or improvements to the home, but does make the home conform to current, applicable building codes in the affected area. The goal is to repair the home to a safe and sanitary living or functioning condition. FEMA will not pay to return a home to its condition before the disaster. The IHP can also make a contribution through Replacement Assistance toward the replacement of an uninsured or underinsured owner-occupied residence that was damaged in a disaster event. However, the $34,000 limit means that it is unlikely that IHP awards will pay for the full replacement of a residence. IHP recipients whose homes are located in a Special Flood Hazard Area and are in a community participating in the NFIP and who receive assistance for repair, replacement, permanent housing construction, and/or personal property as a result of a flood-related disaster must obtain and maintain flood insurance as a condition of accepting disaster assistance. Funding for individuals and families is also available through the Other Needs Assistance (ONA) program. Unlike housing, ONA is cost shared with the state government on a 75% federal, 25% state basis. The ONA program is intended to address specific needs created by the disaster's impact. Assistance under ONA can include clothing, furniture, funeral expenses, child care, emergency medical and/or dental help, and a range of other needs. Flood insurance may be required on insurable items (personal property) if they are to be located in a SFHA. One unique form of assistance that is eligible for ONA funding is the Group Flood Insurance Policy (GFIP) offered by FEMA to IHP recipients after major flood disasters. The GFIP is a temporary mechanism for recipients of IHP funds—generally low-income persons—to acquire flood insurance following a flood loss. This assistance allows households time to recover from the disaster and be in a better position to buy flood insurance after the expiration of the GFIP. The premium for the GFIP is a flat fee of $600 per insured household, which is paid from ONA funds. A special deductible of $200 (applicable separately to any buildings loss and any contents loss) applies to insured flood damage losses sustained by the insured property in the course of any subsequent flooding event during the term of the GFIP. The policy covers the maximum amount of IHP awards (currently $34,000) and begins 60 days after the date of the applicable disaster declaration. The term of the policy is 36 months and is nonrenewable. FEMA is to provide a certificate of coverage to each household and contact the household 60 days before the policy is due to expire. The expiration notification from FEMA is designed, in part, to encourage policyholders to contact a local insurance agent or producer or a private insurance company selling NFIP policies under the WYO program, and advise them as to the amount of coverage the policyholder must maintain in order not to jeopardize their eligibility for future disaster assistance. Other programs which may be available to individuals and families from FEMA include Crisis Counseling for disaster victims, Disaster Legal Assistance, and Disaster Unemployment Assistance (DUA). The latter is available if there is a significant number unemployed due to the disaster who do not qualify for the regular state unemployment program. DUA is federally funded through FEMA but is administered by the Department of Labor and State Unemployment Compensation agencies. These programs do not require flood insurance. FEMA also uses Public Assistance grants to provide short-term shelter for disaster survivors who are unable to return to their homes. For instance, Transitional Shelter Assistance (TSA) provides short-term sheltering assistance to disaster survivors who have a continuing need for shelter after congregate shelters have closed. The TSA initiative is intended to provide short-term lodging for eligible disaster survivors whose communities are either uninhabitable or inaccessible due to disaster-related damages. FEMA considers applicants' eligibility for TSA as part of the IHP application process. TSA is authorized by the Stafford Act and is subject to Public Assistance regulations on state cost share. However, TSA is administered through FEMA's Individual Assistance program, which is better prepared to collect information on individuals than Public Assistance. For those who are eligible for TSA support, FEMA has the authority to fund the use of hotels or motels as transitional shelters, through direct payment to the participating hotels or motels. In the aftermath of Hurricane Sandy in 2012, FEMA designed the Sheltering and Temporary Essential Power (STEP) Pilot Program to work with state, local, and tribal governments to carry out certain essential measures to help restore power, heat, and hot water to residential properties, allowing residents to remain in or return to their homes while permanent repairs were completed. The STEP program home repairs were not accomplished under the authority of the IHP program, but instead were funded under Section 403 of the Stafford Act, which covers essential assistance; in other words, the grants were provided to eligible Public Assistance Grant Program applicants, who in turn used the funding for essential repairs to private residences. The STEP program was intended to reduce the demand for other FEMA-provided shelter, such as congregate shelters or TSA. STEP consisted of three elements: residential electrical meter repairs, shelter essential measures, and rapid temporary exterior repairs. FEMA delivered the STEP program through direct federal assistance; reimbursement of applicants who perform, or contract for the performance of, authorized emergency protective measures; or a combination of the two. Individual residential property owners were not eligible to apply directly to STEP. Eligible costs under the STEP pilot program were limited to $10,000 per residential unit, including equipment, materials, labor, and any associated inspection fees that were necessary to accomplish work that was eligible under STEP. STEP assistance was made available to residents in New York, New Jersey, and Connecticut. The STEP pilot program shared some commonality with IHP, as it provided basic repairs to disaster-affected residences. However, STEP was intended only to make homes habitable for the short term and did not provide any assistance beyond basic repairs to homes, whereas IHP provides financial assistance for home repair or replacement, rental expenses, damaged personal property, and other needs. In New York City, the New York City Rapid Repair Program augmented STEP to allow for repairs to multifamily dwellings and more permanent repairs needed to meet building codes. As STEP funding was not provided to individuals, support from STEP did not affect the determination of any IA grant from FEMA. Households which benefitted from STEP support were not required to have or purchase flood insurance. FEMA instituted a similar program to STEP, called Shelter at Home, to address housing needs following the floods in Louisiana in August 2016 (FEMA-4277-DR-LA). Eligible costs under the Shelter at Home program were limited to single-family owner-occupied properties for repairs up to a maximum value of $15,000. As with the STEP program, Shelter at Home assistance did not affect the determination of any IA grant from FEMA and there was no flood insurance requirement for recipients of Shelter at Home assistance. STEP programs were instituted in Texas following Hurricane Harvey (FEMA-4332-DR-TX), in Florida following Hurricane Irma (FEMA-4337-DR-FL), in Puerto Rico following Hurricane Irma (FEMA-4336-DR-PR) and Hurricane Maria (FEMA-4339-DR-PR), and in the U.S. Virgin Islands following Hurricane Irma (FEMA-4335-DR-VI) and Hurricane Maria (FEMA-4340-DR-VI). All of these STEP programs were available only for disaster-damaged single-family owner-occupied primary residential properties, including duplexes and townhomes. The Texas program is known as Partial Repair and Essential Power for Sheltering (PREPS). All of the STEP programs for the 2017 hurricanes capped the cost of repairs at $20,000. As with previous STEP programs, STEP assistance for the 2017 hurricanes did not affect a FEMA IHP applicant's eligibility for repair, replacement, or permanent or semipermanent housing construction assistance, if approved, under Section 408 of the Stafford Act, and there was no flood insurance requirement for recipients other than providing documentation of flood insurance or certification of no flood insurance. The Coastal Barrier Resources Act ( P.L. 97-348 , as amended through P.L. 106-390 ) restricts housing assistance provided under Section 408 of the Stafford Act. Housing assistance, including repair, replacement, and semipermanent or permanent construction, is not authorized to those who live in the Coastal Barrier Resources System (CBRS) or in an Otherwise Protected Area (OPA). However, essential assistance under Section 403 of the Stafford Act is allowed in the CBRS and in OPAs. In addition, although FEMA discourages some types of sheltering in CBRA or OPA areas, none of the STEP policies exclude implementation of STEP in CBRAs/OPAs. STEP is funded as an emergency protective measure under Section 403 and is, therefore, exempt from most of the CBRA/OPA restrictions. The Small Business Administration (SBA) Disaster Loan Program provides direct loans to businesses, nonprofit organizations, homeowners, and renters to repair or replace property damaged or destroyed in a federally declared disaster. SBA Disaster Loans include Home and Personal Property Disaster Loans, Business Physical Disaster Loans, and Economic Injury Disaster Loans. About 83% of direct disaster loans are awarded to individuals and households rather than small businesses. The program generally offers disaster loans at a fixed rate that have loan maturities of up to 30 years. The SBA Disaster Loan Program can be put into effect by five types of declarations: two types of Presidential Declarations as authorized by the Stafford Act, and three types of SBA declarations. The type of declaration determines what types of loans are made available, but has no bearing on the loan terms or loan caps. A Personal Property Loan provides a creditworthy homeowner or renter in a declared disaster area with up to $40,000 to repair or replace personal property owned by the survivor, while Real Property Loans provide creditworthy homeowners with up to $200,000 to repair or restore the homeowners' primary residence to its predisaster condition. Only uninsured or otherwise uncompensated disaster losses are eligible. The amount that SBA will lend depends on the cost of repairing or replacing the home and/or personal property (minus insurance settlements or grant assistance). The loans may not be used to upgrade a home or build additions to a home unless the upgrade or addition is required by city or county building codes. However, a homeowner can borrow additional funds beyond the cost of repair to cover the costs of mitigation intended to protect their property against future damage; however, mitigation funds may not exceed 20% of the disaster damage, as verified by SBA, to a maximum of $200,000 for home loans. Disaster loans may be used in conjunction with other types of assistance, including insurance, but only to the extent that there is no duplication of benefit. The Stafford Act requires federal agencies providing disaster assistance to ensure that businesses and individuals do not receive disaster assistance for losses for which they have already been compensated. SBA regulations prohibit applicants from receiving a home disaster loan if their damaged property can be repaired or replaced with the proceeds of insurance, gifts, or other compensation. These amounts must either be deducted from the amount of the claimed losses or, if received after SBA has approved and disbursed a loan, as principal payments on their loans. Recipients of SBA loans must carry flood insurance for the life of the loan. Because the National Flood Insurance Reform Act of 1994, among other things, made flood insurance requirements directly applicable to agencies that provide government loans, such as the SBA, such agencies cannot subsidize, insure, or guarantee any loan if the property securing the loan is in a SFHA of a community not participating in the NFIP. In addition, the SBA will deem an applicant ineligible for a home disaster loan if the SBA determines that the applicant assumed the risk by not maintaining flood insurance as required by an earlier SBA disaster loan when the current loss is also due to flood. SBA loans are not available for properties in the Coastal Barrier Resources System (CBRS) or in an Otherwise Protected Area (OPA). In addition to NFIP and other federal assistance that may be automatically triggered with a disaster declaration, individuals may also access federal assistance that is not automatically triggered by such declarations. In some instances that are perceived as catastrophic events, Congress has provided additional resources to states and local governments through the Department of Housing and Urban Development's Community Development Block Grant Disaster Recovery Program (CDBG-DR). The CDBG-DR program is not automatically triggered by a disaster. Instead, Congress has occasionally addressed unmet disaster needs by providing supplemental disaster-related appropriations for the CDBG-DR program. Consequently, CDBG-DR is not provided for all major disasters declared under the Stafford Act, but only provided at the discretion of Congress. The CDBG-DR program is designed to help communities and neighborhoods that otherwise might not recover after a disaster due to limited resources. Eligible grantees include states, units of local government, Indian tribes, and other areas designated by the President as disaster areas. Generally, CDBG-DR grantees must use at least 70% of the funds for activities that principally benefit low- and moderate-income (LMI) persons or areas. Due to the block grant nature of the program, local and state officials exercise a great deal of discretion in determining which combination of eligible activities to employ. This allows communities to use CDBG-DR funds to meet disaster-related needs, including short-term disaster relief, mitigation activities, and long-term recovery activities. Communities and states are also free to amend and revise their annual CDBG plans in response to flood in order to address imminent threats to the health and safety of residents. Communities, at the discretion of Congress, may be reimbursed by CDBG-DR funds for use of their regular CDBG allocation. This results from explicit language included in some appropriations bills. HUD does not provide CDBG-DR funding directly to individuals; however, individuals and families may benefit from a number of the eligible activities for which CDBG-DR funds can be used. Examples of these activities include buyouts of damaged properties in a floodplain and relocating residents to safer areas, relocation payments for people and businesses displaced by a disaster, rehabilitation of homes and buildings damaged by the disaster, and homeownership activities such as down payment assistance, interest rate subsidies, and loan guarantees for disaster victims. Some of the biggest flood-related CDBG-DR grants have been made available in the aftermath of hurricanes. For example, following the 2005 hurricane season (particularly Hurricanes Katrina, Rita, and Wilma), Congress provided $19.7 billion in CDBG-DR funding to five states (Alabama, Florida, Louisiana, Mississippi, and Texas). Louisiana and Mississippi were the two states hardest hit by the 2005 hurricanes and received $13.4 billion and $5.5 billion, respectively. Both states devoted the majority of the CDBG-DR funding to housing recovery, with particular support for homeowners. Louisiana state officials used $3 billion of CDBG-DR funding for the Road Home program. This program defined a homeowner's potential grant amount as the estimated cost to repair or rebuild the home, minus any insurance payments and FEMA assistance for structural repairs, up to a maximum of $150,000. This potential amount was then reduced by 30% for homeowners who did not carry insurance (homeowners insurance and also flood insurance if the property was in a SFHA and the community participated in the NFIP). The state also reduced the award to remove Duplication of Benefits and unpaid taxes owed to the state. Homeowners could choose to repair their property or to relocate (with only 60% of the potential grant amount available if they chose to relocate out of Louisiana). Mississippi established a similar program called the Mississippi Homeowner Grant Program. The maximum assistance in the Mississippi program considered the applicant's income relative to the area median income, and whether or not the property was located in a SFHA. Assistance in Mississippi was also conditional on homeowners' willingness to attach covenants to the property that created commitments to maintain flood insurance, rebuild and repair in accordance with applicable building codes and local ordinances, and elevate the property in accordance with the most recent FEMA guidelines. After Hurricane Sandy, which made landfall in October 2012, $16 billion ($15.8 billion after the sequester) was awarded in CDBG-DR funding to New York City and the states of Connecticut, Maryland, New Jersey, New York, and Rhode Island. This funding has been used in a variety of ways which provide funding directly to individuals and families, including housing rehabilitation and replacement, resilient rebuilding (for example, elevation of a property), property acquisition, and coastal resiliency measures. The State of New Jersey used CDBG-DR funding after Hurricane Sandy to make grants of up to $10,000 through its Homeowner Resettlement Program which homeowners could use toward addressing anything that would provide an incentive to remain in their community. One of the eligible expenses for which this money could be used was to pay flood insurance premiums. The Resettlement Program was only available to homeowners in the nine most impacted counties whose property was their primary residence which they owned and occupied at the time of the storm, and whose residence sustained a FEMA-verified loss of $8,000 or greater or more than one foot of flooding on the first floor. Before the funds were released, the homeowner was required to sign a promissory note to reside in the county for three years; otherwise, they would have to repay the funds to the state. Initially 60% of the funds were reserved for LMI families in accordance with HUD income guidelines. The disbursement of the funds was evaluated in the order in which the requests were received. Following the 2017 Hurricanes (Harvey, Irma, and Maria), there were three relevant acts containing CDBG-DR supplemental appropriations. Texas was allocated $57.8 million for damages associated with Hurricane Harvey. The first supplemental allocated an additional $5.024 billion to Texas, $616 million to Florida, $1.507 billion to Puerto Rico, and $243 million to the U.S. Virgin Islands. In the second supplemental, Congress did not provide HUD with any CDBG-DR funding, although it did make some modifications to eligibility, to include tribes, and set expenditure deadlines. In the third supplemental, HUD was allocated $28 billion in CDBG-DR funding. Congress required that these funds be used for two purposes: 1. Up to $16 billion to address remaining unmet needs from major disasters in 2017, including Hurricanes Harvey, Irma, and Maria as well as California wildfires and subsequent mudslides. Congress specified that at least $11 million of this be targeted to Puerto Rico and the Virgin Islands, with $2 billion to repair and upgrade the electrical grid in these jurisdictions. 2. At least $12 billion to support mitigation activities among CDBG-DR grantees that experienced presidentially declared disasters from 2015 through 2017. After addressing remaining 2017 unmet needs, HUD was able to make an additional $3.9 billion available for mitigation, bringing the amount available for mitigation to nearly $16 billion for recent CDBG-DR grantees. CDBG-DR funding from the third supplemental for the 2017 hurricanes, including mitigation funding, allocated $18.4 billion to Puerto Rico, $4.7 billion to Texas, $1.21 billion to the U.S. Virgin Islands, and $707.3 million to Florida. Congress may consider whether they agree that individual households should be disadvantaged by a decision made by their community, over which an individual is likely to have very little control. Individuals who live in a community which has not joined, withdraws from, or which has been suspended from the NFIP, are not allowed to buy or renew NFIP flood insurance and are barred from applying for SBA loans. These households may wish to buy NFIP flood insurance but are not allowed to do so, because of their community's NFIP status (or nonstatus). Table 1 provides summary information on available federal assistance from an NFIP insurance policy, FEMA Individuals and Households Program, and SBA disaster loans. This information is provided dependent on the status of the individual's property in the Special Flood Hazard Area, the community's participation in the NFIP, and whether that individual has the required insurance coverage. There is often a perception that flood victims get large amounts of disaster aid and that this may act as a moral hazard which discourages people from purchasing flood insurance and/or adopting risk reduction measures. In fact, the amount of FEMA Individual Assistance after a flood is relatively limited; many of the headline reports of federal aid refer to public assistance or assistance which is not available to all individuals. Flood insurance may be preferable for governments, since policyholders cover a portion of the costs through premium payments. Flood insurance may also be better for individuals, as uninsured households fare less well than those with insurance. Generally, residents must live in a federally declared disaster area to be eligible to receive disaster assistance or disaster loans; in contrast, NFIP policyholders may claim for damages from any flood, regardless of whether the flood was a declared disaster under federal law. Although the maximum coverage available under the NFIP may not be sufficient to cover all flood-related losses, an individual or family will generally be able to get more from NFIP insurance than from disaster assistance. For example, homeowners are able to get up to $350,000 for buildings and contents together and renters are able to get up to $100,000, compared to a maximum of $34,000 per household from FEMA disaster assistance. In addition, most disaster victims do not receive the maximum amount available under FEMA disaster assistance. For example, after the South Carolina floods in October 2015, although less than 5% of households in the counties receiving IHP had NFIP flood insurance, the average IHP payment was about $3,200. In contrast, the average NFIP claim for the South Carolina floods was $34,934. Neither flood insurance payments nor Individual Assistance payments need to be paid back; however, the amount available through IA will be reduced by the amount of NFIP proceeds received for the same damages. In addition, a household without flood insurance will only be able to get IA under a limited set of circumstances. An individual or household may be able to borrow up to $240,000 through a combination of SBA Personal Property and Real Property Loans; however, these loans must be paid back with interest. In order to receive SBA loans, recipients must carry flood insurance for the life of the loan. The amount of this assistance is subject to Duplication of Benefits and sequence protocols. The nexus between flood insurance and disaster assistance reveals conflicting aims: the desire to encourage individuals and households to purchase flood insurance versus the humanitarian objective of providing assistance following a disaster so that people do not suffer unnecessarily. This is fundamentally a moral hazard question. A fully individualistic approach to flood risk would advocate that individuals and households should purchase adequate flood insurance to protect themselves against a major flood disaster. A more egalitarian approach could take the view that individuals do not necessarily have a free choice on whether or not they purchase flood insurance (for example, residents of a community which does not participate in the NFIP) and that some individuals and households may not be able to afford sufficient coverage. In this case, the policy question is whether or not the federal government should step in after a disaster even if the victims do not have flood insurance. Congress may allow these conflicting policies to continue and to retain the current difference between the amounts available from flood insurance and disaster assistance, or may consider proposals that would alter the balance between assistance and insurance. A significant amount of money is available to individuals and households through funding sources which are not available in all disasters, particularly through CDBG-DR. For example, homeowners in Louisiana and Mississippi could get grants of up to $150,000 after the 2005 hurricane season, as could homeowners in New Jersey after Hurricane Sandy. Rather than being funded through the annual appropriations process, statutory authority for CDBG-DR funding is provided via supplemental appropriations which are awarded by Congress only in extraordinary circumstances that have resulted in significant unmet needs for long-term recovery. Because Congress has so far opted to use special appropriations to deliver CDBG-DR funds rather than establishing a permanent CDBG disaster recovery program, HUD cannot create permanent regulations and guidance of how states should implement CDBG-DR grants. This may lead to delay and/or confusion in implementation, and may also subject program design decisions to local politics. Unless the individual state required homeowners to purchase flood insurance, the recipients of CDBG-DR grants are exempt from the requirement to purchase flood insurance. Given the unequal use of CDBG-DR, there may be an issue of equity in disaster housing assistance, where some disaster events receive an expanded form of federal assistance to meet housing needs in the form of CDBG, which can create different tiers of disaster housing assistance for declared disasters. NFIP's authorization will expire on November 30, 2018. The availability of NFIP insurance has impacts on other programs operated by FEMA and other agencies such as SBA and HUD. Separately from, or in conjunction with, NFIP reauthorization, the impacts on other programs may be useful to consider. In particular, Congress may consider revising the requirements associated with the Flood Disaster Protection Act and flood insurance. Other sources of disaster assistance are described in detail in the following CRS reports; however, this is not a comprehensive list of available disaster assistance following a flood, but rather a sampling of the most commonly used programs. CRS Report R44593, Introduction to the National Flood Insurance Program (NFIP) CRS Report R41981, Congressional Primer on Responding to Major Disasters and Emergencies CRS Report R44619, FEMA Disaster Housing: The Individuals and Households Program—Implementation and Potential Issues for Congress CRS Report R41309, The SBA Disaster Loan Program: Overview and Possible Issues for Congress CRS Report RL31734, Federal Disaster Assistance Response and Recovery Programs: Brief Summaries CRS Report RL33330, Community Development Block Grant Funds in Disaster Relief and Recovery CRS Report R45084, 2017 Disaster Supplemental Appropriations: Overview | After a flood, people are often uncertain if their eligibility for federal disaster assistance is linked in any way to whether or not they have flood insurance. Because much of the other disaster assistance that is available to individuals comes from the Federal Emergency Management Agency (FEMA), there may be confusion between possible claims provided through the National Flood Insurance Program (NFIP, which is also managed by FEMA), and other disaster assistance programs. This report provides an overview of the assistance available to individuals and households following a flood and provides links to more comprehensive guidance on both flood insurance and disaster assistance. The National Flood Insurance Program (NFIP) is the main program intended to provide federal assistance to homeowners and renters recovering from flood losses. The maximum coverage for one- to four-family homes is $100,000 for contents and $250,000 for buildings coverage. In addition to NFIP claims payments to policyholders, homeowners and renters may also access a number of other federal programs aimed at mitigating the impact on individuals and households. The principal FEMA program to offer assistance to individuals and families is the Individuals and Households Program (IHP). The total of all IHP assistance to one household cannot exceed $34,000. IHP recipients whose homes are located in a Special Flood Hazard Area, are in a community participating in the NFIP, and who receive assistance for repair, replacement, permanent housing construction, and/or personal property as a result of a flood-related disaster must obtain and maintain flood insurance as a condition of accepting disaster assistance. The Small Business Administration (SBA) Disaster Loan Program provides direct loans to businesses, nonprofit organizations, homeowners, and renters to repair or replace property destroyed in a federally declared disaster. A Personal Property Loan provides a creditworthy homeowner or renter in a declared disaster area with up to $40,000 to repair or replace personal property owned by the survivor, while Real Property Loans provide creditworthy homeowners with up to $200,000 to repair or restore the homeowners' primary residence to its predisaster condition. Recipients of SBA loans must carry flood insurance for the life of the loan. In some instances that are perceived as catastrophic events, Congress has provided additional resources to states and local governments through the Department of Housing and Urban Development's Community Development Block Grant Disaster Recovery Program (CDBG-DR); however, the CDBG-DR program is not automatically triggered by a disaster. Due to the block grant nature of the program, local and state officials exercise a great deal of discretion in determining which combination of eligible activities to employ. This allows communities to use CDBG-DR funds to meet disaster-related needs, including short-term disaster relief, mitigation activities, and long-term recovery activities. HUD does not provide CDBG-DR funding directly to individuals; however, individuals and families may benefit from a number of the eligible activities for which CDBG-DR funds can be used. Unless the individual state requires the purchase of flood insurance, the recipients of CDBG-DR grants are exempt from the requirement to purchase flood insurance. The NFIP's authorization expires on November 30, 2018. If the NFIP is not reauthorized and is allowed to lapse, the authority to provide new flood insurance contracts will expire. If the NFIP were to lapse, the unavailability of NFIP insurance could have an impact on other programs such as IHP, SBA disaster loans, and CDBG-DR. Separately from or in conjunction with NFIP reauthorization, the impacts on such other programs may be useful to consider. In particular, Congress may consider revising the requirements for flood insurance in the Flood Disaster Protection Act. |
The purpose of this report is to provide Congress with an overview of the nature and statusof the designated foreign terrorist organizations list (FTO list), as a potential tool in overseeing theimplementation and effects of U.S. legislation designed as a basis for imposing sanctions onterrorists. The report centers on the list of terrorist groups that are formally designated by theSecretary of State pursuant to section 219 of the Immigration and Nationality Act (8 U.S.C. 1101 et seq .), as amended under the Antiterrorism and Effective Death Penalty Act of 1996 ( P.L.104-132 ). These groups are often collectively referred to as the "terrorist group list" or "FTO list." The focus here is on the operation and effectiveness of the FTO list as a U.S.counterterrorism tool. The first part of the report provides a background on the process fordesignating a group, as well as the procedure used to remove a group. It describes the administrationof the list and the role of the various Executive agencies involved in maintaining it. (1) Next follows a sectionexplaining the distinctions between the FTO list and other terrorist lists that are maintained by theU.S. government, with an emphasis on both tracing the complicated interplay among the numerouslists and untangling their confusing acronyms. The arguments in favor and against the FTO list arethen discussed, with information about the practicalities of implementing it. The report concludeswith a discussion of potential policy options for Congress, including some of the recently proposedamendments to the legislation that establishes it. The potential issue for Congress is to assess, as part of its oversight responsibility, theeffectiveness of the FTO list in confronting terrorist groups that are a threat to the United States. This report will be updated as events warrant. The 1996 Antiterrorism and Effective Death Penalty Act (AEDPA), which amends section219 of the Immigration and Nationality Act (P.L. 82-414; 8 U.S.C. 1101 et. seq .), states that theSecretary of State is authorized to designate an organization as a "foreign terrorist organization" ifthree conditions are met: 1. The organization is foreign; 2. The organization engages in terrorist activity; 3. The terrorist activity threatens the security of United States citizens or the nationalsecurity of the United States. (2) If the Secretary of State decides that an organization meets these conditions, he or she may add it tothe terrorist group list at any time by informing Congress and publishing a notice to that effect in the Federal Register . Designations last for two years, at which time they may be renewed. Groups canalso be removed from the list at any time, either by the Secretary of State or by Act of Congress. Thecriteria for removal by the Secretary are general and are subject to interpretation: the Secretary ofState may revoke a designation if he or she finds either that the circumstances that were the basis forthe designation have changed, or that the national security of the United States warrants a revocationof the designation. (3) Designations normally occur after an involved interagency process; but the Secretary of State makesthe ultimate decision. Although the State Department officially designates a group and takes the lead, there are anumber of agencies involved in administering the FTO list. Before the determination, theintelligence community is an important player, because the designation is based upon evidence ofa group's terrorist activity. This often involves classified information and entails assembling anadministrative record that will potentially stand up in court. The intelligence community alsoprovides the information upon which decisions to renew an organization's designation arebased. (4) The JusticeDepartment weighs the legal evidence before the designation is approved, and when renewal is beingconsidered. The Department of Homeland Security is also consulted before designations are made. After the designation, the Treasury Department may block financial transactions involvingan organization's assets and determine whether U.S. banks are complying with the law. The JusticeDepartment determines whether or not to prosecute offenders who violate any aspect of the TreasuryDepartment's sanctions. Judges from the Department of Justice's Executive Office of ImmigrationReview decide immigration cases, with appeals potentially going all the way to the Attorney General. A variety of different agencies in the Department of Homeland Security are then involved in carryingout immigration sanctions, including deportations. Thus, from the perspective of the members of a group, the legal consequences of beingdesignated a foreign terrorist organization are in two general areas: financing and immigration. Under the AEDPA, people who provide funds or other material support to a designated FTO arebreaking the law and may be prosecuted. (5) This applies to both the members of a group and to those who maybe sympathizers. If Treasury imposes sanctions, U.S. financial institutions are required to block thefunds of designated FTOs and their agents and to report that blockage to the Treasury Department. This can have important consequences for a designated terrorist organization's ability to access itsresources. As for immigration, members of designated FTOs can be denied visas or excluded fromentering the United States, and/or they can be deported once they are in the country. The FTO list is not the only so-called "terrorist list" that the U.S. government keeps. (6) There are a number of others,and it is important to clarify the distinctions among them. (7) Probably the best known is the "state-sponsors of terrorism" list, which is pursuant to section6(j) of the Export Administration Act of 1979 ( P.L. 96-72 ; 50 U.S.C. app. 2405(j)(asamended)). (8) Under theterms of the act, the Secretary of State provides Congress with the list of countries that have"repeatedly provided support for acts of international terrorism." There are currently seven stateson the state sponsors of terrorism list: Cuba, Iran, Iraq, Libya, North Korea, Sudan, and Syria. (9) Being on the list subjects acountry to a range of severe U.S. export controls, especially of dual-use technology and militaryweapons. The provision of U.S. foreign aid (except humanitarian assistance) is also prohibited. The state sponsors of terrorism list has been remarkably static since its initiation in 1979,with only two states ever having been removed: South Yemen, which was removed in 1990 whenit effectively ceased to exist, merging with North Yemen to form the current state of Yemen; andIraq, which was removed from the list in1982 (when it was allied with the United States) and wasreturned to the list in 1990 (after its invasion of Kuwait). (10) This list differs from the FTO list, as it is directed specificallytoward states, not substate actors -- like the terrorist groups that the states allegedly support. It alsoderives from different legislation. (11) At least three other important U.S. "terrorist lists" are in use. The "specially designatedterrorists" (SDTs) list was generated pursuant to the International Emergency Economic Powers Act( P.L. 95-223 ; 50 U.S.C. 1701 et seq .). It was initiated under Presidential Executive Order 12947 on25 January 1995 and was specifically oriented toward persons (individuals and entities) who threatento disrupt the Middle East Peace Process. Later, following the events of September 11, 2001, thePresident invoked the same emergency authorities in Presidential Executive Order 13224, to block"all property and interests in property" of certain designated terrorists and individuals and entitiesmaterially supporting them. (12) This established another, much longer list, known as theSpecially Designated Global Terrorists (SDGTs) list. There are currently over three hundred personsidentified as SDGTs. These two lists are especially targeted toward blocking terrorist financing, andthey do not have an immigration element. The Treasury Department maintains the so-called SDT and SDGT lists, and, unlike the FTOlist, the Secretary of the Treasury takes the lead in adding individuals or organizations to the lists andthen freezing the assets of persons or entities that are on them. The lists have grown to include morethan 200 entities, organizations, and/or individuals. They derive from different legislation and,again, are not the same as the designated FTO list. (13) The SDT, SDGT, state sponsors, and (as of October 2002) FTO lists were placed togetherin a new, larger roster called the "Specially Designated Nationals and Blocked Persons" (SDN) listmaintained by the Office of Foreign Assets Control of the Treasury Department. (14) Although the individuallists retain separateness pursuant to their legislation, this comprehensive SDN list presents in oneplace all of the terrorist entities that are economically sanctioned through having their assets blocked. (It also includes individuals and organizations that are sanctioned by having their assets blocked fornarcotics trafficking and other activities.) There are thus fourteen different sanctions programsincluded in the SDN list, not all of which pertain to terrorists. The list is accessible via the Internetand is frequently updated to reflect the fluid nature of U.S. economic sanctions. (15) There is also the so-called "Terrorist Exclusion List" or "TEL," which is pursuant to Section411 of the USA Patriot Act of 2001 ( P.L. 107-56 ; 8 U.S.C., 1182). It authorizes the Secretary ofState, in consultation with (or at the request of) the Attorney General, to designate terroristorganizations strictly for immigration purposes. Individuals associated with organizations on theTEL list are prevented from entering the United States and/or may be deported if they are alreadyhere. (16) (It is worthnoting, that none of these immigration sanctions has an effect on the behavior of U.S. citizens.) TheTEL list expands the grounds for exclusion from the United States and has a broader standard andless detailed administrative procedure than does the FTO list. The State Department maintains theTEL list. (17) In sum, with respect to sanctions against terrorists, the Executive branch maintains anintricate array of lists pursuant to various legislation and Executive Orders. These lists do overlap;however, the Executive Branch implements sanctions against state sponsors of terrorism, terroristorganizations, and individual terrorists somewhat differently depending upon which legislationapplies, what the purpose is, and which list is being considered. There are also international listsmaintained by the United Nations and the European Union, for example, that are not considered here. This report looks in detail only at the designated FTO list and its sanctions, which the StateDepartment takes the lead in administering and which names only specially designated terroristorganizations. The FTO list has unique importance not only because of the specific measuresundertaken to thwart the activities of designated groups but also because of the symbolic, public roleit plays as a tool of U.S. counterterrorism policy. The first terrorist organizations were designated and put on the FTO list in October 1997,about eighteen months after the passage of the AEDPA. There were thirty organizations on thatinitial list. In October 1999, the first review and redesignation occurred. Of the 30 groups originallyon the list, 27 were redesignated, three were allowed to lapse, and one more group was added. (18) Notably, the group thatwas added to the FTO list that year was Al Qaeda, which was designated a foreign terroristorganization especially because of its involvement in the August 1998 bombings of the U.S.embassies in Nairobi, Kenya, and Dar Es Salaam, Tanzania. The first exercise of the Secretary of State's ability to add a group outside the usual two-yearcycle occurred in 2000, when the Islamic Movement of Uzbekistan was designated on its own. Thenin the regular biennial review in 2001, the State Department added two new groups, the Real IrishRepublican Army (RIRA) and the United Self-Defense Forces/Group of Colombia (AUC), andcombined two other groups (Kahane Chai and Kach) into one. (19) That brought the total to28 FTOs. Since that time, the list has grown significantly. There have been eight groups added tothe FTO list since October 5, 2001: the Al-Aqsa Martyrs Brigade (which is an armed wing of theFatah movement), 'Asbat al-Ansar (a Lebanese-based group associated with Al Qaeda), theCommunist Party of Philippines/New People's Army (CPP/NPA) (a Maoist group),Jaish-e-Mohammed (JEM) (an Islamic extremist group based in Pakistan), Jemaah Islamiya (JI) (asoutheast Asian terrorist network connected with Al Qaeda), Lashkar-e-Tayyiba (LT) (aPakistan-based group fighting in Kashmir), and Salafist Group for Call and Combat (GSPC)(apparent outgrowth of the Algerian GIA, active in Europe, Africa and the Middle East). There are36 groups currently designated as foreign terrorist organizations. (See Appendix A.) There are advantages and disadvantages for the United States in using a formal list as amechanism for counterterrorism purposes. (20) Chief among the advantages is the fact that the FTO list bringslegal clarity to efforts to identify and prosecute members of terrorist organizations and those whosupport them. Having the designated FTO list helps to target U.S. counterterrorist sanctions underthe AEDPA because there is no ambiguity about which groups are included and which are not. Ifa group is on the FTO list, then the AEDPA sanctions apply; if not, they do not. Thus, being addedto the list can have very substantial implications for both the organization and for U.S.counterterrorist efforts. In practical bureaucratic terms, the FTO list also provides lucidity in the often complicatedinteragency process of coordinating the actions of Executive agencies, by giving them a central focalpoint upon which the efforts converge. U.S. counterterrorism is therefore potentially more effective. State, Treasury, Justice, Homeland Security, and other agencies all recognize that groups on the listare subject to scrutiny and sanctions. And these measures arguably make Americans more securefrom terrorist attacks, for example, by cutting down on terrorist organizations' access to resourcesand preventing terrorist group members from entering the country. Specifically, the departments ofHomeland Security and Justice have used affiliation with an FTO as grounds for deportation ofaliens. (21) The TreasuryDepartment, working with the interagency and international communities, has used the FTO list(among the other U.S. terrorist sanctions programs) in its effort reportedly to block more than $125billion in assets worldwide. (22) And, of course, the Justice Department has prosecutedindividuals affiliated with FTOs. (23) Having a focal point for agency coordination enhances theeffectiveness of government implementation and may also serve as a deterrent to organizations thatconsider engaging in illegal behavior. Likewise, the FTO list is a useful mechanism in dealing with other governments, especiallythose that are coordinating counterterrorism efforts with the United States. Labeling and listingterrorist organizations also opposed by other states can be an important source of convergence inbilateral national relations. There is a sense of alliance against a common enemy. Often importantbenefits are derived in counterterrorism or other aspects of the bilateral relationship as a result. Moreover, states that are, actually or potentially, supporting organizations on the list can be left inno doubt about U.S. policy on the issue. Clearly labeling what the United States governmentconsiders a foreign terrorist organization can have significant domestic and international foreignpolicy advantages. It can be a powerful diplomatic tool, residing in the State Department's Officeof the Coordinator for Counterterrorism. Another important benefit is the attention that the FTO list gives to the organizations that areon it. Drawing attention to terrorist groups aids in identifying them not only for states but fornongovernmental organizations and individuals. And likewise the terrorist organizations are fullyplaced on notice that someone is watching what they do. This can make it more difficult for themto operate. The groups on the FTO list are stigmatized. Many modern terrorist organizations have avaried portfolio of activities, some of which may be ostensibly legitimate. Some who may havepreviously viewed an organization primarily as a charity or as a public advocacy group mayreconsider supporting it. Publicizing which groups are formally designated has important legalimplications: since the law punishes those who wittingly support terrorist organizations, ignoranceof a listed organization's activities is less defensible. Potential donors may not necessarily be willingto contribute to an organization that is designated as "terrorist," especially if the gift may result inprosecution under U.S. law. The moral relativity that some people claim dogs the "terrorist" labelis removed, at least as far as official U.S. policy is concerned. Although it has important legal and symbolic significance, some argue that having a "list"is overly mechanistic, restrictive and inflexible, especially in an area of foreign policy that requiresflexibility. Nonstate actors such as terrorist organizations are often able to change their names and/orcharacteristics much more quickly than ponderous bureaucratic lists can reflect. This is a seriousproblem in an era when international terrorism is increasingly globalized in its reach and capabilities,with borders becoming more permeable and less relevant, in an age of Internet links and open tradeareas. (24) Likewise,such lists are not very effective in dealing with ad hoc activities engaged in by "volunteers," whomay not have a clear long-term relationship with an organization. This has become a particularworry with respect to Al Qaeda, for example. (25) The statement that a group is "on the list" or "off the list" can be very misleading, and itssignificance is often misunderstood. It is true that the FTO list is generally considered the primarymeans of imposing sanctions against terrorist organizations. However, not being on the FTO listdoes not necessarily mean that the U.S. government has failed to recognize that a group is engagedin terrorism, is a threat, and should be subject to sanctions. Sometimes, for various reasons,groups (26) are not on theFTO list, but are on the SDT or SDGT list. They can also be on the Terrorist Exclusion List. Theremay be competing priorities in dealing with a group, such as a desire to engage a group innegotiations or to use the FTO naming as leverage for another foreign policy aim. Without a fullappreciation of the interplay among different sanctioning lists, not to mention the interplay betweencompeting foreign policy goals and all of the sanctioning lists, statements about whether or not agroup is on a particular list may ring hollow. It is not necessarily the case that the FTO list is the most effective or prosecutable mechanismto act against terrorist organizations, if that is the aim. Sometimes it is easier to prosecuteorganizations or their associates by using the Executive Orders under IEEPA. For example, it canbe more difficult to prove that someone is materially supporting, or working for or on behalf of, anFTO under AEDPA than it is to prove that someone is violating the terms of Executive Order 13224. In that case, it might be to the benefit of U.S. counterterrorism efforts to name a group a SDGTrather than an FTO. If a group is then also put on the Terrorism Exclusion List, the combined effectsof the sanctions overall could be comparable to being formally named an FTO. (27) Of course, the publicattention and diplomatic leverage that goes along with being on the better-known FTO list is notequalled; however, the point is that in terms of the results with respect to fighting an organization'sactivities, the U.S. sanctions regime is far more complicated than either being "on" the list or "off"the list would imply. Competing foreign policy concerns often result in decisions to keep groups off the list. Thisis not necessarily a problem, as U.S. foreign policy considers numerous competing priorities in anygiven situation. The law "authorizes" but does not require the Secretary of State to make any givendesignation. If there are countervailing foreign policy priorities, then his or her judgment prevails. Nonetheless, inconsistencies of standards from the perspective strictly of terrorism can make the U.S.government appear hypocritical, especially in the eyes of those who see the FTO list only in blackand white terms and may not appreciate the existence of other terrorist lists. Statements aboutorganizations that are not designated regularly appear in the press, journals and academic writing,for example. (28) Havingsuch a high-profile list can politicize and oversimplify what is actually a complex web of legalsanctions that may be in addition to, or instead of, those pursuant to the AEDPA. Furthermore, as noted, above, the FTO list is subject to judicial review. Thus, on a numberof occasions, groups have filed law suits to be removed from it. For example, the Mujahedin-eKhalq (MEK) and the Liberation Tigers of Tamil Eelam (LTTE, or Tamil Tigers) in 1999 both filedsuits in the District of Columbia arguing that they had been denied due process; but they lost incourt. (29) A separatelegal challenge was undertaken by the LTTE and the Turkish Kurdistan Workers' Party (PKK),which argued that the FTO portion of the AEDPA was unconstitutional. The suit was brought byindividuals and groups seeking to make contributions to the designated organizations. They also losttheir case; however, the ability to win in court has at times evidently been an element in the initialdecision whether or not to designate a group. (30) This may mean that the designation has more to do with thelegalities of the evidence than with the protection of U.S. national security from a terrorist threat. In the 108th Congress, a number of amendments have been offered to change the AEDPAlegislation so as to improve the effectiveness and ease of implementation of the FTO list. Some haveproposed that the law should be changed so that the designation does not lapse if the Secretary ofState fails to renew it every two years. It is a significant bureaucratic burden to ensure that thedesignations are appropriately reviewed, investigated, the administrative record updated, theappropriate agencies consulted, and the public statement of renewal made every two years after theinitial designation. Some might argue that the burden of proof should be placed on the terroristorganization, and that the designations should stand unless a successful appeal is placed by theorganization. The requirement for renewal is one of the aspects that some believe make the FTO listless desirable than the other sanctioning tools available under IEEPA and the relevant ExecutiveOrders. On the other hand, opponents may point out that the powers of the federal government underthe Patriot Act are already extensive, and that placing the burden of proof on designated FTOsessentially makes them guilty until they prove themselves innocent. The state sponsors of terrorismlist has been largely static in part because states remain on the list until the Secretary of State is ableto attest to listed states having stopped being involved in supporting terrorism. It is always difficultto prove a negative. Some might argue that the FTO list is a more flexible document with the currentarrangement regarding renewals and should be kept that way. The FTO list provides a public venuefor the State Department periodically to reemphasize the importance U.S. foreign policy places uponcountering these organizations. Another idea is to remove the requirement for judicial review of the FTO list. This wouldmake it much harder for terrorist organizations to appeal their placement on the list. The argumentsfor and against this suggestion are similar to those presented above, since judicial review is animportant mechanism available for organizations whose members believe that they have beenwrongly labeled and punished. There is a precedent for trying this suggestion. The ForeignNarcotics Kingpin Designation Act (passed in December 1999) originally contained a "no judicialreview provision." This caused concern among some owners of private businesses who feared thatthey might somehow be added to the list for unwitting business relationships with narcoticstraffickers. Shortly thereafter, legislation was passed to remove the provision, and judicial reviewwas restored. Abu Nidal organization (ANO) Abu Sayyaf Group (ASG) Al-Aqsa Martyrs Brigade Armed Islamic Group (GIA) 'Asbat al-Ansar Aum Supreme Truth (Aum) Aum Shinrikyo, Aleph Basque Fatherland and Liberty (ETA) Communist Party of Philippines/New People's Army (CPP/NPA) Al-Gama'a al-Islamiyya (Islamic Group, IG) HAMAS (Islamic Resistance Movement) Harakat ul-Mujahidin (HUM) Hizballah (Party of God) Islamic Movement of Uzbekistan (IMU) Jaish-e-Mohammed (JEM) Jemaah Islamiya (JI) Al-Jihad (Egyptian Islamic Jihad) Kahane Chai (Kach) Kurdistan Workers' Party (PKK, KADEK) Lashkar-e-Tayyiba (LT) Lashkar I Jhangvi (LJ) Liberation Tigers of Tamil Eelam (LTTE) Mujahedin-e Khalq Organization (MEK or MKO) National Liberation Army (ELN -- Colombia) Palestine Islamic Jihad (PIJ) Palestine Liberation Front (PLF) Popular Front for the Liberation of Palestine (PFLP) Popular Front for the Liberation of Palestine-General Command (PFLP-GC) Al Qaeda Real IRA (RIRA) Revolutionary Armed Forces of Colombia (FARC) Revolutionary Nuclei Revolutionary Organization 17 November (17 November) Revolutionary People's Liberation Party/Front (DHKP/C) Salafist Group for Call and Combat (GSPC)] Sendero Luminoso (Shining Path or SL) United Self-Defense Forces/Group of Colombia (AUC) Source: U.S. Department of State, Patterns of Global Terrorism 2002, published April 2003;accessible at http://www.state.gov/s/ct/rls/ , p. 99ff. (Some spellings have been adapted.) | The purpose of this report is to provide Congress with an overview of the nature and statusof the designated foreign terrorist organizations list, as a potential tool in overseeing theimplementation and effects of U.S. legislation designed to sanction terrorists. It centers on the listof terrorist groups that are formally designated by the Secretary of State pursuant to section 219 ofthe Immigration and Nationality Act, as amended under the Antiterrorism and Effective DeathPenalty Act of 1996 ( P.L. 104-132 ). These groups are often collectively referred to as the "FTO list." FTO list designations, which last for two years and must be renewed, occur after aninteragency process involving the departments of State, Justice, Homeland Security, and theTreasury. Since the designations can be challenged in court, they require a detailed administrativerecord often based on classified information. An organization that is placed on the FTO list issubject to financial and immigration sanctions, potentially including the blocking of assets, theprosecution of supporters who provide funds, refusal of visas, and deportations of members. Therehave been a number of designations and changes since the list was established, but it currentlyincludes thirty-six organizations. (See Appendix A.) The FTO list is often confused with some of the other "terrorist lists" that are maintained bythe U.S. government. These include the "state-sponsors of terrorism" list, which is pursuant toSection 6(j) of the 1979 Export Administration Act ( P.L. 96-72 ; 50 U.S.C. app. 2405(6)(j)); the"Specially Designated Terrorists" (SDTs) list, which is pursuant to the International EmergencyEconomic Powers Act ( P.L. 95-223 ; 50 U.S.C. 1701 et seq .) and was initiated in 1995 underPresidential Executive Order 12947; the "Specially Designated Global Terrorists" (SDGT) list,initiated in 2001 under Presidential Executive Order 13224; and, finally, the "Specially DesignatedNationals and Blocked Persons" (SDN) list, a master list that contains the other lists. All of theseare summarized and maintained by the Office of Foreign Assets Control of the Treasury Department. Lastly, the "Terrorist Exclusion List" or "TEL," which relates to immigration and is pursuant toSection 411 of the USA Patriot Act of 2001 (8 U.S.C.1182) is maintained by the State Department. Like the FTO list, the TEL includes the names of terrorist organizations, but it has a broader standardfor inclusion, is subject to less stringent administrative requirements, and is not challengeable incourt. There is a complicated interplay among all of these lists, and it is important to distinguishthem from the better-known FTO list. The FTO list has been of considerable interest to Congress, and there are arguments in favorand against it. It publicly stigmatizes groups and provides a clear focal point for interagencycooperation on terrorist sanctions; however, some argue that it is inflexible and misleading, sincegroups that are not on the list are still often subject to U.S. sanctions. The report concludes with adiscussion of potential policy options for Congress, including some of the recently proposedamendments to the legislation that establishes it. It will be updated as events warrant. |
RS21510 -- NATO's Decision-Making Procedure Updated March 8, 2004 In February 2003, the United States asked that NATO begin planning to provide Turkey with defensive systems in the event of an attack by Iraq during theimpending war with Saddam Hussein's regime. The request also asked that NATO members backfill for some U.S.forces in the Balkans, needed for thepossible conflict with Iraq. France, Germany, and Belgium objected in the North Atlantic Council (NAC), NATO'ssupreme political body. They contendedthat granting the request would be the equivalent of acknowledging that Iraq had impeded U.N. weaponsinspections, as yet unproven in the view of the threegovernments, and be a pretext for war. NATO Secretary General Robertson at that point invoked the "silenceprocedure," under which any membergovernment objecting to the request must send him a formal letter stating its opposition. The three governmentssent such a letter in the stated time frame,stymieing the U.S. request. Turkey itself then asked for consultations concerning its defense needs under ArticleIV of the North Atlantic Treaty. The United States asked that Turkey's request for assistance be discussed in the Defense Planning Committee (DPC), where France is not a member. TheGerman government was willing to grant the request for assistance to Turkey, and dropped its opposition. TheBelgian government, now isolated, dropped itsobjection. The DPC then granted the request for defense planning, which resulted in the deployment of AWACS,Patriot missiles, and other defensive systemsto protect Turkey. Consensus in the NAC is generally sought when allied governments must formulate policy on an important strategic issue. Examples include approval ofNATO's Strategic Concept (NATO's document that serves as a strategic guideline), relations with Partnership forPeace countries, the NATO budget,deployment of forces for peace operations, and invocation of Article V. Consensus is clearly differentiated from"unanimity," which NATO does not seek. Unanimity would require an actively stated vote in favor of a measure. Structure and Process. NATO has a civil and a military structure. The supreme political decision-makingbody, the North Atlantic Council (NAC), sits in Brussels, and is chaired by the Secretary General. Each of the 19member states has a representative on theNAC. Key proposals for military decisions are made by the Military Committee (MC). A senior European military officer chairs the Military Committee. The MChas 18 members because France withdrew from the alliance's integrated military structure in 1966. France sendsan observer, without a vote, to the MC. France has full representation on the NAC, however, as Paris did not withdraw from NATO's politicaldecision-making structure. The NAC has the authorityto approve all key MC documents. Normally, any government may have two opportunities to influence a major NATO decision. For example, the MC established a working group at the level ofcolonel to work out the deployment and responsibilities of NATO member state forces to be sent to Bosnia for peaceoperations in the 1990s. The 18representatives on the working group met for eight months, and eventually drafted a document that was approvedby the MC. The MC then sent the documentto the NAC's international staff. Ultimately, all 19 representatives on the NAC refined the document's language,and approved it. Reaching consensus is therefore a process in which member governments have ample opportunity to provide language to NATO documents and decisions thatreflect national governments' individual views. The North Atlantic Council (NAC). The NAC achieves consensus through a process in which nogovernment states its objection. A formal vote in which governments state their position is not taken. During theKosovo conflict, for example, it was clear toall governments that Greece was uncomfortable with a decision to go to war. NATO does not require a governmentto vote in favor of a conflict, but rather toobject explicitly if it opposes such a decision. Athens chose not to object, knowing its allies wished to take militaryaction against Serbia. In contrast toNATO, the EU seeks unanimity on key issues. Unanimity characterizes EU decision-making when, for example,new members are invited to join, or revisionsto the Union's governing treaties must be adopted. At NATO, the "silence procedure" may be used for any decision requiring a consensus. At times, the procedure allows governments in opposition to a measureto avoid confronting other allies around the table during a session of the NAC. The procedure can also providecover for a government from unwanted pressreporting that might characterize its policy as out of step with other allies. By not sending a letter to the SecretaryGeneral within a specified time period, agovernment can avoid the step of stating its explicit objection to a policy if it believes other allies are set on a courseof action. This procedure failed in theeffort to begin defense planning for Turkey when three governments were in opposition. The procedure can be moresuccessful if only one government is put inthe position of having to take the formal step of sending a letter of opposition to the Secretary General, and mayrefrain from doing so to avoid being isolated. NATO uses the same principle of consensus in the DPC, where 18 members make proposals on such matters as force structure. Normally, the DPC's proposalsare sent to the Military Committee or to the NAC for approval. When France withdrew from the MilitaryCommittee in 1966, it also surrendered its seat on theDPC. NATO in the past has made important preliminary decisions on military operations in the DPC. However,in 1992, when NATO decided to enforce thearms embargo in the Adriatic Sea against the countries of the disintegrating Yugoslavia, France wished to participatein the decision and to send forces as partof the operation. For this reason, NATO transferred the decision to the NAC, where France could play a role. Thispractice set a precedent for subsequentNATO military operations. The NAC made the decisions to establish SFOR, approve the plan for OperationAllied Force in Kosovo, and establish KFOR inthe conflict's aftermath, each time because France wished to participate in these operations. When France (andBelgium and Germany) objected in February2003 to military assistance to Turkey, however, the United States was instrumental in the maneuver to move outof the NAC and back to the DPC to approveAnkara's request for assistance under Article IV. The maneuver raised the question of whether the United States,and other allies, were attempting to avoid orweaken the principle of consensus. Within the U.S. government and in allied governments, there is varied support for preserving decision-making by consensus. Most senior U.S. officialsassociated with NATO affairs contend that they support the principle of consensus, although some acknowledgethat forging consensus in an era when NATOmay go out-of-area is likely to be difficult. Support for preserving the principle of consensus centers upon a desire to maintain political solidarity for controversial measures. In this view, the consent of19 sovereign governments, each taking an independent decision to work with other governments, is a formidableexpression of solidarity. At the same time,there can be political costs due to the sparring and the time involved in reaching consensus. NATO's decision togo to war against Serbia in 1999 was anexample of such an instance. Military action against Serbia had been postponed for a number of days, whilecivilians were losing their lives in Kosovo. Theallies first made an effort to achieve legitimization for the operation in the U.N., but did not submit the requisiteresolution when Russia signalled that it wouldcast a veto. The allies decided to debate in the NAC the issue of going to war without such a resolution, in the enddeciding that 19 governments consenting tothe use of military force supplied a measure of political legitimacy. Officials involved in that NAC debate say thatthe need for obtaining consensus outweighedthe need for acting quickly. The Kosovo conflict illustrated some of the difficulties involved in maintaining consensus. Some critics of management of the conflict, including someMembers of Congress, criticized the target-selection process. Press reports indicated that all governments in theNAC had to approve NATO's individualtargets for Serbia. France, in particular, was singled out in press reports for criticism for objecting to specifictargets. In fact, NATO was following a verydifferent procedure for target selection. Member governments, including the United States, wished to be carefulto avoid civilian casualties, particularly in theabsence of a U.N. resolution that might be cited to legitimize the ends used to compel the Milosevic governmentto cease ethnic cleansing. They made adecision before the conflict began, after an initial operational plan produced by the MC, to attack targets in threephases. Each phase marked an escalation overthe previous one; stepping up to the next phase - and not individual targets - required consent from the NAC. PhaseI targets were indisputably militarytargets, such as air defense systems, airfields, and troop concentrations, and there was strong agreement that thesemust be struck. Phase II targets wereinfrastructure, such as bridges and petroleum depots, that might serve both civilian and military usage, and weretherefore more controversial. Phase III targetswere "the more significant targets associated with Serb repression," such as police headquarters involved in ethniccleansing, often located in urban centers suchas Belgrade. According to then SACEUR General Wesley Clark, and to sources interviewed, it was the Pentagonand the White House, as well as the Britishgovernment, that above all raised barriers and sought delays before attacking Phase II and III targets, with Franceand other governments raising occasionalobjections. (2) The Kosovo conflict underscores the political pressure placed on the NAC in maintaining consensus when military action comes into play, and the fact that theFrench government has often been singled out when disagreements arise. Different governments place varyingdegrees of emphasis on civilian control of themilitary, and on the reactions of their own populations when there are civilian casualties. The United Statesgovernment tends to have more confidence in itsarmed forces in target selection and in making decisions on the battlefield than do most allied governments. Someallies, given the recent history of theirmilitaries stepping into political affairs or using excessive force against civilians, place greater restraints on theirarmed forces. In France, the effort by armyofficers to overthrow President de Gaulle's government in 1960-62, and in Germany, excesses of the Wehrmacht and the Gestapo in the Second World War, arewithin the memory of many leaders and populations, and affect how these governments seek to manage militaryconflict. The diversity of viewpoints in theNAC means that constant negotiation is necessary in providing authority to the SACEUR to plan and execute amilitary operation. Wrangling over precisephrasing of a document can be a means to provide clarity for decision-makers; in contrast, it can also be meant toprovide vagueness that gives political cover toa member government that may give its own interpretation to its populace about the purpose of a NATO decision. Altering or abandoning the principle of consensus at a moment when NATO may accept new members poses other problems. For candidate state governments,the prospect of such a change raises the question of whether the United States and other current members lackconfidence in the candidates to participate in thefull range of allied decision-making. Representatives of some of these governments also express displeasure withthe tendency of some Administration officialsto divide the continent into an "old" and "new" Europe, even if the characterization is meant to favor them. Sucha division suggests a possible marginalizationof France and Germany, and of an alliance where member states are set against each other, implicit for some in anyabandonment of the consensus principle. Some officials view any prospective effort by the United States to move away from the consensus principle as aversion of U.S. "unilateralism," in whichWashington might pressure weaker or small-state governments to follow its lead, an issue raised when the BushAdministration sought support of several alliedgovernments in the coalition against Iraq. The political complexities inherent in NAC and MC debates mean that there is no simple fix to improve NATO decision-making. At the same time, some U.S.officials believe that the growing necessity for out-of-area missions indicates a clear need to develop a new processto permit participation under NATOauspices by willing allies in such operations. (3) Some U.S. officials, without enthusiasm, suggest an EU model, where member states' votes are weighted, based on their populations. This form of "qualifiedmajority voting" (QMV) gives greater influence to the largest countries, but small states may still band together toblock an initiative. Critics of adopting suchan approach for NATO point out that the alliance is a mutual defense organization, where supreme national interestssuch as the survival of a country and thelives of a government's soldiers are at issue. In such circumstances, they believe that the EU's mechanistic approachto decision-making over less momentousissues is inappropriate for NATO. The EU is different in nature from NATO. The EU must grapple with issuesinvolving the sharing of national sovereignty ona wide range of issues. As a result, extensive deal-making has been part of the EU (earlier, the EuropeanCommunity) since its origins, but has not beenprevalent in NATO. Nonetheless, QMV in NATO could lead, as it often does in the EU, to faction-building orextended horse-trading. However, one system used in elements of EU decision-making is drawing interest from those in NATO who support coalitions of the willing and capable. Forissues that involve only selected governments, the EU has devised "committees of contributors." In this concept,governments that wish to participate in aproject receive general approval from a principal EU governing body to proceed among themselves, while the othergovernments take a general interest and aresponsibility that might involve oversight. An element of the concept involves "constructive abstention," in whichgovernments with interests not directlyaffected stand aside and permit action by those with interests that are directly in play. A "committee of contributors" in NATO might follow a similar outline, and might appeal especially to governments that are both NATO and EU members. Countries on the committee for a military operation, for example, would be those willing to contribute troops andother assets. The committee would formulatea general plan for operations, and submit it to the NAC for a "blessing." The NAC might allow the committee touse NATO assets, such as AWACS and theplanning staff. The NAC, in effect, would endorse the right of committee members to act in their own interests, butnot specifically endorse the operation itself. Committee members among themselves could then make key decisions, possibly based on consensus, such as howmuch authority to delegate to SACEUR forcontingency planning and target selection. The committee would keep the NAC informed on a regular basis. Shouldthe NATO Response Force (NRF),comprised of 25,000 troops, be fully developed for "expeditionary" operations beyond the Treaty area, "committeesof contributors" could be a means tostreamline decision-making and keep it within the ken of interested governments. Such committees could serve to avoid the recent maneuver of having to go to the DPC, since that step is effective only for sidelining France. France, after all,has been involved in virtually all key NATO military operations, and might in the future wish to participate inmissions. France's forces constitute a largecomponent of the Eurocorps, one of the high-value multinational military formations available to NATO. France,with Britain, has the only other continental"expeditionary" military able to serve in high-intensity conflicts. The "committees of contributors" might isolatesmall countries such as Belgium, which inrecent times has increasingly criticized NATO as a "toolbox" of U.S. policy, and opposed out-of-area operations,but has only minimal military capability tocontribute in any event. Some officials who have served at NATO make a contrary argument to the possible usefulness of "committees of contributors." They believe that smallcountries such as Belgium might insist that any out-of-area mission be decided by the NAC as a whole, since assets(AWACS, intelligence) being used wouldbelong to NATO as a whole, and would thus be assets for which, in part, each country pays. | This report provides a brief analysis of NATO's decision-making procedures, withseveral examples of how theallies have handled sensitive issues in the past. It describes the February 2003 dispute over providing NATO defenseplanning and equipment to Turkey, andanalyzes the debate over the decision-making process, including possible alterations of that process. This reportwill be periodically updated. See also CRS Report RS21354, The NATO Summit at Prague, 2002. |
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 knowingly recruiting, enticing, harboring, transporting, providing or obtaining another individual, in or affecting interstate or foreign commerce or within U.S. special maritime and territorial jurisdiction, with the knowledge that the individual would be used to engage in a commercial sex act either as child or through force, fraud or coercion. The proposed section would condemn profiting from such a venture as well. In either case, offenders would face imprisonment for any term of years not less than 15 years or for life (not less than 10 years if the child were 14 years of age or older). 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. 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. 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). It 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. 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. 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. Offenders would be punished by imprisonment for not more than 5 years. 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 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, 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. Under existing law, it is a federal crime punishable by imprisonment for not more than 20 years to obstruct enforcement of the peonage prohibition. 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. 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. Unlike the proposed amendment, present law does 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. 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. It would permit the Attorney General to return property confiscated under other laws to trafficking victims. 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. 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). Paragraph 214(b)(1) of Section 214 would amend the Victims of Crime Act of 1984. 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. 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. 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. 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. 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. | 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 the women and children most often the 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. 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. This is an abridged version of CRS Report RL34323, William Wilberforce Trafficking Victims Protection Reauthorization Act of 2007 (H.R. 3887 as Passed by the House): Criminal Law Provisions, by [author name scrubbed] without the footnotes, quotations, or citations to authority found in the longer report. |
The American Jobs Creation Act of 2004 ( P.L. 108-357 ; the Jobs Act) contained a number of provisions related to the taxation of multi-national corporations. Among these provisions were more generous rules for multinationals to use in allocating interest expense for purposes of the U.S. foreign tax credit. This rule is referred to as the "worldwide" allocation of interest and it is the subject of this report. The act's changes were due to take effect for tax years beginning after December 31, 2008. The implementation was, subsequently, delayed until tax years beginning after December 31, 2010, by P.L. 110-289 . Other proposals introduced in the 110 th Congress, including H.R. 5720 , H.R. 6049 , H.R. 3920 , and H.R. 7060 , would have also delayed or repealed the worldwide interest allocation rule. In the 111 th Congress, the Worker, Homeownership, and Business Assistance Act of 2009, P.L. 111-92 , delayed implementation of the worldwide allocation rules to 2018, while the Hiring Incentives To Restore Employment Act, P.L. 111-147 , further delayed implementation to 2021. Another proposal in the 111 th Congress, H.R. 3962 , the Affordable Healthcare for America Act of 2009, would repeal the worldwide allocation rule. The Jobs Act's interest allocation provision was designed to correct what some argue was an imperfection in the design of the foreign tax credit rules. In general, the tax code places a limit on the foreign tax credit. To calculate the limit, firms are required to separate interest and other expenses according to source—foreign or domestic. Because of effects detailed below, the more interest that is assigned to domestic sources, the more foreign tax credits a firm can claim and the lower its U.S. tax liability. Some believed that the prior law's approach unduly left taxpayers exposed to double taxation of foreign-source income. The Jobs Act addressed this perceived flaw. The analysis here indicates that worldwide allocation rules, while losing revenue, would likely be better aligned with the objective of the foreign tax credit. Tax planning techniques could undermine this objective—and lead to increased revenue loss and efficiency costs. The act contained another relevant modification to the interest allocation rules, that would increase a firm's creditable taxes. Specifically, the provision expands the subgroup election for banks to include other financial intermediaries, including insurance companies—which allows for the separate calculation of interest allocation. This provision could insulate some firms from a portion of the interest allocation rules, and it is at odds with the theory underlying the act's other provisions. The United States—in principle—taxes its resident corporations and individuals on their worldwide income, regardless of where it is earned, under the residence rule. The foreign tax credit and deferral are the key structural pieces of the U.S. taxation of foreign-source income. The foreign tax credit provisions generally permit U.S. taxpayers to credit foreign taxes they pay against U.S. taxes they would otherwise owe—on a dollar-for-dollar basis. For example, a U.S. corporation chartered in North Dakota is potentially subject to U.S. tax on income it earns outside the United States. Concurrently, however, the foreign countries where the income is earned generally tax that income, even if it is earned by a foreign (U.S. in this case) investor, under the source principle. In the absence of the foreign tax credit, this income would potentially face double-taxation and possibly very high tax rates. The foreign tax credit, however, generally alleviates the possibility of double-taxation of foreign-source income. With the credit, the U.S. concedes that the country where income is earned has the primary right to tax that income and collect the tax revenue that it generates. This results in the U.S. collecting only the U.S. tax due after paying foreign taxes—if positive. As such, the foreign tax credit helps to define the U.S. tax jurisdiction and it is not a tax expenditure favoring selected groups. While theoretically straight-forward, overlapping jurisdictions introduce numerous complications. To better understand interest allocation rules, it is useful to first examine two key structural pieces: deferral and the foreign tax credit limitation. As noted above, deferral is one of the key structural pieces of the U.S. taxation of foreign-source income. U.S.-owned firms can conduct their foreign operations through foreign chartered subsidiaries. Unlike U.S. chartered firms, these foreign-chartered corporations are generally taxed only on income earned in the United States. Thus, where a U.S. parent firm invests abroad through a foreign chartered subsidiary, U.S. taxes do not apply to its foreign income, as long as the income is reinvested abroad. U.S. taxes are, in other words, deferred or postponed. Because of discounting, firms view the cost of taxes paid in the future as less than an identical amount paid in the present. U.S. taxes do apply when the income is repatriated to the U.S. parent firm as intra-firm dividends. Foreign tax credits can be claimed with respect to U.S. tax on dividends received from foreign subsidiaries. In addition to the direct credit, "indirect" foreign tax credits can be claimed by a U.S. parent firm for foreign taxes paid by the subsidiary during the time the income was tax-deferred. As noted above, the U.S. concedes that the country where income is earned has the primary right to tax that income and collect the tax revenue that it generates. The U.S. retains, however, the primary right to tax U.S. source-income. In order to protect its domestic tax base, the U.S. imposes a limitation on the foreign tax credit. In effect, the tax code only allows foreign tax credits to offset the U.S. tax on foreign source-income. Any foreign taxes paid in excess of the limit become "excess credits" and can be carried back one year and carried forward up to 10 years. The foreign tax credit and its mechanics can be understood clearly by looking at the tax rate on foreign income that is produced by the foreign tax credit. With the foreign tax credit and its limitations, a U.S. investor pays total taxes (U.S. plus foreign taxes) on foreign income at an average rate equal to the higher of the U.S. pre-credit tax rate or the foreign tax rate. For example, if a firm pays U.S. tax at a 35% rate and the foreign tax rate is 10%, its total tax on foreign income would consist of the 10% foreign tax plus the 25% of U.S. tax that remains after the 10% offset by the foreign tax credit. If, instead, the foreign tax rate is 50%, the firm could offset all of its U.S. tax on foreign income with the foreign tax credit, and would pay only foreign taxes—at a 50% rate. If a firm is in an excess credit position—its foreign taxes exceed U.S. tax on foreign-source income—the sourcing of income and deductions matters. Under the foreign tax credit limitation, maximum creditable foreign taxes are limited to the amount of U.S. pre-credit tax falling on foreign source income rather than domestic-source income. It follows that if, for example, an item of revenue is determined to have a foreign rather than U.S. source, then the maximum foreign tax credit is increased because foreign income and the share of U.S. pre-credit tax falling on foreign income is increased. The reverse is true with deductions; a deduction allocated to foreign rather than U.S. sources reduces foreign income and U.S. pre-credit tax on foreign income; it reduces creditable foreign taxes and increases after-credit U.S. tax. Whether an expense is deducted from foreign or U.S. income matters for tax purposes. The tax code, therefore, contains rules for allocating deductions between foreign and U.S. sources. In the case of interest expense, the rules generally are based on the approach that money is fungible and that interest expense is properly attributable to all business activities and property of a taxpayer, regardless of any specific purpose for incurring an obligation on which interest is paid. For example, a U.S. parent company might borrow in the U.S. and use the funds to increase its equity stake in a foreign subsidiary, which uses those borrowed funds to make its own investments. Conversely, a U.S. firm could borrow domestically to finance domestic investment—investment that might otherwise have been financed through repatriated earnings. In this case, domestic borrowing may support both domestic and foreign investment. While it is beyond the scope of this report to determine if the fungibility of debt is a reasonable assumption, except to recognize that it underlies both the current interest allocation rules and those enacted by the Jobs Act, some facts on each side are worth noting. First, in favor of fungibility, corporations are legal entities, and not economic ones. As a result, corporate boundaries can be easily manipulated for financial gain. Conversely, the existence of cross-jurisdictional interest rate differentials suggest that fungibility may not hold between all jurisdictions. Current law applies the fungibility principle in a manner sometimes referred to as "waters edge" allocation. Under this system, foreign subsidiaries are not explicitly included in the allocation. This has two implications for the allocation formula. First, only a domestic parent's equity stake in its foreign subsidiary is counted as an asset—excluding the foreign subsidiary's assets financed by debt. The parent's assets, in contrast, are all included in the calculation—whether financed by equity or debt. Secondly, the subsidiary's interest expense is automatically allocated to foreign sources. This occurs since the subsidiary's interest expense reduces dividend payments to the parent, which are all allocated to foreign sources. An alternative to the "waters edge" allocation is a "worldwide" allocation regime, such as enacted by the Jobs Act. Under a "worldwide" allocation, the borrowing of foreign subsidiaries would be taken into account. This change would have two effects, which combined, increase the foreign tax credit limit of multinationals and therefore decrease after-credit U.S. taxes. The first effect involves including interest of the foreign subsidiary. By allocating a portion of foreign debt to domestic use, this reduces foreign source deductions, increases foreign source income, increases the foreign tax credit limit and reduces U.S. tax liability. The second effect involves counting foreign subsidiary, debt financed assets as part of the worldwide asset base of the parent company. Taken in isolation, this would allocate more interest to foreign sources and raise U.S. tax liability. Mathematically, however, the first effect dominates—so tax liability is reduced under worldwide allocation. One can argue that worldwide allocation more accurately limits the foreign tax credit to income that is attributable to a foreign source, as long as borrowed funds are fungible. Briefly, this perspective results as follows: if it is true that borrowing in one location finances investment in all locations equally; then it is true that borrowing domestically or abroad should not alter the share of income earned domestically or abroad. Remembering that the purpose of the foreign tax credit limitation is to protect the U.S. tax base, while minimizing double-taxation of foreign-source income, it then follows that location of borrowing should not affect the maximum creditable foreign taxes. Under current law, the limitation can be affected by shifting the borrowing location. While worldwide allocation would achieve a more accurate foreign tax credit limitation, there are also some complications and disadvantages to such an approach, including administrative complications, tax planning complications, and increases in investment distortions (even though U.S. revenue is lost). Also, if interest rates vary across jurisdictions, it isn't clear whether fungibility of borrowing is pervasive and that worldwide allocation of interest is completely appropriate to achieving the goal of limiting the foreign tax credit to income that is attributable to a foreign source. One obvious disadvantage of worldwide allocation is that it would require foreign subsidiaries, which are not always wholly owned by U.S. firms, to classify their assets and borrowing for U.S. tax purposes as having a U.S. or foreign location. This change would complicate both IRS tax administration and firm compliance. A second issue with worldwide allocation is the possibility that firms could artificially increase their gross foreign assets to eliminate any interest allocation. Under worldwide allocation, there are no decreases in the foreign tax credit limit if the foreign subsidiary has a debt to asset ratio as high or higher than the parent company. However, if firms could borrow and redeposit funds, they could increase their debt to gross asset ratios. For example, suppose a parent company has $100 million in assets and its subsidiary also has $100 million in assets, with only $50 million in debt attributable to the parent company. Under both current and pending law, half of the debt ($25 million) would be allocated to the subsidiary. This allocation is consistent with the worldwide fungibility of debt. Suppose, however, that the subsidiary could borrow $100 million and redeposit the $100 million in a bank account, then no allocation would occur. The subsidiary would now have $200 million in gross assets, two-thirds of the total, gross debt would be $150 million and $50 million would be allocated to domestic uses. The possibility of borrowing is one reason to restrain the allocation to a non-negative one; otherwise this technique could be used, at the extreme, to further reduce U.S. tax liability and to render the foreign tax credit limit meaningless. While this discussion outlines a possible tax planning technique; firms may not choose to use it and that transaction costs could reduce the value of the technique. It does illustrate that at an extreme, tax planning could eliminate the allocation rules entirely. It is possible that other methods could be used to prevent such abuses, but they would likely be complex and add to the administrative complications, mentioned above. Another worldwide allocation issue concerns economic efficiency. As noted above, the purpose of the foreign tax credit limit is not to ensure the efficient allocation of resources; rather, it is concerned with protecting the U.S. tax base. The impact of worldwide allocation on the ability of the economy to efficiently allocate investment and borrowing among different locations, however, can be viewed as one cost of fine-tuning the foreign tax credit limitation. In some respects, worldwide allocation might create greater distortions in the allocation of debt and equity capital, relative to the non-tax allocation. First, worldwide allocation magnifies tax-based incentives to borrow abroad—an important consideration if debt is not fungible, as assumed. Allocating interest on the worldwide basis of aggregate capital stock, for purposes of the foreign tax credit limit, effectively reduces borrowing in the U.S. and increases it abroad. In effect, any savings can be calculated by multiplying the foreign tax rate times the interest shifted abroad. For example, if the interest rate were 10 percent and the foreign tax rate 40 percent, a $100 dollar shift in debt from the U.S. to a foreign locale would save the company $4. If there were no allocation rules, however, then the shift in debt abroad would lead to a larger interest deduction abroad, but a smaller foreign tax credit limit, because the flow of dividends is net of interest costs. In this case, the benefit of shifting is the difference in the tax rates. Continuing our example, the foreign tax rate is 40 percent and the U.S. tax rate is 35 percent, so that the savings is only $0.50 (0.05 times the interest). The current system is in between these two cases; the allocation of domestic interest does mean that a shift in the debt abroad has an effect in reducing the foreign tax credit limitation, but not the effect that would occur with no allocation rules. Similarly, the degree to which equity investment is discouraged in the high tax countries (a general efficiency problem with international taxation), while minimized when there is no allocation rule at all, is likely to be larger with the worldwide allocation system than with the current allocation system. The efficiency effects of shifting both debt and equity abroad simultaneously would be more complex and depend upon the level of debt by the parent firm and other factors. In some cases, the current allocation rules cause more distortions and in some cases they reduce distortions. Overall, the best system for minimizing the distortions in both the allocation of borrowing and equity investment is to have no allocation rules at all. Nevertheless, if the parent tends to do most of the borrowing (which may occur for a variety of non-tax reasons), having no allocation rules could cause a significant loss of U.S. revenue compared to both the current system and to the worldwide approach. That is, some efficiency cost is necessary to protect the U.S. tax base. In both cases, however, partial allocation rules are less distortionary than full allocation rules. The rules are less clear with respect to investment shifts that occur simultaneously with debt shift. These issues become more complicated when considering multiple country investments. Since firms are generally not required to calculate separate foreign tax credit limits for different countries, firms can use excess credits from one country—a high tax country—to shelter income from a low tax country from U.S. tax. Accordingly, even if a firm is in an excess credit position and makes interest allocations, it will still be faced with an incentive to invest in low-tax countries. Moreover, it is difficult to make precise judgements about economic efficiency when the tax system is not efficient in other ways, such as with deferral. Nevertheless it is interesting that there are cases where a change in the allocation rules that lowers taxes of multinational corporations can magnify distortions. A final complication relating to interest allocation rules is the possibility of interest rate differentials. In a perfect world with completely mobile capital, such interest rate differentials would not occur. However, if the domestic savers prefer investing in particular locations or there are differences in risk across locations, such differentials may arise. In particular, if foreign interest rates are higher than U.S. rates, worldwide allocation rules will have a larger effect increasing the foreign tax credit limit than would be the case where interest rates are identical. It is difficult to ascertain how these interest rate differentials should influence the allocation process. Certainly, the presence of interest rate differentials suggests that the very presumption of fungibility is in question, and also suggests that the presumed standard that justifies worldwide allocation—equal debt-to-equity ratios—may not be the case. While beyond the scope of this paper, this area may need further exploration. Along with allowing firms to allocate interest expense on the basis of worldwide groups, the Jobs Act contained an additional related change. Current law contains a subgroup election for firms that are banks. The act expands this election to a wider range of financial intermediaries, including finance companies and insurance firms. Such an election could, potentially, reduce the amount of interest a worldwide group is required to allocate to foreign sources. For example, a firm that has a financial subsidiary which conducts genuine financial intermediation could arrange to have a portion of the non-financial part of the firms' borrowing undertaken by the subsidiary. If the financial subsidiary's assets are principally located in the U.S., borrowing through the subsidiary could be insulated from allocation rules. More directly stated, firms could distribute their borrowing among related subsidiaries to minimize foreign allocations of interest. The act does contain anti-abuse provisions whose apparent intent is to limit such arrangements. Nonetheless, it remains to be seen if the anti-abuse provisions will be effective in limiting such arrangements. As mentioned above, the Jobs Act contains a number of rules intended to limit the extent to which the expansion of the bank group election can be used to avoid interest allocation. For example, the act would limit the extent to which a subgroup member can increase the portion of its earnings it pays to the parent as dividends. This rule is, presumably, designed to limit the means by which a subgroup can borrow and subsequently transmit debt to its parent. If the subgroup is new, however, the rules for calculating average dividends are confined to the subgroups' years in existence, which may provide a mechanism for avoiding the limitation. In short, the act's subgroup election provision appears to present potential opportunities for firms to avoid the allocation of interest according to the fungibility principle. Unlike the act's other changes in the allocation rules (discussed above), this feature of the bill appears to move the system away from the "theoretically pure" foreign tax credit limitation under the assumption of fungibility. The analysis in this report suggests that there are benefits and disadvantages to worldwide allocation of interest enacted by the Jobs Act. If debt is fungible, worldwide allocation is the most accurate method of ensuring that the U.S. foreign tax credit is used for its intended purpose: allowing the foreign tax credit to offset the full share of U.S. pre-credit tax that falls on foreign source income. Absent additional rules, however, opportunities for tax planning may limit the achievement of this objective. Also, like the foreign tax credit limit itself, allocation rules tend to contribute to the distortions that discourage equity investment abroad. Adopting worldwide allocation rules could, in several ways, increase these distortions relative to current law. While the distortions created by current law can be viewed as a cost of collecting taxes—since they increase U.S. revenue—and potential increased distortion associated with worldwide rules cannot since they decrease U.S. revenue. Finally, the subgroup election provision in the Jobs Act does not appear consistent with the general objective of the foreign tax credit limit or the act's own worldwide allocation regime. This subgroup election may permit firms to reduce the current domestic interest allocation costs, while achieving foreign interest allocation benefits. This appendix derives the allocation rules that most accurately support the foreign tax credit limitation—the rules that most accurately limit creditable foreign taxes to U.S. tax on foreign-source income. While this ideal rule is one under which the location of borrowing does not affect the foreign tax credit limit for U.S. tax purposes, taxpayers could still change their overall (that is, foreign and U.S. combined) tax liability by switching the location of borrowing. The appendix continues by showing how the incentive to borrow abroad is affected by allocation rules. The discussion concludes with an analysis of how the allocation rules affect investment. Deriving Accurate Allocation Rules The shape that accurate allocation rules take depends, crucially, upon the assumption of debt fungibility. As noted in the text, it is unclear whether fungibility accurately represents real world experiences. Since both current and enacted law both make this assumption, however, fungibility will be assumed—that debt supports investment in all locations, regardless of the borrowing locale. With the assumption of fungibility, a shift in the location of borrowing should not shift the location of investment. Further, since investment produces income, a shift in the location of borrowing should not alter the proportion of income earned at home or abroad. Thus, for the foreign tax credit limit to be accurate, a firm should not be able to affect the limit by shifting its location of borrowing. The Basic Limitation without Allocation of Interest Assume a multinational's U.S. tax liability can be expressed as: (1) U.S. Tax = t(Y + D/(1 - t f ) - iB d ) - tD/(1 - t f ); where t is the U.S. tax rate, Y is U.S.-source income before interest deductions, D is dividends from a foreign subsidiary, t f is the foreign tax rate, i is the interest rate, and B d is domestic borrowing. The equation's first term represents the tax on worldwide income, with dividends grossed up to a pre-foreign tax basis, while the second term is the foreign tax credit, which is limited to the U.S. tax on grossed up dividends. The foreign tax credit is also limited to actual foreign taxes paid (or deemed paid, in the case of dividends). As a result, changing the base of the foreign tax credit only has an effect when a company is in an "excess credit" position—where the foreign tax rate is greater than the U.S. rate. For this analysis, foreign subsidiary dividends are defined in terms of foreign earnings and other elements as: (2) Y f = D + R + iB f + tf(Y f - iB f ); where Y f is foreign earnings before deducting interest, R is retained earnings, and B f is borrowing by the foreign subsidiary. In all cases, the amounts would be scaled back for a subsidiary that isn't wholly owned (e.g., if a subsidiary is 90 percent owned, then all three values would be multiplied by 0.9). Foreign earnings are the sum of dividends, retained earnings, interest payments, and foreign taxes. Therefore: (3) D/(1 - t f ) = Y f - R/(1 - tf) - iB f . Thus, equation (1) can be rewritten: (4) U.S. Tax - t(Y + Y f - R/(1 - t f ) - iB f - iB d ) - t(Y f - R/(1 - t f ) - iB f ) . For a firm in an excess credit position, the limitation, L, is the last term: (5) L = t(Y f - R/(1 - t f ) - iB f ) . In this world, without allocation rules that require the allocation of domestic interest to foreign sources, the taxpayer could increase the limitation—and reduce their taxes—by shifting borrowing to their subsidiary (by reducing iB f and increasing iB d by equal amounts). Clearly, if fungibility is assumed, requiring no allocation rules does not result in an effective limitation. Adjusting for the Fungibility of Borrowing: The Ideal For the limitation to be unaffected by the location of borrowing, geographic-specific borrowing cannot be a parameter in equation (5). That is, neither B f nor B d can appear in the equation. This condition is satisfied, incompletely, by replacing the term iB f in the equation with iB T . In this formulation, the limitation could be unaffected by the borrowing location with an allocation rule allocating all borrowing costs to foreign income, or, alternatively, to domestic income. Clearly, this is at odds with the assumption of fungibility. That is, if a firm has both foreign and domestic investment supported by borrowing, some portion of the interest on total borrowing must be allocated to foreign sources and that proportion must be independent of the borrowing locale. Thus, assuming fungibility, an accurate limitation can be written as: (6) L = t(Y f - R/(1 - t f ) - iAB T ); where A is the portion of interest allocated to foreign sources. Fungibility requires that "A" cannot be an arbitrarily chosen fraction (50%, for example), and that only the location of assets defines "A". Thus: (7) A = K f /K T . The ideal limitation can, therefore, be defined as: (8) L* = t(Y f - R/(1 - t f ) - i((K f /K T )B T )). Next, we compare the current law's allocation and the Jobs Act's rules to this ideal formula. Adjusting for the Fungibility of Borrowing: Current Law and the Jobs Act As noted in the text, current law requires part of domestic borrowing to be allocated to foreign sources. However, because the subsidiary's own interest payments reduce repatriated earnings and not domestic-source income, all the subsidiary's borrowing costs are automatically allocated to foreign sources. Thus the parameter B T in the ideal limitation, equation (8), above, is replaced by B d . In addition, not all the subsidiaries' assets are included in the allocation rule, A—only the parent's equity stake in the subsidiary is included. Thus, (9) A = (K f - B f )/(K T - B f ) and (10) L = t(Y f - R/(1 - t f ) - iB f - i((K f - B f )/(K T - B F ))B d ), and since B d = B T - B f , (11) L = t(Y f - R/(1 - t f ) - iB f - i((K f - B f )/(K T - B F ))(B T - B f )). Given that the limitation is, clearly, dependent on the location of borrowing—i.e. the respective values of B f and B d , current law violates the principle of fungibility. That is, a taxpayer can increase or decrease the limitation by shifting the borrowing location. While a full discussion of this topic is in the following section, below, note for now that dL/dB f > 0 and that a taxpayer can increase their limitation by shifting borrowing from domestic to foreign locations. Given current law violates the principle of fungibility, let's turn to the JOBS Act's rules. As noted in the text, all assets of the subsidiary are included in the allocation formula. Thus, equation (7) is unchanged. Additionally, the interest expense of the subsidiary is also subject to allocation—both B d , as in equation (9), and B f are multiplied by A. This can be accomplished by allocating part of domestic interest to foreign sources and part of foreign interest to domestic sources—since foreign borrowing has already been netted out of the dividend. Thus, the limitation equation can be expressed as: (12) L = t(Y f - R/(1 - t f ) - iB f - iB d (K f /K T ) + iB f (K d /K T )). This simplifies to: (13) L = L* = t(Y f - R/(1 - t f ) - i((K f /K T )B T )), which is the ideal limitation formula, equation (8). As it is consistent with fungibility, the value of the limitation is independent of the location of borrowing, and it is proportional to the location of investment. Effects on Borrowing Location In order to examine the effects of tax regimes on borrowing locale, we depart from the base model by adding foreign taxes. To simplify the analysis, we assume a single tax rate applies to both dividends and retained earnings. This analysis assumes that foreign tax authorities do not make allocation adjustments. Thus the total tax paid by a company can be expressed as: (14) Total Tax = t(Y + Y f - R/(1 - t f ) - iB T ) - t(Y f - R/((1-t f ) - iB f - i((B T - B f )(K f - B f )/(K T - B f )) + t f (Y f - iB f ) where t f is the foreign tax rate. This rule can be contrasted with the circumstances where there is no allocation rule in place: (15) Total Tax = t(Y + Y f - R/(1 - t f ) - iB T ) - t(Y f - R/((1-t f ) - iB f ) + t f (Y f - iB f ) and the worldwide allocation rule, contained in the Jobs Act: (16) Total Tax = t(Y + Y f - R/(1 - t f ) - iB T ) - t(Y f - R/((1-t f ) - i(K f /K T )B T ) + t f (Y f - iB f ). Totally differentiating equation (14) gives us the effect of shifting a small amount of debt from domestic to foreign use, under current law, as: (17) Change in Tax = -t f i + ti(K T - K f )* (K T - B T ) * Change in Foreign Debt (K T - B f ) (K T - B f ). When there is no allocation rule, the result is: (18) Change in Tax = (-t f i + ti) * Change in Foreign Debt, and finally, with worldwide allocation: (19) Change in Tax = -t f i * Change in Foreign Debt. Note that the largest incentive to borrow abroad occurs with the worldwide allocation, and the smallest incentive occurs with no allocation rules. Without allocation rules, the savings from shifting debt abroad is the difference between the tax savings from the foreign deduction and the tax savings from the domestic deduction. With worldwide allocation, worldwide interest is allocated the same way regardless of where it originates, so that the only effects that multiply the expression ti, each one less than one, that dilute but do not eliminate the effect of the foreign tax credit limit. The first term is the direct effect from allocating domestic interest and the second is the effect of using net rather than gross foreign assets in the allocation formula. Effects on Equity Investment Next, let us consider the effect of allocation rules on equity investment. To do so, we change the notation slightly to reflect the idea that gross income is the return on capital multiplied by the capital stock. Under current law, the total tax of a firm can be expressed as: (20) Total Tax = t(rK d + r f K f - R/(1 - t f ) - iB T ) - t(r f K f - R/(1 - t f ) - iB f -i(B T - B f )(K f - B f )/(K T - B f )) + t f (r f K f - iB f ) where r is the return on U.S. capital and r f is the return to foreign capital, both on a before-tax basis. This rule can be contrasted with the circumstances where there is no allocation rule at all: (21) Total Tax = t(rK d + r f K f - R/(1 - t f ) - iB T ) - t(r f K f - R/(1 - t f ) - iB f ) + t f (r f K f - iB f ) and the Jobs Act rule, with worldwide allocation: (22) Total Tax = t(rK d + r f K f - R/(1 - t f ) - iB T ) - t(r f K f - R/(1 - t f ) - (iB T K f /K T )) + t f (r f K f - iB f ). In order to isolate the tax effect, consider the case where the pretax returns are equal—in practice they will not equal after the consideration of tax rules. Further, consider the case where very small, but slightly, different taxes are added to this, previously, case without taxes. Next, we totally differentiating equations (20)-(22) with respect to K f , which holds the firm's total capital stock fixed. The change in the tax liability under current law with a reallocation of capital is: (23) Change in Tax = ((t f - t)r + ti( B d )) * Change in Foreign Capital (K T - B f *). When there are no allocation rules: (24) Change in Tax = (t f - t)r * Change in Foreign Capital, and under worldwide allocation rules: (25) Change in Tax = ((t f - t) + ti B T ) * Change in Foreign Capital. K T In all three cases, the tax systems discourage investment abroad, due to the high tax country. Allocation rules magnify this effect because the adjustment to the foreign tax credit limit increases with larger shares of the capital stock located abroad. In this case, however, the worldwide allocation rule will further discourage investment abroad because of a more powerful effect on the allocation rule. As a result, worldwide allocation is likely to be less efficient than domestic interest allocation with respect to disincentives for equity investment. Effects on Investment Financed by Debt and Equity Finally, we consider the effects on investment abroad that are financed by both debt and equity. Assume that the debt to asset ratio of the subsidiary is fixed, and that the total assets and debt of the parent and subsidiary are also fixed. To consider the effects on equity investment, we again adjust our notation to reflect idea that gross income is the return on capital multiplied by the capital stock. The equations from the previous section are modified to allow borrowing to change when the capital stock is altered. In examining the change in taxes for a given change in foreign assets, the tax effects of the change in foreign debt are incorporated. It is assumed that B f bears a constant relationship of K f . If the initial ratio of foreign debt to foreign assets is defined as the constant a, then B f - aK f , and a change in B f is equal to a times the change in K f . That assumption, along with the preceding assumption, allows the following derivations. Under current law the effect of the change in tax can be expressed as: (26) Change in Tax = ((t f - t)® - iB f /K f + ti [(B T - B f )/(K T - B f )][(-tiB f )/(K f )] [((K T - K f )/(K T - B f )) + ((K T - K f )(B T - B f ))/(K T - B F ) 2 ] * Change in Foreign Capital, without an allocation rule: (27) Change in Tax = (t f - t)® - iB f /K f ) * Change in Foreign Capital, and with worldwide allocation: (28) Change in Tax = (t f - t)® - iB f /K f ) + ti[(B T /K T ) - (B f /K f )] * Change in Foreign Capital. Again, in all three cases, the tax systems discourage investment abroad, due to the high tax country, although this effect is moderated by the deduction for debt financed investment. The worldwide allocation rule—when debt to asset ratios are lower abroad than in the United States—would discourage investment to a lesser amount than equity investment. This moderation of effect results from a small allocation being made as some of the U.S. interest is shifted abroad. Since the worldwide allocation rule would not apply when foreign debt to equity ratios are higher, the worldwide allocation rule would either further discourage investment abroad or have no effect. In contrast, the current allocation rule may either encourage or discourage investment abroad. The first term is unchanged from the previous section, and reflects the effect of allocating more existing domestic interest abroad as the capital stock increases. The second term reflects the fact that some interest has shifted abroad and would not be allocated. If domestic debt is small relative to foreign debt, then the current allocation rule would, simultaneously, raise U.S. revenue and discourage foreign investment in high tax jurisdictions. | The foreign tax credit alleviates the double-taxation that would result if U.S. investors' overseas income were to be taxed by both the United States and a foreign country. U.S. taxpayers credit foreign taxes paid against U.S. taxes they would otherwise owe, and in doing so concede that the country where income is earned has the primary right to tax that income. But the United States retains the primary right to tax U.S.-source income, placing a limit on the foreign tax credit: foreign taxes can only offset the part of a U.S. taxpayer's U.S. tax that falls on foreign source income. It is this limit to which the American Jobs Creation Act of 2004 (P.L. 108-357, Jobs Act) applied. To calculate the limit, a firm separates its revenue and costs, for tax purposes, into those having a foreign source and those having a U.S. source. Foreign taxes can offset U.S. tax on revenue "sourced" abroad; in effect, foreign-source income is exempt from U.S. tax for firms whose foreign tax credits exceed the limit (firms with "excess credits"). But because deductions allocated abroad reduce U.S. tax, the effect is the same as if deductions allocated to foreign sources cannot be claimed for U.S. tax purposes. If a U.S. firm has foreign investments, current law requires at least part of the U.S. interest to be allocated to foreign sources based on the theory that debt is fungible—that regardless of where funds are borrowed, they support a firm's worldwide investment. But multinational firms have argued that if part of domestic interest is allocated abroad, part of foreign interest should be allocated to the United States, which would reduce U.S. tax. (Some critics have suggested, however, that granting multinationals tax benefits through interest allocation revisions should be accompanied by restrictions on the benefit of deferral, which allows taxes.) This worldwide allocation rule was adopted in the Jobs Act, but has not yet been implemented. The Jobs Act called for implementation starting in 2009, while P.L. 110-289 subsequently delayed implementation until 2011. In the 111th Congress, the Worker, Homeownership, and Business Assistance Act of 2009, P.L. 111-92, delayed implementation of the worldwide allocation rules to 2018, while the Hiring Incentives To Restore Employment Act, P.L. 111-147, further delayed implementation to 2021. Another proposal in the 111th Congress, H.R. 3962, the Affordable Healthcare for America Act of 2009, would repeal the worldwide allocation rule. The current law's interest allocation rules are likely imperfectly structured to achieve the objective of the foreign tax credit limit and worldwide allocation of interest as enacted by the Jobs Act, while losing revenue, would probably be more consistent with the basic objective of the foreign tax credit limit. Tax planning techniques, however, could undermine this objective and cause further revenue loss. And, like the foreign tax credit limit itself, allocation rules contribute to tax distortions which may be heightened with worldwide allocation. Further, an expansion of the bank "subgroup" elections contained in the Jobs Act may not be consistent with the general objective of worldwide allocation of interest. Although the Jobs Act contains anti-abuse rules, these subgroup elections may permit firms to avoid the impact of the interest allocation rules. This report will be updated as legislative events warrant. |
Congress passed the Occupational Safety and Health Act of 1970 ("OSH Act" or "act") to "assure so far as possible every working man and woman in the Nation safe and healthful working conditions and to preserve our human resources …" In the years leading up to the OSH Act, approximately 14,500 workers died annually from work-related injuries, and the number of Americans dying from work-related injuries between 1966 and 1970 exceeded the number of Americans killed in the Vietnam War during that period. Additionally, work-related injuries disabled approximately 2.2 million Americans each year. Congress therefore found existing health and safety standards inadequate at protecting workers and passed the OSH Act, whereby it sought a "comprehensive, nationwide approach" to occupational health and safety. The OSH Act obligated the Secretary of Labor to protect occupational safety and health as required by the act. However, the act also created the Assistant Secretary of Labor for Occupational Safety and Health, and thus the Occupational Safety and Health Administration ("OSHA"), to whom the Secretary of Labor has delegated responsibility for his obligations under the act. The OSH Act also created the Occupational Safety and Health Review Commission ("OSHRC") —an adjudicatory agency that is independent of the Department of Labor and therefore OSHA—that is tasked with reviewing OSHA enforcement actions (i.e., citations and penalties). The OSH Act contains express limitations on its applicability. For example, Section 4(b)(1) of the act provides that the act does not apply "to working conditions of employees with respect to which other federal agencies … exercise statutory authority" over occupational safety and health regulations and standards. Congress apparently intended this language to prevent regulatory inefficiency by precluding OSHA from duplicating worker safety efforts in areas already regulated by other agencies. To that end, health and safety regulations of other agencies that apply to a workplace hazard preempt OSHA's regulations regarding that hazard. The OSH Act further expressly limits its applicability by allowing states to control occupational safety and health regulation through state plans. If OSHA approves of a state plan, which requires, among other things, that the plan provide health and safety protection that is at least as adequate as the protections provided by OSHA, then the state plan requirements, and not OSHA's standards and regulations, will apply. Finally, the OSH Act applies only to employment performed in U.S. states and territories, generally does not apply to federal, state, or local government employment, and only applies to employers with employees (i.e., it does not apply to self-employed people). The OSH Act contains two primary enforcement provisions, each of which furnishes a unique obligation upon employers. First, Section 5(a)(1) of the act, the so-called "General Duty Clause," requires all employers, regardless of industry, to provide workplaces that are free of potentially harmful hazards. Second, the act mandates employer compliance with OSHA's workplace safety standards, some of which are industry specific. The General Duty Clause and OSHA's workplace safety standards are treated the same for purposes of complaints, inspections, and citations. That is, employers are equally bound to comply with the General Duty Clause and applicable OSHA standards and both are similarly enforced through complaints, inspections, and citations. OSHA bears the burden of showing that an employer has violated the General Duty Clause or an OSHA standard by a preponderance of the evidence. Additionally, employers cannot be held liable for violations of the General Duty Clause or an OSHA standard unless they had actual or constructive knowledge of the violation's existence. Thus, after establishing that an employer has violated the General Duty Clause or an OSHA standard by a preponderance of the evidence, OSHA bears the added burden of proving that the employer did so with actual or constructive knowledge. Under the General Duty Clause, employers must provide employees with "employment and a place of employment which are free from recognized hazards that are causing or are likely to cause death or serious physical harm." Apparently recognizing the impracticality of having OSHA issue safety standards for every type of employer and employment, Congress intended the General Duty Clause to be a catchall provision establishing a broad employer duty to protect worker health and safety in the absence of applicable OSHA-created standards. To that end, when an OSHA-created standard applies to a hazard, an employer's compliance with the standard can be deemed to satisfy, and thereby preempt, the General Duty Clause. However, this preemption occurs only when the employer successfully proves, as an affirmative defense, that the OSHA standard adequately addresses the hazard or, if the standard inadequately addresses the hazard, that the employer did not know of the inadequacy of the standard. Thus, if an employer knows that a safety standard inadequately protects employees against a hazard, the employer must still comply with the General Duty Clause regarding that hazard. To successfully prove a violation of the General Duty Clause, OSHA must show that (1) a workplace condition poses a hazard to an employee; (2) the employer constructively or actually recognizes that the workplace condition is a hazard; (3) the hazard is causing, or is likely to cause, serious physical harm or death; and (4) feasible means exist to materially reduce or eliminate the hazard. If OSHA successfully proves a violation of the General Duty Clause, it must then show that the employer violated the clause with actual or constructive knowledge for the employer to have violated the OSH Act. A General Duty Clause violation requires that a workplace condition pose a hazard to an employee. This does not require actual harm to an employee; the ability of a workplace condition to harm an employee can render it a hazard. Additionally, OSHRC has recognized that a workplace condition can be a hazard absent a significant chance that the condition will injure an employee. On the other hand, for a condition to be a hazard, it must occur in "other than a freakish or utterly implausible concurrence of circumstances." Accordingly, for a workplace condition to be a hazard, it must be more than "utterly implausible" that the condition will injure or kill an employee, but there need not be a significant chance that it will injure or kill an employee. If a workplace condition is a hazard, OSHA must establish that it is a "recognized" hazard to prove a violation of the General Duty Clause. A recognized hazard is a workplace condition that is either recognized as hazardous by the employer's industry, or that the employer actually knows to be hazardous. In determining that an industry recognizes a hazard, OSHRC has found persuasive evidence showing that, for example, accepted industry standards or industry publications acknowledge the hazard. Similarly, OSHA can establish an employer's actual knowledge of a hazardous condition by putting forth various types of evidence, including evidence showing that there were numerous previous accidents or injuries or employee complaints. An employer's actual knowledge of a hazardous condition can sustain a General Duty Clause violation even if the employer's industry has not recognized the condition as hazardous. If OSHA successfully establishes that a workplace condition is a recognized hazard, it must prove that the hazard is causing, or is likely to cause, serious physical injury or death to an employee. OSHRC has held that the probability that physical harm or death will occur, which it considers when determining whether a hazard exists as discussed above, is irrelevant in determining whether a recognized hazard is causing, or is likely to cause, serious physical harm or death to employees. Rather, OSHRC considers the level of physical harm that an employee would face if an accident were to happen, no matter how slight the chance an accident would happen in the first place. For example, in Waldon Health Care Center , a hazardous workplace condition presented only a small chance that employees would catch Hepatitis B, a virus from which, OSHRC noted, most people fully recover. Even so, OSHRC found serious physical harm or death likely because a small percentage of people that catch Hepatitis B die or do not fully recover from it, and the hazardous condition therefore had the chance, though apparently slight, of seriously injuring or killing employees. Previous incidents wherein the recognized hazard caused serious physical harm or death are not necessary to establish that the hazard is causing, or is likely to cause, injury or death. However, it appears that previous injuries or deaths are sufficient , unless rebutted, to establish that the hazard is causing, or is likely to cause, serious physical injury or death. Reviewing courts generally defer to OSHRC determinations that a recognized hazard is likely to cause serious injury or death. Courts and the OSHRC generally agree that Congress did not intend the General Duty Clause to protect employees against all conceivable workplace hazards. Rather, Congress intended the clause to protect employees against only hazards that are preventable . Accordingly, if OSHA successfully establishes that a workplace condition poses a recognized hazard that is likely to cause serious physical harm or death to an employee, OSHA must then prove that the hazard is preventable; that is, feasible means of materially reducing the hazard exist. In practice, litigation of whether feasible means of reducing a recognized hazard exist appears to unfold in two steps. First, because OSHA bears the burden of establishing that a feasible means of abatement exists, OSHA must initially show that an employer could feasibly take specific actions that would materially reduce a risk to employees. Next, the employer often responds by arguing that OSHA's suggested actions are infeasible. OSHA bears the burden of showing that a feasible means of materially reducing a hazard exists, which requires it to show that specific abatement actions by an employer would feasibly and materially reduce the hazard. These abatement actions generally appear to fall into two categories: physical means of abatement and abatement by implementing new or additional procedures. When proposing an abatement action, OSHA can show its feasibility through evidence showing, for example, that similar employers in the industry have successfully implemented the means of abatement or industry standards recommend the means of abatement. If an employer does not rebut OSHA's evidence by putting forth his own evidence showing that the suggested means of abatement would be infeasible or ineffective at reducing the hazard, OSHA has successfully met its burden of establishing that a feasible means exists to reduce or eliminate a hazard. Employers often attempt to rebut OSHA's evidence by showing that OSHA's suggested means of abatement is infeasible or ineffective. They may do so by, among other things, proving that the suggested means of abatement is cost prohibitive or, though possible to implement and its implementation would significantly and materially reduce the cited hazard, the suggested means of abatement causes some greater harm. For example, in Cargill, Inc. , OSHA suggested that a grain elevator and feed mill operator upwardly extend sheet casings at the top of a vertical conveyor through the roof of a building so that, in the event of a grain dust explosion, air could escape and prevent secondary explosions and fires. In response, the employer presented evidence that extending the casings would pierce structural beams which support the roof, thereby seriously weakening the roof, and OSHA did not challenge the employer's evidence on this point. OSHRC, accepting the employer's evidence, found OSHA's suggested means of abatement infeasible because, while it may have reduced the risks of secondary grain dust explosions, it would have created a new risk by weakening the roof such that the roof could collapse. In addition to the four elements discussed above, to successfully hold an employer in violation of the General Duty Clause, OSHA must prove that an employer had actual or constructive knowledge of the condition that violated the OSH Act. This requirement of actual or constructive knowledge on the part of the employer also applies to violations of OSHA-created standards, discussed below. OSHRC has held that OSHA does not have to prove that an employer knew the requirements of the act or knew that a condition violated the act to establish an employer's knowledge. Rather, OSHA must show that the employer knew of the physical conditions giving rise to the violation. Proving actual knowledge is generally as straightforward as it sounds: OSHA can do so through evidence showing that the employer knew that the violating condition existed. Conversely, demonstrating an employer's constructive knowledge of a violating condition is less straightforward. This requires OSHA to prove that, though the employer did not know the condition existed, the employer could have known about the condition through the exercise of reasonable diligence. OSHA can prove constructive knowledge by showing, for example, that the employer did not have an adequate safety program for promoting compliance with safety standards or that the condition was in plain view. The amount of time that a violating condition existed is relevant to determining whether it could have been discovered through the exercise of reasonable diligence; the longer a condition existed, the more likely courts and OSHRC are to find that the condition could have been discovered through reasonable diligence. For example, in R.P. Carbone Construction Co. , a construction company allegedly failed to exercise reasonable diligence to protect its employees from potential falls while building a steel structure. OSHRC found, and the U.S. Court of Appeals for the Sixth Circuit upheld, that because employees' lack of fall protection was plainly observable throughout the construction site and existed for approximately two weeks, the exercise of reasonable diligence could have informed the employer that the employees lacked fall protection. A supervisory employee's actual or constructive knowledge of a condition can generally be imputed to the supervisor's employer. A supervisory employee is one to whom an employer has delegated authority over other employees, even if only temporarily. In the U.S. Court of Appeals for the Fifth Circuit ("Fifth Circuit"), however, if a supervisor's own conduct caused a condition that violates the act, the supervisor's knowledge of the condition cannot be imputed to his employer unless his conduct was foreseeable. The Fifth Circuit has held that a supervisor's violative conduct is not foreseeable, and therefore a supervisor's knowledge of his own violative conduct cannot be imputed onto an employer, if an employer has sufficient safety policies, training, and disciplinary procedures in place. In addition to the obligations under the General Duty Clause, employers must "comply with occupational safety and health standards" that OSHA promulgates pursuant to Section 5(a)(2) of the OSH Act. The OSH Act defines occupational safety and health standards as standards requiring "conditions, or the adoption or use of one or more practices, means, methods, operations, or processes, reasonably necessary or appropriate to provide safe or healthful employment and places of employment." OSHA-created standards generally take two forms: specific standards and general standards. Specific standards narrowly apply to specified industries or activities (e.g., a standard applicable to logging). General standards apply to classes of hazards that may be found throughout a number of industries (e.g., fire prevention standards). In order to establish that an employer violated an OSHA-created standard, OSHA bears the burden of proving that (1) the standard applies to the cited workplace condition; (2) the employer did not comply with the terms of the standard; and (3) employees had access to the cited workplace condition. Additionally, as is also necessary to establish a violation of the General Duty Clause as discussed above, for OSHA to prove a violation of OSHA-created standards it must prove that the employer had actual or constructive knowledge of the cited condition. More specifically, OSHA must establish that the employer knew, or could have known through reasonable diligence, of the existence of the cited condition. In determining whether a standard applies to an employer's conduct, OSHRC generally considers the activity that the employer was engaged in when the citation arose. For example, in Pico Industries , OSHRC observed that when an employer was "engaged in steel erection activity," a standard applicable to steel erection applied. Under OSHA regulations, if multiple standards apply to an activity or hazard, the most specific standard preempts more general standard(s). The reverse is also true: general standards apply when there is no applicable specific industry standard. OSHA standards include, for example, those found in Code of Federal Regulations (C.F.R.) Title 29 Parts 1910 (general standards), 1915 (shipyard standards), 1917 (marine terminal standards), 1918 (longshoring standards), 1926 (construction standards), and 1928 (agriculture standards). Employers are responsible for determining which standards apply to them and following the requirements of applicable standards even in the absence of any action by OSHA. That is, even if OSHA has received no complaints about an employer, has not inspected an employer, and has not issued a citation to an employer, the employer must comply with standards applicable to them. However, employers obtain exemptions from standards through variances. The OSH Act permits employers to apply for exemptions from the requirements of OSHA-created standards or regulations under specified circumstances. Generally, OSHA must approve such exemptions, called variances, before an employer can permissibly fail to comply with an OSHA standard or the employee is in violation of the standard. In other words, variances excuse only failure to comply with OSHA standards occurring after OSHA grants a variance; they do not retroactively remedy violations of standards. The OSH Act authorizes OSHA to grant four types of variance: (1) temporary variances; (2) permanent variances; (3) experimental variances; and (4) variances required for national defense. The OSH Act allows employers to apply for, and OSHA to grant, temporary variances from OSHA-created standards when an employer cannot comply with a standard by the time the standard goes into effect. To obtain such a variance, an employer must show three things. First, the employer must show that he cannot comply with a standard by its effective date because professional or technical personnel, materials, or equipment needed to comply with the standard are unavailable, or because the employer cannot finish necessary facility alterations or construction by the effective date. Second, the employer must show that he is protecting his employees against the hazard covered by the standard despite not following the standard. Third, the employer must show that a program is in place for complying with the standard as quickly as practicably possible. OSHA cannot grant a temporary variance unless the employer's employees are first given notice of, and the opportunity to participate in, a hearing on the variance. Temporary variances expire at the earlier of (1) the date the employer comes into compliance with the standard or (2) one year. However, OSHA can grant renewal of a temporary variance up to two times. In addition to temporary variances, the OSH Act permits employers to apply for, and OSHA to grant, permanent variances from OSHA-created standards. However, OSHA can only grant such permanent variances under narrowly prescribed circumstances. More specifically, a permanent variance requires an employer to show, by a preponderance of the evidence, that his "conditions, practices, means, methods, operations, or processes" will provide the same level of health and safety protection as compliance with the standard. In granting a permanent variance, OSHA must determine, on the record after the opportunity for inspection and, where appropriate, hearing, that the employer has successfully met his burden. Additionally, before OSHA can grant a permanent variance, affected employees must receive notice of, and the opportunity to participate in, a hearing on the application for a permanent variance. Permanent variances are permanent in the sense that they generally do not contain an expiration date. However, OSHA can modify or revoke a permanent variance at any time six months after its approval. An employer, employees, or OSHA through its own motion can apply to modify or revoke a permanent variance. The OSH Act allows OSHA to grant variances when doing so is necessary for an employer to participate in an experiment that demonstrates the effectiveness of novel workplace health and safety techniques. Either OSHA or the Secretary of Health and Human Services must approve these experiments. Under the OSH Act, OSHA can grant variances from standards "as … necessary and proper to avoid serious impairment of the national defense." OSHA must determine that a variance is necessary for national defense on the record after notice and opportunity for hearing. National defense variances last no more than six months, but employers can apply to renew them. The OSH Act and OSHA regulations require certain employers to maintain and distribute information. More specifically, some employers must keep records of workplace injuries and illnesses, some of which they are then required to report to OSHA. The OSH Act and OSHA regulations further require employers to disseminate certain information to employees via posting requirements. The OSH Act gives OSHA fairly broad authority to require employers to keep records of workplace injuries and illnesses. The act authorizes OSHA to promulgate regulations requiring employers to maintain records of, and report, non-minor injuries, deaths, and illnesses that are work-related. Under this authority, OSHA has passed generally applicable regulations requiring certain employers to maintain workplace injury and illness records and submit such records to OSHA. OSHA's recordkeeping requirements for workplace injuries and illnesses are perhaps best considered by reference to two questions. First, as a threshold matter, to what employers do OSHA's recordkeeping regulations for workplace injuries and illnesses apply? Second, if OSHA's recordkeeping regulations apply to an employer, what workplace injuries and illnesses must be recorded and reported? OSHA's recordkeeping requirements for workplace injuries and illnesses generally apply to all employers within the OSH Act's scope, subject to two broad exceptions. First, the recordkeeping requirements do not apply to employers that had a total of 10 or fewer employees at all times during the last calendar year. Second, the recordkeeping requirements do not apply to employers falling within one of the "low hazard retail, service, finance, insurance, or real estate" employer groups listed in the relevant OSHA regulations. This list of exempted employer groups is extensive and specific; it includes, for example, hardware stores, gasoline service stations, used car dealers, and apparel and accessory stores. The recordkeeping regulations require employers operating multiple establishments, or physical locations where business is conducted, to distinguish between exempted and non-exempted establishments for recordkeeping purposes. For example, if an employer owns a factory that produces clothes (i.e., an establishment that is not on the list of exempt employer groups) and an apparel store that sells the clothes (i.e., an establishment that is on the list of exempt employer groups), the employer would have to maintain workplace injury and illness records for the factory but not the apparel store, provided that the employer has a total of 11 or more employees. Even if an employer qualifies for an exception from recordkeeping requirements, he must still maintain records if selected to participate in OSHA's annual employer survey, discussed below in the context of reporting requirements, or asked to do so by the Bureau of Labor Statistics (BLS). If an employer is required to keep workplace injury and illness records, he does not need to keep records on all workplace injuries and illnesses. Rather, the employer is only required to keep records on injuries and illnesses that are (1) "work-related," (2) "new case[s]," and (3) qualify as injuries and illnesses as defined in the relevant regulations. An injury or illness is work-related if an event in the workplace caused, contributed to, or significantly aggravated the injury or illness. If an injury or illness results from workplace events, it is generally presumed to be a work-related injury. Additionally, covered employers are only required to keep records of "new cases," meaning the employee has not had a previous injury or illness recorded of the same type affecting the same body part or, if the employee has, he recovered completely in the interim between the previous injury or illness and the current one. An employee has recovered completely if all signs or symptoms have disappeared. Finally, a qualifying injury or illness is generally one resulting in "death, days away from work, restricted work or transfer to another job, medical treatment beyond first aid, loss of consciousness ... [or] significant injury or illness diagnosed by a physician or other licensed healthcare professional." Under the OSH Act and OSHA regulations, employers are generally required to report information on workplace injuries and illnesses to OSHA outside of an inspection in two circumstances. First, employers falling within the OSH Act's coverage, whether required to keep records or not, must report serious work-related injuries to OSHA. Such serious work-related injuries include those resulting in: (1) deaths of employees; (2) hospitalizations that lead to any employee receiving in-patient treatment; or (3) an employee's amputations or loss of an eye. Employers must report work-related deaths to OSHA within eight hours of their occurrence, but have 24 hours to report work-related in-patient hospitalizations, amputations, or eye losses. Reports of serious injuries must be made to OSHA via telephone, or through electronic submission at OSHA.gov. The second instance wherein employers must report workplace injury and illness data to OSHA outside of the context of an inspection occurs when OSHA selects an employer to participate in its annual survey. OSHA regulations require the randomly selected employers in certain industries that receive OSHA's annual survey form to complete the form and send it back to OSHA. The form generally requires employers to submit information from their injury and illness records. However, as discussed earlier in this report, not all employers are required to keep injury and illness records under OSHA regulations. If OSHA sends an annual survey form to an employer that is exempted from the injury and illness recordkeeping requirements, the employer is required to keep such records for the following year and subsequently return the survey form to OSHA. In November 2013, OSHA proposed a rule that would eliminate OSHA's annual survey of employers, but heighten employers' obligations to report injury and illness data to OSHA. Under the rule, employers that are already required to keep injury and illness records would have to submit information from these records to OSHA electronically. The rule thus does not appear to impose additional recordkeeping obligations on employers. The frequency of the compulsory submissions required by the rule would vary based on the size of the employer. Employers that had 250 or more employees in the previous calendar year would be required to submit injury and illness information four times per year. Employers that had 20 or more employees in the previous calendar year and are in certain designated industries would have to submit the required data every year. Additionally, all employers, regardless of their size, would have to submit injury and illness information to OSHA if OSHA informs them that they must do so. Once the information is submitted, OSHA would make it publicly available, minus any data whose public release is precluded by the Freedom of Information Act, the Privacy Act, or any specific provisions of OSHA regulations. The OSH Act and OSHA regulations contain requirements apparently aimed at ensuring employers communicate to their employees about employee rights and obligations under the act. These requirements mandate that employers post certain materials at worksites where employees can readily see them. Posting requirements under the OSH Act and OSHA regulations direct employers to (1) display the OSHA poster at each work site; (2) post annual summaries of injury illness and data records if they are required to maintain such records; (3) post any citations that they receive; and (4) post petitions for modifications of abatement dates subsequent to facing OSHA citations. The OSH Act mandates that OSHA promulgate regulations requiring employers to "keep their employees informed of their protections and obligations under [the act], including the provisions of applicable standards" through "posting of notices or other appropriate means." Pursuant to this mandate, OSHA regulations require covered employers to post a notice, furnished by OSHA, at their worksites. This notice, known colloquially as the "OSHA poster," informs employees that, for example, they have the right to notify employers about workplace hazards, they can request OSHA inspections if they believe there are hazardous conditions at their workplace, and they have the right to see OSHA citations issued to their employer. Employers must display the OSHA poster in "conspicuous place[s] or places where notices to employees are customarily posted." Employers must also make sure the OSHA poster remains unaltered and undefaced. Covered employers must also post annual summaries of injury and illness records if they are required to keep such records. Like the OSHA poster, employers must post such annual summaries in "conspicuous place[s] or places where notices to employees are customarily placed." Further, like the OSHA poster, employers must ensure that the annual summary posting is not altered or defaced. In addition to the OSHA poster and annual summaries of injury and illness records, OSHA regulations require employers to immediately post any citations, or unedited copies thereof, that they receive. A citation must generally be posted where the alleged violation giving rise to the citation occurred. However, if it is not practicable to post the citation where the alleged violation occurred, an employer can post the citation in a "prominent place" where all affected employees can readily observe it. Citations must remain posted until the latter of the date on which the employer eliminates the cited violation or three working days. Contesting a citation does not absolve an employer of his obligation to post the citation. However, under such circumstances the employer can also post a notice indicating that he is contesting the citation, including his reasons for doing so. If an employer petitions for modification of the abatement date of a citation, OSHA regulations require the employer to post the petition. When OSHA issues a citation to an employer for violating a workplace safety standard, such citations contain an "abatement date," or a date by which the employer must come into compliance with the cited safety standard. The employer can petition OSHA to modify the abatement date when, despite good faith efforts, he has been unable to come into compliance with requirements of a citation by the abatement date because of factors that are "beyond his reasonable control." The employer must post a copy of such a petition in a conspicuous place that would provide notice to all affected employees, or near the location giving rise to the violation. The petition must remain posted for 10 working days. The OSH Act grants OSHA the authority to enter and inspect sites wherein employees perform work for an employer. The OSH Act further permits OSHA to inspect all relevant structures, equipment, and conditions found within such worksites. However, OSHA's authority to enter and inspect worksites is limited in two ways. First, any OSHA entrance into, and inspection of, a worksite must be "reasonable." More specifically, OSHA can only enter and inspect workplaces at "reasonable times" such as during work hours, "within reasonable limits," and "in a reasonable manner." Second, the Supreme Court has held that OSHA inspections are subject to the Fourth Amendment, and thus OSHA needs a warrant to inspect worksites without employer permission. Inspection unreasonableness is an affirmative defense to a citation resulting from that inspection that must be raised and proven by an employer. To succeed, an employer must point toward unreasonable OSHA conduct in violation of the OSH Act. The employer must also show that OSHA's unreasonable conduct prejudiced the employer. The inquiry into whether an OSHA inspection was unreasonable is factual, varying from case-to-case. For example, OSHRC has found an OSHA inspection unreasonable when a city building inspector gave an employer 10 days to correct violations of building codes and forwarded the employer's building code violations to OSHA, which then conducted an inspection before the 10 day correction period expired. After inspection, OSHA cited the employer for the same hazards as the city building inspector, which OSHRC deemed "inherently unfair and unreasonable." If an employer succeeds in establishing that an inspection was unreasonable in violation of the OSH Act, any evidence obtained through that inspection cannot be used against the employer. In addition to being limited by the OSH Act reasonableness restrictions, the Supreme Court held in Sec'y of Labor v. Barlow's that OSHA inspections are limited by the Fourth Amendment, and OSHA therefore needs a warrant to inspect an employer's worksite over the employer's objections. In Barlow's , when an OSHA inspector went to the defendant's electrical and plumbing installation business to conduct an inspection, the defendant refused the inspector entry citing his Fourth Amendment rights. The Court held that the Fourth Amendment prohibition against unreasonable governmental searches applies to both homes and workplaces. The court observed that, generally, warrantless governmental searches are presumptively unreasonable under the Fourth Amendment. Accordingly, despite noting that nothing in the language of the OSH Act appears to require a warrant or any other process before an OSHA inspection, OSHA inspectors generally cannot conduct an inspection without first obtaining a warrant. However, this warrant requirement does not apply to OSHA inspections that are conducted with an employer's consent. If proper authority for an inspection exists (i.e., the inspection is reasonable under the OSH Act and complies with the warrant requirement if the employer objects to inspection), OSHA can conduct both programmed and unprogrammed inspections. OSHA generally conducts two types of inspections: unprogrammed inspections and programmed inspections. Unprogrammed inspections are initiated in response to a specific incident or event. In contrast, programmed inspections are those routine inspections that are scheduled under OSHA's objective administrative procedures. Unprogrammed inspections, or inspections that OSHA initiates in response to a specific incident or event, often take one of two forms. First, unprogrammed inspections occur in response to employee complaints or third party referrals submitted to OSHA. Second, unprogrammed inspections occur after OSHA receives a report of a serious accident. The OSH Act allows employees to request an OSHA inspection if they believe that an imminent danger or a violation of a health or safety standard poses a physical threat to employees. The act requires that any such employee request for an inspection be in writing, detail the grounds for the inspection with "reasonable particularity," and be signed by the employee or employee's representative. Once an employee requests an OSHA inspection, OSHA determines whether there are "reasonable grounds" to believe that the alleged imminent danger or violation exists. If OSHA determines that such reasonable grounds are present, OSHA must conduct an inspection. If OSHA determines, however, that reasonable grounds do not exist, it must inform the requesting employee of such and is not obligated to conduct an inspection. Though not addressed in the OSH Act, OSHA regulations allow an employee to internally appeal OSHA's determination that no reasonable grounds for an inspection exist. If, on review, OSHA again finds inspection unwarranted, such a finding is "final and not subject to further review." OSHA similarly conducts inspections based on referrals, which are distinguished from employee complaints because they generally originate from third parties. OSHA may conduct inspections based on referrals via, for example, information reports by media sources made directly to OSHA or disseminated through the news. OSHA may also conduct inspections in response to reports by other federal, state, or local government agencies. Unprogrammed OSHA inspections can also result from the reports of serious injuries that employers are required to make to OSHA. As discussed earlier in this report, all employers subject to the OSH Act must report to OSHA any workplace accidents resulting in an employee's death, in-patient hospitalization, or amputation or loss of an eye. OSHA policies require that all such deaths or injuries be "thoroughly investigated" via inspection to determine whether a violation of the OSH Act or OSHA standards contributed to the death or injury. In addition to unprogrammed inspections, OSHA conducts programmed inspections, or routine inspections that are scheduled under the objective administrative procedures of an inspection program or plan. OSHA conducts multiple types of programmed inspection. For example, OSHA conducts programmed inspections for specific industries, such as parts of the maritime and construction industries. OSHA also maintains an inspection program, known as the Site-Specific Targeting Program, for worksites that have 40 or more employees and have high rates of worker injuries and illnesses. Under the OSH Act, any person who gives an employer unauthorized advance notice of an inspection can face up to a $1,000 fine and six months in prison. OSHA regulations clarify when advance notice of an inspection is authorized, and thus can be given without violating the act. Under these regulations, advance notice is only permitted when (1) there is an imminent danger, so that the employer can attempt to remedy the danger immediately; (2) an inspection would be best conducted after normal business hours or other special preparations must be completed before an inspection; (3) it is necessary to ensure that parties who must be allowed to accompany an inspector can be present; and (4) OSHA determines advance notice would better effectuate inspection. OSHA is authorized to set the time for an inspection, subject to the reasonableness restrictions discussed earlier in this report. Even so, OSHA generally conducts inspections during regular working hours unless "special circumstances indicate otherwise." When an OSHA inspector arrives at a worksite for an inspection, he must present his credentials to the employer and "explain the nature and purpose of the inspection." Further, if the employer must keep injury and illness records, the OSHA inspector can ask for copies of such records, which the employer must provide within four hours. At the onset of the inspection, the OSHA inspector must inform the employer of what records he wants to review. The OSH Act allows both employers and employees to have a representative accompany an OSHA inspector during an inspection. OSHA regulations further allow additional employer or employee representatives to accompany OSHA inspectors when inspectors find that additional representatives will assist inspection. Employees' representatives must generally also be employees of the employer. However, inspectors have the discretion to permit third parties to serve as employee representatives if an inspector determines that such representation is "reasonably necessary" to conducting an "effective and thorough" worksite inspection. Additionally, inspectors can deny any representative from accompanying them during inspections when the representative's accompaniment would inhibit the inspection. During a worksite inspection, OSHA inspectors can collect environmental samples, take pictures or videos, or use any other reasonable investigation methods. OSHA inspectors may also consult with employees regarding potential health and safety concerns, and employees must be given the opportunity to inform the inspector of any OSH Act violations that they believe exist at the worksite. If an inspector uncovers an imminent danger that could immediately cause death or serious injury, he must inform affected employees and employers. The inspector will then encourage the employer to remedy the danger. If the employer refuses to or cannot remedy the danger, the OSH Act grants federal district courts jurisdiction to restrain any workplace conditions or practices posing such imminent dangers. A regulatory requirement that inspections not unreasonably disrupt workplace operations constrains OSHA inspector conduct during an inspection. Additionally, the OSH Act generally requires inspectors to keep confidential any information obtained during an inspection containing, or with the potential to reveal, trade secrets. However, inspectors can disclose such information in two circumstances: (1) when needed to effectuate enforcement of the act, they can disclose such information to officers and employees and (2) they can disclose such information in proceedings under the act. When an inspector discloses information containing trade secrets during a proceeding, the entity hearing the proceeding (i.e., OSHA, the OSHRC, or a court) issues any orders that are appropriate to protect the information from further disclosure. At the end of an inspection, the OSHA inspector conducts a closing conference with the employer and employee representatives. This conference can occur jointly—with both representatives—or separately, on-site or via telephone. At this closing conference, the inspector discusses anything found during the inspection that appears to violate the act or raise any other relevant issues. The OSHA inspector also informs the employer and employee representatives of their rights and obligations moving forward and answers any of their questions. If an inspection shows that an employer has violated the OSH Act or an OSHA standard, OSHA issues the employer citations and, potentially, penalties. The act prescribes the procedural and substantive requirements for citations and penalties. The act further provides that penalties vary depending on the type of violation. After an inspection, OSHA reviews the report of its inspector to determine whether the inspection uncovered a violation of the OSH Act or an OSHA standard. If, after reviewing the inspection report, OSHA believes that an employer has violated the OSH Act or an OSHA standard, the act requires OSHA to issue a citation to the employer. OSHA must issue this citation "with reasonable promptness" no more than six months after the OSH Act or OSHA standard violation. The OSH Act requires that citations be in writing, particularly describe the nature of the violation, provide notice of which provision of the OSH Act or OSHA standard the employer allegedly violated, and contain an abatement date, or date by which the employer must remedy the violation. OSHA may issue a notice of proposed penalty within a reasonable time of an inspection after, or concurrent with, a citation. OSHA must send any notice of proposed penalty to an employer by personal service or certified mail. Additionally, a notice of proposed penalty must inform the employer that the proposed penalties will become final unless the employer seeks their appeal within 15 working days of receiving the notification. Under the act, penalties vary depending on the seriousness and type of violation that occurred. Violations fall into one of three levels of seriousness: (1) serious violations; (2) non-serious violations; and (3) de minimis violations. Additionally, violations at each level of seriousness can result in increased penalties if the violation is willful, results from a failure to abate harm, or is part of an employer's repeated violation of the act. A violation of the OSH Act or OSHA standards is serious if there is a "substantial probability" that the violation could result in death or serious physical harm for an employee. Courts and OSHRC have held that this requirement does not mean OSHA must establish that there is a substantial probability that an accident will occur. Rather, to establish a serious violation of the act, OSHA must show that there is a substantial probability that if an accident were to occur, no matter its chances of happening, it could result in death or serious physical harm in "other than freakish or utterly implausible" circumstances. Even if a violation could result in death or serious physical harm for an employee, the violation will not be considered serious if the employer did not, and could not through the exercise of reasonable diligence, know of the violation. If an employer commits a serious violation, the OSH Act requires OSHA to issue the employer a penalty no greater than $7,000. The OSH Act classifies "non-serious" violations distinctly from "serious" violations, and provides different penalties for the two. However, unlike serious violations, the act does not define non-serious violations other than to provide that they are violations "determined not to be of a serious nature." OSHRC has interpreted this language to include violations that have a "direct and immediate relationship" with occupational health and safety, but do not present a substantial probability that death or serious physical harm will result. Unlike serious violations, for which OSHA must issue penalties up to $7,000, OSHA may issue penalties up to $7,000 for non-serious violations. De minimis violations are those that do not have a direct and immediate relationship with safety and health. Such violations occur when, for example, an employer complies with a proposed standard rather than the standard in effect and the proposed standard provides equal or greater employee protection, or follows the intent of a standard but deviates slightly from its specific requirements in a way that poses no direct or immediate threat to employee safety or health. De minimis violations do not result in citations; if an employer commits a de minimis violation, OSHA issues the employer a notice instead of a citation. Notices of de minimis violations are not subject to the same requirements as citations (e.g., they need not contain an abatement date and there is no requirement that they be issued within six months of the alleged violation). De minimis violations cannot result in penalties. The OSH Act permits OSHA to issue increased penalties to "any employer who willfully … violates the requirements of [the act]." However, the act does not define a willful violation. Courts and the OSHRC have held that a willful violation is one that an employer commits with either intentional disregard of the requirements of the act, or plain indifference for employee safety. An employer intentionally disregards the requirements of the act when he actually knows what the act requires yet fails to comply with the act. Even if an employer does not actually know of the requirements of the act, he can be found to have willfully violated the act if his behavior shows plain indifference toward employee safety, which requires OSHA to show that the employer's state of mind was such that even if he were aware of the violation, he would not care. Employers have not willfully violated the act if they reasonably, and in good faith, believed their conduct was not in violation of the act. Additionally, it is generally harder for OSHA to prove a willful violation of the General Duty Clause than a willful violation of an OSHA standard because it is more difficult to prove that an employer intentionally disregarded, or was plainly indifferent to, "the broad duty to 'furnish a place of employment free from recognized hazards.'" An employer that willfully violates the OSH Act faces a mandatory penalty of between $5,000 and $70,000. Further, if an employer's willful violation of an OSHA standard causes an employee's death, the employer shall, upon conviction, be punished by a fine of up to $10,000 or imprisonment for up to six months. If the employer had previously been convicted of such a willful violation causing death, the employer can be punished by a fine of up to $20,000 or imprisonment for up to one year. OSHA can issue a Notification of Failure to Abate if an inspection reveals that an employer failed to bring a violating condition, for which OSHA has issued the employer a citation, into compliance with the OSH Act by the abatement date within the citation. For a Notification of Failure to Abate to withstand review, OSHA must prove that the original citation became a final OSHA order, and that the violative conditions for which OSHA originally cited the employer still existed upon re-inspection. If OSHA successfully meets its burden, an employer can potentially raise a number of defenses. For example, the employer can argue that the original citation did not particularly describe the violation such that he lacked notice of what was needed to abate the hazard, or that the original cited hazard, which became final due to operation of law rather than adjudication, did not violate the OSH Act. Under the OSH Act, if OSHA issues a Notification of Failure to Abate to an employer, the employer can face a penalty of up to $7,000 for each day past the abatement date that the employer fails to correct the hazard. Unlike a failure-to-abate violation, which results from an employer's failure to remedy an existing violation that they have already been cited for, a repeated violation results from a new violation. This new violation must be "substantially similar" to a previously cited violation which resulted in a final order against the employer. To meet its burden of establishing that the latter violation is substantially similar to the prior violation, OSHA can show that both citations result from the employer's failure to comply with the same standard. The burden then shifts to the employer to show that the two violations are not substantially similar by, for example, showing that they involve different conditions or hazards. Violations of the same specific standards, rather than general standards, make two violations more likely to be substantially similar because the violations are more likely to involve the same conditions and hazards. When two violations result from different standards, OSHA can generally prove that they are substantially similar by showing that the violations resulted from substantially similar hazards. OSHA can issue penalties of up to $70,000 for repeated violations. Employers have 15 working days upon receiving a citation or notice of proposed penalty to notify OSHA that they intend to contest the notice or citation, which can include protest of the abatement date contained within the citation. If the employer does not notify OSHA of his intent to contest the citation or notice of proposed penalty within this 15-working-day window, the citation and notice of proposed penalty are deemed final orders of OSHRC and are not subject to agency or judicial review. Employees also have a right to protest, though it is narrower than an employer's right to protest: they can protest only the abatement date of a citation on the basis that the allotted abatement time is unreasonable. This limited employee right to protest is subject to the same 15-working-day time constraint as employers' right to review. When an employer or employee notifies OSHA of its intent to protest a citation or notice of proposed penalty, OSHA "immediately advise[s]" OSHRC of such notification. OSHRC then commences its independent review process. A protest before OSHRC first goes to an OSHRC Administrative Law Judge (ALJ), who hears it. The ALJ then issues a written decision. Any party adversely affected by the ALJ's decision can then petition to OSHRC for further review. Additionally, an OSHRC Commissioner may direct review of an ALJ's decision on his own motion. In either circumstance, no party has a right to OSHRC review of an ALJ's decision; review is discretionary with OSHRC. If OSHRC does not order review of an ALJ's decision within 30 days of the docketing date of the decision, the decision becomes a final order of OSHRC. If OSHRC does review an ALJ's decision, it then issues a final order on the matter. Any person adversely affected by a final OSHRC order can seek its appeal in (1) the U.S. Court of Appeals wherein the violation allegedly occurred; (2) the U.S. Court of Appeals wherein the employer has its principal office; or (3) the U.S. Court of Appeals for the D.C. Circuit. Additionally, OSHA can seek appeal of an OSHRC order. Petition for review of an OSHRC order, whether by an adversely affected party or OSHA, must be filed within 60 days of the OSHRC order. Filing a petition for review of an OSHRC order does not stay the order; the order remains in effect until a court of appeals vacates it. On review, the courts of appeal find OSHRC's findings of facts conclusive if the facts are supported by substantial evidence. | Through the Occupational Safety and Health Act of 1970 ("OSH Act" or "act"), Congress sought a nationwide approach to regulating workplace accidents and injuries. The act authorizes the Secretary of Labor to create and enforce workplace safety standards. Additionally, the act contains a "General Duty Clause," also enforced by the Secretary of Labor, which generally requires employers to provide workplaces that are free of potentially harmful hazards. The act created the Occupational Safety and Health Administration ("OSHA") and an Assistant Secretary of Labor for Occupational Safety and Health, to whom the Secretary of Labor has delegated his enforcement rights and obligations under the act. The act also established the Occupational Safety and Health Review Commission ("OSHRC"), an adjudicatory agency independent of the Department of Labor, and therefore OSHA, that is tasked with reviewing enforcement actions. OSHA enforces its standards and the General Duty Clause through inspections, citations, and penalties. Employers can seek review of OSHA enforcement actions first with OSHRC and then with U.S. Courts of Appeals. |
This report analyzes Division C of the Department of Defense Emergency Supplemental Appropriations, P.L. 109-148 , which was signed into law on December 30, 2005, and which limits liability with respect to pandemic flu and other public health countermeasures. Division C, which is titled the "Public Readiness and Emergency Preparedness Act," (PREP Act) created § 319F-3 of the Public Health Service Act, which provides that, except in one circumstance (discussed below under "New Federal Cause of Action"), a "covered person" would be immune from suit and liability for "all claims for loss caused by, arising out of, relating to, or resulting from the administration to or the use by an individual of a covered countermeasure if a declaration ... has been issued with respect to such countermeasure." The declaration referred to is a declaration by the Secretary of Health and Human Services (HHS) of a public health emergency or the credible risk of such emergency. Division C defines a "covered person" to include the United States and a (i) manufacturer, (ii) distributor, (iii) program planner, (iv) qualified person who prescribed, administered, or dispensed a covered countermeasure, or (v) official, agent, or employee of (i) through (iv). Under the Federal Tort Claims Act (FTCA), officials, agents, and employees of the United States are already immune from tort liability. Immunity is granted "to any claim for loss that has a causal relationship with the administration to or use by an individual of a covered countermeasure, including a causal relationship with the design, development, clinical testing or investigation, manufacture, labeling, distribution, formulation, packaging, marketing, promotion, sale, purchase, donation, dispensing, prescribing, administration, or use of such countermeasure." A "covered countermeasure" includes (A) "a qualified pandemic or epidemic product," (B) "a security countermeasure," or (C) a drug, biological product, or device that is authorized for emergency use in accordance with section 564 of the Federal, Food, Drug, and Cosmetic Act (FDCA). Each of the terms in (A), (B), and (C) is itself defined in Division C as follows: A. "Qualified pandemic or epidemic product" is defined as a drug, biological product, or device, as these three terms are defined in the FDCA, with the additional limitation that all three terms apply only to "a product manufactured, used, designed, developed, modified, licensed, or procured ... to diagnose, mitigate, prevent, treat, or cure a pandemic or epidemic," or "a serious or life-threatening disease or condition caused by [such] a product"—but only if such a product meets one of three other qualifications under the FDCA. B. "Security countermeasure" is defined in Division C as it is defined in § 319F-2(c)(1)(B) of the Public Health Service Act, as a drug, biological product, or device (as those terms are defined in the FDCA) that the Secretary of HHS approves as necessary to diagnose, mitigate, prevent, or treat harm from any biological, chemical, radiological, or nuclear agent. C. "Drug," "biological product," and "device" are all defined by the FDCA. On January 26, 2007, Secretary Michael O. Leavitt made the first such declaration "to provide targeted liability protections for pandemic countermeasures based on a credible risk that an avian influenza virus spreads and evolves into a strain capable of causing a pandemic of human influenza." Since then, the Secretary of HHS has issued additional declarations covering various countermeasures against anthrax, botulism, acute radiation syndrome, smallpox, and various strains of influenza. Most recently, in response to the H1N1 influenza pandemic, Secretary Kathleen Sebelius issued declarations limiting liability for harm arising from the use of certain influenza antivirals and vaccines. The single circumstance in which Division C allows a covered person to be held liable is when a "death or serious physical injury" was caused by the "willful misconduct" of a covered person. Division C defines "willful misconduct" as an act or omission that is taken "(i) intentionally to achieve a wrongful purpose; (ii) knowingly without legal or factual justification; and (iii) in disregard of a known or obvious risk that is so great as to make it highly probable that the harm will outweigh the benefit." In addition, the Secretary of HHS, in consultation with the Attorney General, "shall promulgate regulations ... that further restrict the scope of actions or omissions by a covered person that may qualify as 'willful misconduct.'" Furthermore, "the plaintiff shall have the burden of proving by clear and convincing evidence willful misconduct by each covered person sued and that such willful misconduct caused the death or serious physical injury." The "clear and convincing" standard is higher than the usual burden of proof in civil cases, which is proof by a "preponderance of the evidence." Finally, if an act or omission by a manufacturer or distributor is subject to regulation by Division C or by the FDCA, then such act or omission shall not constitute willful misconduct if neither the Secretary of HHS nor the Attorney General has initiated an enforcement action with respect to the act or omission, or if such an enforcement action has been initiated and the enforcement action has been terminated or finally resolved without a specified penalty imposed on the covered person. The proceeding in which an injured party may seek to prove that a covered person had engaged in willful misconduct is a new federal cause of action that Division C created; suits under state tort law are prohibited. Subsection (d) of the new § 319F-3 provides: "For purposes of section 2679(b)(2)(B) of title 28, United States Code, such a cause of action is not an action brought for violation of a statute of the United States under which an action against an individual is otherwise authorized." This apparently means that the new federal cause of action may not be brought against a federal employee. Division C provides that suits under the new federal cause of action may be brought only in the U.S. District Court for the District of Columbia, and that such court, with exceptions noted below, shall apply the substantive law, including choice of law principles, of the state in which the alleged willful misconduct occurred. The reference to "choice of law principles" means that the court will apply the law of the state in which the alleged willful misconduct occurred, but, if that state's law provides that a different state's law should apply, then the court will apply the other state's law. Although federal district court cases are usually heard by a single judge, cases under Division C's new federal cause of action will be "assigned initially to a panel of three judges. Such panel shall have jurisdiction over such action for purposes of considering motions to dismiss, motions for summary judgment, and matters related thereto. If such panel has denied such motions, or if the time for filing such motions has expired, such panel shall refer the action to the chief judge for assignment for further proceedings, including any trial." This suggests that the panel's jurisdiction is limited to pretrial motions, and that a single judge will run the trial, including ruling on motions to dismiss and motions for summary judgment that were made after the trial began. Under the new federal cause of action, certain matters are not governed by state law. Damage awards will be reduced by the amount of collateral source benefits, with "collateral source benefits" defined to include amounts the plaintiff is entitled to receive from any governmental program, workers' compensation law, health or disability insurance, and the like. Collateral sources will have no right of subrogation, which means that they could not recover, out of the damages the plaintiff recovers in a lawsuit brought under the new federal cause of action, benefits that they had paid the plaintiff. Under the new federal cause of action, noneconomic damages, which are damages for pain and suffering and other non-monetary losses, "may be awarded only in an amount directly proportional to the percentage of responsibility of a defendant for harm to the plaintiff." This means that, if two defendants are found liable for willful misconduct, then they will not be jointly and severally liable for noneconomic damages, which means that they will not each be liable for the full amount of the plaintiff's noneconomic damages. If, for example, one of the two defendants was 25% responsible for the harm and the other was 75% responsible for the harm, then the plaintiff may recover no more than 25% of his noneconomic damages from the first, even if the second is insolvent. With respect to economic damages, however, the plaintiff may recover up to 100% from either liable party, if the relevant state law provides for joint and several liability. Under the new federal cause of action, Rule 11 sanctions against attorneys, law firms, or parties, for filing frivolous claims or defenses or filing papers for improper purposes, are mandatory. Rule 11 currently makes sanctions discretionary on the part of the court. Division C also created a new section 319F-4 of the Public Health Service Act which, upon issuance by the Secretary of the declaration referred to in the first paragraph of this report, would establish in the Treasury the "Covered Countermeasure Process Fund." "[T]he Secretary shall, after amounts have by law been provided for the Fund under subsection (a) provide compensation to an eligible individual for a covered injury [i.e., serious physical injury or death] directly caused by the administration or use of a covered countermeasure pursuant to such declaration." Despite the "shall" quoted in the previous sentence, an eligible "individual has an election to accept the compensation or to bring an action under" the new federal cause of action, but may not do both. Compensation under this fund would be in the same amount as is prescribed by sections 264, 265, and 266 of the Public Service Health Act for persons injured as a result of the administration of certain countermeasures against smallpox. These three sections provide, respectively, medical benefits, compensation for lost employment income, and death benefits, but do not provide damages for pain and suffering. Congress has enacted other tort reform statutes to limit liability under state law. The rest of this report describes the broad categories into which these statutes may be placed, so that Division C can be compared with them. Some federal statutes have eliminated tort liability with no exceptions, and without providing an alternative means of compensation. Other federal statutes have eliminated tort liability for ordinary negligence but not for gross negligence or willful misconduct. Division C eliminated tort liability except for willful misconduct, and therefore falls in between these two categories. In addition, Division C would allow injured persons to recover compensation from the Covered Countermeasure Process Fund, if Congress appropriates money for it. More than 50 federal statutes provide total immunity to particular private parties, but make the U.S. government liable, under the Federal Tort Claims Act, in their stead. There are situations, however, in which the U.S. government may not be held liable under the FTCA, and, in those situations, victims may be left without a remedy. Even when the United States may be held liable under the FTCA, it may never be held liable for punitive damages, even in states that authorize punitive damages awards. Occasionally Congress immunizes private parties but establishes a federal compensation program. Examples include the Radiation Exposure Compensation Act, which immunizes government contractors who carried out atomic weapons testing programs from 1946 to 1962, as well as the National Childhood Vaccine Injury Compensation Act of 1986 and the September 11 th Victims Compensation Fund of 2001. Finally, some federal tort reform statutes do not eliminate the right to sue and do not establish alternative compensation mechanisms. Rather, they cap noneconomic and punitive damages, limit each defendant's share of the total liability to its share of responsibility for the plaintiff's injuries, or take other steps to limit recovery. Division C substitutes a federal cause of action for state causes of action, but continues to apply state law. | Division C of P.L. 109-148 (2005), 42 U.S.C. §§ 247d-6d, 247d-6e, also known as the Public Readiness and Emergency Preparedness Act (PREP Act), limits liability with respect to pandemic flu and other public health countermeasures. Specifically, upon a declaration by the Secretary of Health and Human Services of a public health emergency or the credible risk of such emergency, Division C would, with respect to a "covered countermeasure," eliminate liability, with one exception, for the United States, and for manufacturers, distributors, program planners, persons who prescribe, administer or dispense the countermeasure, and employees of any of the above. The exception to immunity from liability is that a defendant who engaged in willful misconduct would be subject to liability under a new federal cause of action, though not under state tort law, if death or serious injury results. Division C's limitation on liability is a more extensive restriction on victims' ability to recover than exists in most federal tort reform statutes. However, victims could, in lieu of suing, accept payment under a new "Covered Countermeasure Process Fund," if Congress appropriates money for this fund. The first PREP Act declaration was issued on January 26, 2007, to limit liability for the administration of the H5N1 influenza vaccine. Since then, declarations have been issued covering countermeasures against other strains of influenza (including H1N1), anthrax, botulism, small pox, and acute radiation syndrome. |
M ore than two dozen legislative proposals in the 114 th Congress included provisions concerning water use efficiency, or water conservation. These legislative proposals did not seek to set specific enforceable water use efficiency standards or goals. Rather, most sought to encourage or provide incentives for practices, technologies, and measures to achieve improved water use efficiency. Some of the proposals were standalone bills that solely addressed water use efficiency and conservation. Some were components of bills that addressed western U.S. drought; critical water resource conditions in western states have contributed to national policy proposals that include water use efficiency. Some of the water use efficiency proposals were included in comprehensive energy policy bills. That is, water efficiency and energy efficiency were linked in some legislation, although water use efficiency was generally the secondary policy consideration in such bills. Many of the water use efficiency proposals also had been introduced in previous Congresses, but did not advance. The 114 th Congress legislation can be broadly grouped in five categories of proposals, which are described in this report. Codifying the WaterSense program, Research and development, Water use efficiency in buildings, especially federal buildings, Financial and technical assistance, and Tax incentives. A few bills passed the Senate or House, and one measure that addressed water use efficiency in part (i.e., water use in buildings) was enacted. WaterSense is a voluntary labeling and recognition program created by the Environmental Protection Agency (EPA) in 2006 as a companion to Energy Star, which is a similar program administered by EPA and the Department of Energy (DOE). Energy Star is authorized in law (Energy Policy Act of 2005, P.L. 109-58 , 42 U.S.C. §6294a), while WaterSense is not. Both programs involve partnerships between government, manufacturers, and others that seek to help consumers and businesses easily identify highly efficient products, homes, and buildings, with Energy Star focusing on energy efficiency and WaterSense focusing on water efficiency. While the latter program's central focus is on reducing water use, EPA recognizes that water efficiency also results in energy savings. The program's overall goal is to identify and certify through labeling products that are at least 20% more efficient than standard products available in the market. Through WaterSense, EPA has so far issued performance-based water-use specifications for seven product categories and has others under development. EPA also has issued a New Home Specification that incorporates existing criteria for indoor products and outdoor uses. Once a specification for a product category is established, in order to obtain a WaterSense label, manufacturers submit their products for testing by third-party laboratories or certifying bodies that have been licensed by EPA. Legislative proposals to formally establish the program in law have been introduced a number of times since the 111 th Congress. One of the arguments in support of codifying the WaterSense program legislatively has been that, because the program is an EPA administrative initiative, it is difficult for EPA program managers and supporters to call on resources to expand its activities; establishing the program in law, especially with authorization of appropriations, would give the program status to address this problem, proponents say. The program is funded through regular appropriations to EPA that have been less than $5 million annually, or less than 10% of amounts appropriated for the Energy Star program. A number of bills were introduced in the 114 th Congress to codify in law a WaterSense program at EPA, direct the EPA Administrator to establish and maintain water-efficiency performance standards, promote the WaterSense label, review and update WaterSense specifications, and provide information to the public. Bills to establish WaterSense in law included the following. S.Amdt. 3221 , an amendment to S. 2012 , the Energy Policy Modernization Act, was approved by the Senate on April 19, 2016. It would, among other provisions, direct EPA to review existing WaterSense specifications not more than six years after adoption and make revisions to achieve additional water savings. Language identical to the provision in S. 2012 was included in S. 2848 , the Water Resources Development Act of 2016, which the Senate passed on September 15, 2016. Comprehensive water resources development legislation subsequently was passed by the House and Senate ( S. 612 ), but it did not include the WaterSense provisions. Another comprehensive energy policy bill introduced in the Senate, S. 2089 , the American Energy Innovation Act, included a provision to codify WaterSense. It proposed to authorize appropriations of $5 million annually for four years, to be adjusted for inflation in subsequent fiscal years. S. 176 , the Water in the 21 st Century Act, proposed to codify the WaterSense program at EPA and authorize a total of $50 million in appropriations over four years, beginning at $5 million and increasing to $20 million in the fourth year. Similar House legislation was H.R. 291 . Three bills that expressly addressed the western U.S. drought, S. 1894 and S. 2533 / H.R. 5247 , proposed to similarly codify the program. These bills proposed to authorize appropriations of $5 million annually for five years. H.R. 8 , the North American Energy Security and Infrastructure Act, a comprehensive energy policy bill passed by the House in December 2015, included a provision to codify the WaterSense program; however, this bill did not authorize appropriations to implement the program. H.R. 3720 , the Water Advanced Technologies for Efficient Resource Use Act, likewise proposed to establish the program in law. It proposed to authorize a total of $87.5 million in appropriations, beginning at $7.5 million and increasing to $50 million in the fourth year, to be adjusted for inflation in subsequent fiscal years. Bills in the 114 th Congress included varied approaches to research and development of technologies to achieve improved water use efficiency. S. 653 , the Water Resources Research Amendments Act of 2015, proposed to reauthorize the Water Resources Research Act (P.L. 88-379, as amended) and provide grant funding to Water Resources Research Institutes in each state, territory, and the District of Columbia for applied water supply research through FY2020. This bill, which the Senate passed in June 2015, added research into alternative approaches to water use efficiency and energy efficiency of wastewater treatment works to the scope of the nation's water research agenda. Other bills with similar provisions included H.R. 291 , S. 176 , and S. 2848 . Several bills concerned with the western U.S. drought included provisions directing the U.S. Geological Survey to establish a water data system to "advance the availability, timely distribution, and widespread use of water data and information for water management, education, research, assessment, and monitoring purposes." Underlying these provisions is concern that there is need for more and better data on water use that would assist decisionmaking by government, water managers, communities, and the private sector. Bills with these "open water data system" provisions included H.R. 291 , S. 176 , S. 1837 , and S. 1894 . The purpose of S. 1485 , the Water Efficiency Innovation Act, was "to provide for the advancement of energy-water efficiency research, development, and deployment activities." To do so, it proposed to direct the Department of Energy to advance energy efficiency in water and wastewater treatment facilities, including systems that treat municipal, industrial, and agricultural waste. H.R. 4653 was a bill that broadly addressed financial and technical management of water systems that are subject to requirements of the Safe Drinking Water Act. Among its provisions, this bill proposed to direct EPA to develop criteria for effective water loss and leak control technology to be used by water systems. Leak detection has been referred to as an "under-appreciated" water conservation strategy. Buildings are estimated to account for approximately 13% of total water consumed in the United States per day. Of that total, 26% is estimated to be used by commercial building occupants, and 74% by homeowners. EPA's WaterSense program focuses primarily on water use efficiency of products used inside and outside residential buildings, but some of its specifications (e.g., for bathroom fixtures) also apply to products used in commercial buildings such as hotels, motels, restaurants, schools, and office buildings. It is sometimes argued that, on matters of policy, the federal government should lead by example. In that regard several existing policy requirements direct federal agencies to use water-efficient products and services. Section 423 of the Energy Independence and Security Act of 2007 ( P.L. 100-140 , 42 U.S.C. §17083) directs the energy managers of federal buildings to conduct water and energy evaluations of their buildings and to implement energy and water efficiency measures identified through those audits. Executive Order 13423 (January 26, 2007) directed federal agencies to reduce water consumption intensity through life-cycle cost-effective measures by 2% annually, or 16% by the end of FY2015, and to acquire goods and services that are energy-efficient, water-efficient, and use recycled content. Executive Order 13693 (May 25, 2015) is the most recent Executive Order concerned with federal environmental, energy, and transportation management. In particular, it extends to FY2025 the schedule in E.O. 13423 requiring federal buildings to reduce water consumption intensity by 2% annually, or by 36% relative to a FY2007 baseline. It also broadens the mandate to include reducing agency potable water consumption intensity; reducing agency industrial, landscaping, and agricultural water consumption; installing water meters in federal buildings to improve water conservation and management; and installing green infrastructure features to help with stormwater and wastewater management. It directs that all new construction of federal buildings greater than 5,000 gross square feet be designed, where feasible, to be "water net-zero" by FY2030 (i.e., to return the equivalent amount of water as was withdrawn from all sources through practices such as recycle and reuse). Further, it directs agencies to give purchase preference to WaterSense-certified products and services and products designated under the Department of Energy's Federal Energy Management Program (FEMP). Several bills in the 114 th Congress addressed aspects of water use efficiency in federal buildings. H.R. 3720 proposed to build on E.O. 13693 to direct federal agencies to give purchase preference to WaterSense-certified products and services and FEMP-designated products. S. 869 , the All-of-the-Above Federal Building Energy Conservation Act, proposed to authorize DOE to establish energy performance requirements for federal buildings that consider energy and water savings. It also proposed to require federal energy managers to perform energy and water evaluations and to implement energy and water savings measures. Similar provisions were included in S. 720 / H.R. 2177 , the Energy Savings and Industrial Competitiveness Act. H.R. 614 , the Savings, Accountability, Value, and Efficiency (SAVE) Act, similarly proposed to direct federal building energy managers to adopt identified energy and water conservation savings. Two bills included provisions that addressed the energy and water savings potential of thermal insulation. The bills were H.R. 568 , the Thermal Insulation Efficiency Improvement Act, and H.R. 8 . They proposed to require DOE to report to Congress on the impact of thermal insulation on both energy and water use systems for potable hot and chilled water in federal buildings, and the return on investment of installing such insulation. One enacted bill, S. 535 , the Energy Efficiency Improvement Act of 2015 ( P.L. 114-11 ) in part addresses energy and water use efficiency in commercial buildings. Among its provisions, the bill requires the General Services Administration (GSA) to develop and publish model leasing provisions to encourage building owners and tenants to use cost-effective energy efficiency and water efficiency measures in commercial buildings. It also requires GSA to develop policies and best practices to implement the measures for the realty services provided by the GSA to federal agencies and to make these policies and practices available to state, county, and municipal governments for their use in managing owned and leased buildings. The largest number of water use efficiency bills in the 114 th Congress proposed to provide technical and financial assistance for adopting or demonstrating practices or measures that conserve water. A number of the bills proposed to assist owners and operators of public water systems and water utilities in adopting or installing water-efficient systems, while a few proposed to help provide incentives for consumers to purchase and install water-efficient products or services. Several bills ( H.R. 8 , S. 2012 , S. 2089 , S. 886 , and H.R. 3143 ) included similar provisions to establish a Smart Energy and Water Efficiency Pilot Program administered by DOE to award grants to water systems, utilities, and water districts to demonstrate innovative technologies for energy and water efficiency. The House passed H.R. 8 in December 2015, and the Senate passed S. 2012 in April 2016. Separate legislation, S. 2673 , proposed to establish a grant program at EPA for technical assistance and financing of innovative technologies to be used by public water and wastewater systems to address a range of project types including water conservation, water quality, drinking water, and treating agricultural, municipal, and industrial wastewater. Authorized funding under this program would be $50 million per year. S. 2848 included a similar grant program. H.R. 2177 and S. 720 included provisions directing the Department of Energy to work with manufacturers to identify opportunities for improved water-efficient processes in manufacturing, along with technical assistance on energy efficiency, pollution prevention, and natural resource conservation in manufacturing. Several bills ( S. 176 , H.R. 291 , S. 741 , H.R. 1278 , and H.R. 4653 ) included provisions that proposed to authorize EPA to award grants to owners and operators of water systems to increase the systems' resilience to changes in hydrologic conditions. Among other eligible uses would be projects to conserve water or enhance water use efficiency of the water system. The legislation proposed to authorize $50 million per year for five years. Two bills that addressed the western U.S. drought ( S. 1837 and H.R. 2983 ) and two standalone measures ( H.R. 1775 and S. 896 ) included provisions that proposed to authorize EPA to award planning, development, and implementation grants for innovative stormwater management projects. A fifth bill ( H.R. 4648 ), while not directly authorizing assistance, proposed to establish in law the authority to reserve a portion of Clean Water Act infrastructure funding for such projects. Innovative stormwater management techniques, such as green infrastructure projects using natural systems (e.g., planting trees and restoring wetlands), are intended to mimic natural systems as a way to reduce and treat stormwater at its source, thus saving the water resource and improving water quality. Three bills ( S. 176 , H.R. 291 , and H.R. 3720 ) proposed to authorize assistance to state, local, or tribal governments; wastewater, water, or energy utilities; or nonprofit organizations to support incentive programs for residential water-efficient products and services. Throughout the United States, a number of local governments and water and energy utilities offer rebates, vouchers, or other types of incentives to consumers, but providing resources to support such programs can be challenging. The legislation proposed to authorize EPA to provide assistance to eligible entities for such consumer incentive programs. Finally, several bills in the 114 th Congress proposed to establish a new federal financing program for water infrastructure projects in western states. One of the goals of funded projects would be water efficiency and energy efficiency in development of water supply projects. The proposal, called the Reclamation Infrastructure Finance and Investment Act (RIFIA), is modeled after Water Infrastructure Finance and Investment Act (WIFIA) legislation that Congress enacted in 2014 ( P.L. 113-121 ). WIFIA is to be implemented by EPA and the Army Corps of Engineers throughout the United States; RIFIA would be implemented by the Bureau of Reclamation solely in western states. Bills that contained provisions to provide federal credit assistance to projects in the western states include S. 176 / H.R. 291 , S. 1837 , S. 1894 , S. 2533 / H.R. 5247 , and H.R. 6022 . The final category of bills in the 114 th Congress proposed to use the federal tax code to provide incentives for improved water use efficiency. Two bills ( H.R. 2983 and S. 1837 ) proposed to amend the Internal Revenue Code of 1986 to provide a refundable federal tax credit for the purchase and installation of a qualified water-harvesting system. Rain barrels and similar rainwater harvesting systems collect stormwater runoff and store the water for subsequent uses such as irrigation, toilet flushing, washing clothes, or washing vehicles, thus reducing water use and managing stormwater. A few states (for example, Arizona and Texas) currently allow tax exemption under state law for installing such systems. Two other bills ( H.R. 3720 and H.R. 4615 ) proposed to amend the Internal Revenue Code of 1986 to provide that rebates or other types of financial incentives received for installing water conservation measures are exempt from federal taxation. Energy efficiency rebates have been exempt from federal tax since 1992. These bills were intended to achieve the same treatment for rebates or other assistance provided for water efficiency equipment or measures. This report has identified five categories of bills in the 114 th Congress that addressed water use efficiency, or water conservation, approaches and policy. A significant number of bills—often more than two dozen—have similarly been introduced in prior Congresses. Many of the 114 th Congress proposals have been introduced multiple times. For example, five bills to establish the WaterSense program in law were introduced in the 111 th Congress, and eight measures to do so were introduced in 2015 and 2016. The number of bills that proposed to authorize grants or other financial assistance has increased—five bills were proposed in the 111 th Congress, while 20 were introduced in 2015 and 2016. Some of the policy approaches described in this report were included in bills that addressed multiple aspects of water use efficiency. One such bill is H.R. 3720 , with provisions that touched on four aspects of the issue—WaterSense, water use in buildings, financial assistance, and tax incentives. In other proposals, water use efficiency was one of a number of issues, but not the main issue, contained in comprehensive policy proposals on topics such as energy policy (e.g., H.R. 8 , S. 2012 , and S. 2089 ), water policy generally ( H.R. 291 and S. 176 ), or solutions to the western U.S. drought ( S. 1837 , S. 1894 , S. 2533 / H.R. 5247 , and H.R. 2983 ). The Senate and House passed separate energy policy bills ( S. 2012 and H.R. 8 ), but did not reach consensus on a final bill before the end of the 114 th Congress. In December 2016, Congress enacted legislation that addressed western U.S. drought ( S. 612 ), but it did not include the water efficiency provisions of separate drought bills. In the area of energy policy, including energy efficiency considerations, a body of legislation exists that broadly defines a federal role in research, technical and financial assistance, and information. Currently, no similar statement of federal policy exists regarding water use efficiency or conservation. At the same time, interest has increased to address the pressures on water resources—pressures of access, scarcity, and quality due to population and economic growth, pollution, and other challenges—which some analysts believe is equally important as a national issue as is energy. | More than two dozen legislative proposals in the 114th Congress were introduced that included provisions concerning water use efficiency, or water conservation, in nonagricultural sectors. These legislative proposals did not seek to set specific enforceable water use efficiency standards or goals. Rather, most sought to encourage or provide incentives for adoption of practices, technologies, and measures to achieve improved water use efficiency. The 114th Congress legislation can be broadly grouped in five categories of proposals. Codifying the WaterSense program. WaterSense is a voluntary labeling and recognition program that seeks to help consumers and businesses identify highly water-efficient products, services, and homes. It was established administratively by the Environmental Protection Agency in 2006. Nine legislative measures included provisions to establish the program in law. Research and development. Several bills focused on research and development aspects of water use efficiency, including proposals that addressed needs for more and better water use data. Research also is examining technology advances in water and wastewater treatment facilities that would achieve water and energy savings. Water use efficiency in buildings. Buildings are estimated to account for about 13% of total water consumed in the United States; one-quarter of that total is used by commercial buildings, and three-quarters by residences. It is sometimes argued that the federal government should lead by example. Thus, several bills in the 114th Congress addressed aspects of water use efficiency in federal buildings. Financial and technical assistance. The largest number of bills in the 114th Congress proposed to provide technical and financial assistance for identifying, adopting, or demonstrating practices or measures that conserve water. A number of the bills proposed to assist owners and operators of public water systems and water utilities in adopting or installing water-efficient systems, while a few proposed to help provide incentives for consumers to purchase and install water-efficient products or services. Federal tax incentives. Several bills proposed to use the federal tax code to provide incentives for adopting or installing equipment or practices to save water, such as a federal tax credit for purchasing qualified equipment or federal tax exemption of rebates or other financial incentives received for installing water conservation measures. Some of the policy approaches described in this report were included in bills that addressed multiple aspects of water use efficiency alone, such as WaterSense and financial assistance. In other proposals, water use efficiency was one of a number of issues, but not the main issue, contained in a comprehensive policy proposal on topics such as energy policy, water policy generally, or solutions to the western U.S. drought. A few of the bills discussed here passed the Senate or House during the 114th Congress, and one measure that addressed water use efficiency in part (i.e., water use in buildings) was enacted. Many of these proposals also were introduced in previous Congresses. |
The Constitution states that those accused of a federal crime shall be tried in the state in which the crime occurred and by a jury selected from the district in which the crime occurred: The Trial of all Crimes . . . shall be by Jury . . . 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. In all criminal prosecutions, the accused shall enjoy the right to . . . trial, by an impartial jury of the State and district wherein the crime shall have been committed, which district shall have been previously ascertained by law. . . . The Federal Rules of Criminal Procedure mirror the Constitution's requirements: "Unless a statute or these rules permit otherwise, the government must prosecute an offense in a district where the offense was committed. . . ." Statutory provisions supplement the rules, and the courts implement them in light of constitutional demands. Subject to constitutional or statutory limitations, the government decides where a prosecution is to begin and bears the burden of establishing that the place it has selected is permissible. This obligation extends to every count within the indictment or information. Courts differ over whether venue can be accurately described as an element of the offense, but agree that the government need only establish venue by a preponderance of the evidence. Moreover, venue is not considered jurisdictional. Therefore, a court in an improper venue enjoys the judicial authority to proceed to conviction or acquittal, if the accused waives objection. If the absence of proper venue is apparent on the face of indictment or information, failure to object prior to trial constitutes waiver. If the failure of proper venue is not apparent on the face of the charging document and is not established during the presentation of the government's case in the main, objection may be raised at the close of the government's case. Absent a contrary statutory provision, the district in which venue is proper, the district in which the offense was committed, "the ' locus delicti [of the charged offense,] must be determined from the nature of the crime alleged and the location of the act or acts constituting it.' In performing this inquiry, a court must initially identify the conduct constituting the offense (the nature of the crime) and then discern the location of the commission of the criminal acts." The words Congress uses when it drafts a criminal proscription will establish where the offense occurs and therefore the district or districts in which venue is proper. For some time, the courts and academics used a so-called "verb test" as one means of identifying where an offense was committed. So, for example, an offense that applied to anyone who received a bribe could be tried where a bribe was received. The test may still be useful to determine where venue is proper, but particularly in the case of purported multi-district offenses it is not necessarily the last word. As the Supreme Court explained in United States v. Rodriguez-Moreno , "the 'verb test' certainly has value as an interpretative tool; it cannot be applied rigidly, to the exclusion of other relevant statutory language. The test unduly limits the inquiry into the nature of the offense and thereby creates a danger that certain conduct prohibited by statute will be missed." The test endorsed in Rodriguez-Moreno looks to where the "conduct" element or elements of the offense occur. Other than when the accused seeks a change of venue, venue is only an issue when a crime occurs, or can be said to occur, in more than one district or outside of any district. Section 3237 governs venue for certain multi-district crimes. It consists of three parts: one for continuing offenses generally, another for offenses involving elements of the mails or interstate commerce, and a third for tax offenses. The first paragraph of Section 3237 is the oldest portion of the statute. Originally enacted during Reconstruction as part of the general conspiracy statute now found in 18 U.S.C. § 371, the Revised Statutes made it applicable to all multi-district federal crimes. Slightly modified in the 1948 revision, it now provides Except as otherwise expressly provided by enactment of Congress, any offense against the United States begun in one district and completed in another, or committed in more than one district, may be inquired of and prosecuted in any district in which such offense was begun, continued, or completed. Over the years, there has been a certain ebb and flow in the Supreme Court's reading of the venue requirements of the section. The Court first considered the provision in 1890 in Palliser v. United States , when it held that prosecution of an offense under the postal bribery statute might be held in the District of Connecticut in which the letter offering a bribe was received even though the accused had acted entirely outside of the district. The Court expressed no opinion as to whether the offense might also have been tried in the district in New York from which the letter had been sent. Two years later, the Court held that the trial of an indictment for causing the mail delivery of lottery material might be held in the district in which the mail was delivered, but observed that "perhaps" trial might also be held in the district in which the material was deposited in the mail. In later years, the Court concluded that the failure to file required documentation with immigration officials was not a continuous offense and must be prosecuted in the district where the document had to be filed; but that an alien crewman's unlawfully remaining in the United States was a continuous offense and consequently that venue "lies in any district where the crewman willfully remains." In 1998, in United States v. C abrales , the Supreme Court held that money laundering and the crimes that generated the laundered funds did not automatically form one continuous criminal episode. Thus, Cabrales's offense of laundering drug proceeds, generated by drug trafficking in Missouri, but laundered in Florida, should not have been tried in Missouri. The Court was quick to point out, however, that under different circumstances, venue over a money laundering charge might be proper in the district in which its predicate offenses occurred. The next year, the Court confirmed in United States v. Rodriguez-Moreno that venue is proper in any district in which a conduct element of the offense occurs. Conspiracy, with its multiple players with multiple roles, would seem to fit Section 3237's description of a crime that may begin, continue, or end in more than one district. The crime of conspiracy under the general statute is not complete until one of the conspirators takes some affirmative action in furtherance of the criminal scheme. This affirmative action (overt act) is an element of the crime. In such cases, it would come as no surprise if venue were said to be proper wherever an overt act was committed, that is, wherever a conduct element of the crime occurred. An overt act, however, is not an element of several individual federal conspiracy statutes, such as the controlled substance conspiracy statute, for example. In such cases, is venue nevertheless proper wherever an overt act in furtherance of the conspiracy is committed? It appears so. At least one federal appellate court has muffled the impact of the overt act rule by limiting it to cases in which a co-conspirator's venue-expanding overt act is foreseeable by his fellows. Those who aid and abet the commission of a federal crime are punishable as principals. The government may try aiders and abettors either where they provided assistance or where the underlying offense may be prosecuted. As early as 1908 in Armour Packing Co. v. United States , the Supreme Court upheld a conviction following a trial in the Western District of Missouri for the offense of continuous carriage by rail of the defendant's products from Kansas to New York at an illegally reduced rate. The Court concluded that for venue purposes "[t]his is a single continuing offense … continuously committed in each district through which the transportation is received at the prohibited rate." The Court's most recent venue decision in 1999 confirmed the continued vitality of this view when it held that if Congress so crafts a criminal offense as to embed as one of its elements a predicate continuing offense, venue over the new crime is proper either wherever the new offense is committed or wherever the continuing predicate offense occurs. In United States v. Rodriguez-Moreno , the defendant had been tried in New Jersey for using a firearm in Maryland during and in relation to a crime of violence, i.e., a kidnapping that had begun in New Jersey. The Court pointed out that the crime in question, 18 U.S.C. § 924(c)(1), "contains two distinct conduct elements – as is relevant in this case, the 'using and carrying' of a gun and the commission of a kidnaping." A defendant commits a crime and may be tried where he commits any of its conduct elements, it explained. Kidnaping is a crime that continues from capture until release and therefore can be tried in any place from, through, or into which the victim is taken, and the appended gun charge travels with it. As the Court explained: The kidnaping, to which the §924(c)(1) offense is attached, was committed in all of the places that any part of it took place, and venue for the kidnaping charge against respondent was appropriate in any of them. (Congress has provided that continuing offenses can be tried 'in any district in which such offense was begun, continued, or completed,' 18 U.S.C. § 3237(a).) Where venue is appropriate for the underlying crime of violence [, in this case kidnaping,] so too it is for the § 924(c)(1) offense. In addition to kidnaping, the lower federal appellate courts have found venue proper based on the continuing nature of violations involving, e.g., (1) failure to pay child support (18 U.S.C. § 228); (2) unlawful possession of a firearm (18 U.S.C. § 922(g)); (3) false statements (18 U.S.C. § 1001); (4) mail fraud (18 U.S.C. § 1341); (5) wire fraud (18 U.S.C. § 1343); (6) bank fraud (18 U.S.C. § 1344); (7) violent crimes in aid of racketeering (18 U.S.C. § 1959); and (8) possession of controlled substances with the intent to distribute (21 U.S.C. § 841). Continuing offenses and the first paragraph of subsection 3237(a) present one other puzzle: is venue proper in any district in which the crime's effects are felt? The Court expressly declined to address the issue in Rodriguez-Moreno : "The Government argues that venue also may permissibly be based upon the effects of a defendant's conduct in a district other than the one in which the defendant performs the acts constituting the offense. Because this case only concerns the locus delicti , we express no opinion as to whether the Government's assertion is correct." The government's brief in the case declared that "[v]enue may also be based on the effects of a defendant's conduct in another district," and cited Armour Packing Co. (multi-state rail transportation at unlawful rate), supra , and the mail cases discussed below. The brief also cited lower court obstruction of justice and Hobbs Act cases. The Hobbs Act outlaws the obstruction of interstate or foreign commerce through the use of violence or extortion. Venue for a Hobbs Act violation is generally considered proper in any district in which there is an obstruction of commerce. An earlier line of cases suggested that an obstruction of justice—intimidation or bribery of witness, bail jumping, or the like—might be tried in the district in which the proceedings were conducted even when the act of obstruction occurred elsewhere. The line gave birth to a suggestion that venue might be predicated upon the impact of the crime within a particular district especially when the offense involved other "substantial contacts" with the district of victimization. After Rodriguez-Moreno , the courts continue to refer to an "effects" or "substantial contacts" test for venue. Some have held that the effect must also constitute a "conduct element" under the statute defining the offense; and that venue may not be based on elements of the offense which are not conduct elements. Yet, the courts are divided over the question of whether venue can be proper in a district based only on effect or substantial contacts there. The second paragraph of Section 3237(a) authorizes the prosecution of offenses involving importing, travel in interstate or foreign commerce, or use of the mail in any district from, through, or into which "commerce, mail matter, or [an] imported object or person moves." The paragraph first appeared in the revision of Title 18 of the United States Code in 1948. In 1944, the Supreme Court in United States v. Johnson had held that under the statute at issue an unlawful use of the mail had to be tried in the place from which the mail was sent rather than in the place in which it was received. The Reviser's Notes that accompany Section 3237 explain that the subparagraph is a response to the decision in Johnson . One scholar has questioned whether the Court's Johnson decision warranted such an expansive response. Perhaps for this reason although the subsection has been used under a wide range of circumstances, its invocation has not always been successful. The tax subsection of the multi-district provision, Subsection 3237(b), is in fact a limited transfer provision under which the accused may ask to be tried in the district in which he resided at the time when the alleged offense occurred. Subsection 3237(b) applies only in the case of prosecutions under 26 U.S.C. § 7203 (willful failure to file a return, supply information or pay a tax), or, if the government seeks to prosecute in a district where venue exists solely because of a mailing to the Internal Revenue Service, under 26 U.S.C. § 7201 (attempted tax evasion) or § 7206(1), (2), or (5) (various frauds and false statements). Congress added Subsection 3237(b) in 1958 under the view that prosecution in the district where a return was received or due rather than the district in which the taxpayer resided visited inappropriate inconvenience and expense upon taxpayers, their attorneys and witnesses. A qualified defendant must file his request to be tried in his home district within 20 days. The court may not grant a request that is not timely. Sections 3235 and 3236 provide special venue requirements in murder cases. Section 3235 dates from the First Congress, and states that "the trial of offenses punishable with death shall be had in the county where the offense was committed, where that can be done without great inconvenience." The cases under the section are few and rarely seem to favor the accused. For instance, more than one court has held that the section does not apply to offenses punishable with death unless the charges are for "unitary" murder offenses. As in other instances, the benefits of Section 3235 can be waived if the accused fails to move to dismiss for improper venue. Moreover, the determination that the benefit can be denied in the face of "great inconvenience" is a matter within the trial court's discretion. Courts have found great inconvenience when there was no federal courthouse within the county in which the crime was committed; when a majority of the government's witnesses were located outside of the county in which the crime was committed; and when observance would overburden court resources. Section 3236 provides that for venue purposes in murder and manslaughter cases, the offense will be deemed to have occurred where the death-causing act is committed. Congress enacted Section 3236 in apparent reaction to a Supreme Court observation that a federal murder case could not be brought if an injury were inflicted within a district in the United States but death occurred elsewhere. Here too the case law is sparse. Two trial courts have held that Section 3236 only applies to "unitary" murder cases and thus does not apply to murders committed in aid of racketeering in violation of 18 U.S.C. § 1959. A third held that Section 3236 must yield where Section 3237 (venue in multiple districts) is applicable. And an appeals court has held that under Section 3236 a father who battered his three-year-old daughter in one district may be tried in a second district where she died of pneumonia as a consequence of his negligence there. Occasionally, Congress has enacted special venue provisions for particular crimes. These provisions dictate venue decisions unless they contravene constitutional requirements e.g ., (1) 8 U.S.C. § 1328 (importation of aliens for immoral purposes); (2) 8 U.S.C. § 1329 (immigration offenses generally); (3) 15 U.S.C. § 80a-43 (investment company offenses); (4) 15 U.S.C. § 298 (falsely stamped gold or silver); (5) 18 U.S.C. § 228(e) (failure to pay legal child support obligations); (6) 18 U.S.C. § 1073 (flight to avoid prosecution); (7) 18 U.S.C. § 1074 (flight to avoid prosecution for property damage); (8) 18 U.S.C. § 1512( i ) (obstruction of justice); (9) 18 U.S.C. § 1956( i ) (money laundering); (10) 18 U.S.C. § 2339(b) (harboring terrorists); (11) 18 U.S.C. § 2339A(a) (material support of terrorists); (12) 21 U.S.C. § 959(d) (manufacturing or distributing controlled substances abroad for importation into the United States); and (13) 46 U.S.C. § 70504(b) (Maritime Drug Law Enforcement offenses). Special venue provisions governing prosecution of a few other crimes simply replicate the features of Rule 18, i.e. , a violation is to be prosecuted in the district in which it occurs: (1) 15 U.S.C. § 78aa (securities offenses); (2) 15 U.S.C. § 80b-14 (investment adviser offenses); (3) 15 U.S.C. § 715i(c) (interstate transportation of petroleum products); (4) 15 U.S.C. § 717u (natural gas offenses); and (5) 21 U.S.C. § 17 (falsely labeled dairy or food products). The Constitution recognizes that certain crimes, like piracy, may be committed beyond the geographical confines of any federal judicial district. Article III, after declaring that the trial of crimes shall be in the state in which they are committed, adds, "but when not committed within any State, the Trial shall be at such Place or Places as the Congress may by Law have directed." The First Congress decided that "the trial of crimes committed on the high seas, or in any place out of the jurisdiction of any particular state, shall be in the district where the offender is apprehended, or into which he may first be brought." The approach changed little over the years until the early 1960s. Then, Congress amended the provision to address two problems: (1) to permit a single trial for crimes committed overseas by a group of offenders who scattered when they returned to this country, and (2) to toll the statute of limitations by permitting indictment when the suspect was overseas but not clearly a fugitive. Section 3238 now reads as follows: The trial of all offenses begun or committed upon the high seas, or elsewhere out of the jurisdiction of any particular State or district, shall be in the district in which the offender, or any one of two or more joint offenders, is arrested or is first brought; but if such offender or offenders are not so arrested or brought into any district, an indictment or information may be filed in the district of the last known residence of the offender or of any one of two or more joint offenders, or if no such residence is known the indictment or information may be filed in the District of Columbia. The federal appellate courts disagree over whether Section 3238 may apply when an offense is committed in part within the United States and in part outside the United States. The Ninth Circuit and perhaps the Second Circuit believe that Section 3238 only applies to offenses that, as the caption says, are "not committed in any district." The Third, Fourth, and Fifth Circuits believe that it need not be restricted to offenses committed wholly outside the United States, and applies to offenses that, as the section says, are "begun or committed ... elsewhere." The district to which Section 3238 refers includes the districts of the U.S. District Courts in the territories, but does not include the geographical confines of the other courts of the U.S. territories that have not been designated "district courts." The district in which a defendant is first arrested for purposes of Section 3228 is the district "where the defendant is first restrained of his liberty in connection with the offense charged ." Thus, venue in a particular district by operation of Section 3238 is no less proper because the defendant was initially arrested in another district under another charge, or because he entered the United States in another district prior to his indictment in the District of Columbia and subsequent arrest. Conversely, venue is not proper in a second district after an accused has been arrested for the extraterritorial offense in another district. The "last known address" or District of Columbia basis for venue under Section 3238 is an alternative basis for venue over an extraterritorial offense available to the exclusion of venue elsewhere when the offender has not first been arrested in or brought to another district. In the case of multiple co-defendants, venue over an extraterritorial offense is proper for all offenders in any district in which it is proper for one of them. Venue is no less proper because the authorities arranged for the arrest of a co-defendant within a particular district. There is another, alternative venue statute for certain espionage related cases, Section 3239: The trial for any offense involving a violation, begun or committed upon the high seas or elsewhere out of the jurisdiction of any particular State or district, of— (1) section 793, 794, 798, [espionage] or section 1030(a)(1) [obtaining classified information by unauthorized computer access] of this title; (2) section 601 of the National Security Act of 1947 (50 U.S.C. 421)[disclosure of the identities of covert agents]; or (3) section 4(b) or 4(c) of the Subversive Activities Control Act of 1950 (50 U.S.C. 783(b) or (c))[receipt of classified information by foreign agents]; may be in the District of Columbia or in any other district authorized by law. Section 3239 affords the government the option to bring an exterritorial espionage case in the District of Columbia when it would otherwise be precluded from doing so under Section 3238. Section 3238 permits the government to bring an extraterritorial espionage case in the District of Columbia if the offender's residence is unknown. If the offender's last address in this country is known, Section 3238 requires that the case be brought there or in the district in which the offender is first arrested or brought or any other district in which venue is otherwise proper. But without more the option to bring an extraterritorial espionage case in the District of Columbia is not necessarily available in all cases under Section 3238. Section 3239 changes that. For Prejudice : While the Constitution promises the accused a trial in the district in which the offense was committed, it also promises him a trial by an impartial jury. To fulfill this second promise, Rule 21(a) of the Federal Rules of Criminal Procedure entitles the accused to a change of venue for trial in another district when "so great a prejudice against the defendant exists in the transferring district that the defendant cannot obtain a fair and impartial trial there." Pre-trial publicity usually supplies the basis for a change of venue request under Rule 21(a). The applicable standard is a demanding one. A transfer will ordinarily only be granted when no less disruptive curative measures will suffice. To create so great a prejudice that an impartial trial is not possible, media coverage must have been pervasive, inflammatory, contemporaneous to trial, and produced a serious contamination of the jury pool. Courts have rejected transfer requests under Rule 21(a) in the face of one or more factors suggesting a fair trial was possible or had been conducted: for example, when the pool of potential jurors was large and diverse; when the coverage was less than pervasive; when the coverage had subsided between the commission or discovery of the crime or arrest of the accused and the time of trial; when the coverage was not overwhelmingly inflammatory or sensational; when prospective jurors were subject to thorough voir dire, particularly if the defendant raised no objections at the time; or when evidence suggested that an untainted jury nevertheless might be or might have been selected. In a compelling case, the court may order trial to be held elsewhere within the district under Rule 18, which allows the trial court to set the place of trial, and in a rare case may grant a change of venue. In some instances, a superseding indictment from the original district may follow the defendant to the district to which his case has been transferred. For Convenience : Under Rule 21(b) of the Federal Rules of Criminal Procedure, "Upon the defendant's motion, the court may transfer the proceeding, or one or more counts, against that defendant to another district for the convenience of the parties, any victim, and witnesses and in the interest of justice." When weighing a motion for a transfer under Rule 21(b), the lower federal courts frequently point to the 10 factors mentioned in the Supreme Court's 1994 decision, Platt v. Minnesota Mining & Manufacturing Co. : (1) location of [the] defendant; (2) location of possible witnesses; (3) location of events likely to be in issue; (4) location of documents and records likely to be involved; (5) disruption of defendant's business unless the case is transferred; (6) expense to the parties; (7) location of counsel; (8) relative accessibility of place of trial; (9) docket condition of each district or division involved; and (10) any other special elements which might affect the transfer. The motion runs to the discretion of the trial court, and an appellate court will only overturn the trial court's decision for an abuse of discretion, such as a failure to apply the proper standard. The defendant bears the burden of establishing that convenience and the interests of justice compel a transfer. Courts often begin with the observation that, basic venue requirements having been satisfied, trial should be held in the original district, i.e ., where the government elected to bring the case. Even if the prospective inconvenience for witnesses and prosecutors does not trump a defendant's transfer request, the interests of the court may. For Plea and Sentencing : A defendant, charged with an indictable offense in another district who wishes to plead guilty, may petition the court in that district for a transfer of venue to the district in which he is located. By definition, the rule requires the pendency of an indictment, information, or complaint in the district from which the accused seeks the transfer of venue. Prosecutors in both districts must concur. Should the defendant subsequently fail to plead as agreed or should the receiving court refuse to accept the plea, the transfer is revoked. Juveniles who wish to waive federal delinquency proceedings enjoy similar benefits. | The United States Constitution assures those charged with a serious federal crime that they will be prosecuted in the state and district in which the crime occurred. A crime occurs in any district in which any of its "conduct" elements are committed. Some offenses are committed entirely within a single district; there they may be tried. Other crimes have elements that have occurred in more than one district. Still other crimes have been committed overseas and so have occurred outside any district. Statutory provisions, court rules, and judicial interpretations implement the Constitution's requirements and dictate where multi-district crimes or overseas crimes may be tried. Most litigation involves either a question of whether the government's selection of venue in a multi-district case is proper or whether the court should grant the accused's request for a change of venue. The government bears the burden of establishing venue by a preponderance of the evidence. The defendant may waive trial in a proper venue either explicitly or by failing to object to prosecution in an improper venue in a timely manner. Section 3237 of Title 18 of the U.S. Code supplies three general rules for venue in multi-district cases. Tax cases may be tried where the taxpayer resides. Mail and interstate commerce offenses may be tried in any district traversed during the course of a particular crime. And continuous or overlapping offenses may be tried in any district in which they begin, continue, or are completed. For example, conspiracy, perhaps the most common continuous offense, may be tried where the scheme is joined or where any overt act in its furtherance is committed. These general rules aside, a few crimes, like murder or immigration offenses, have individual venue provisions. In most instances, overseas crimes are tried in the district in which the accused is arrested or into which he is first brought from abroad. An accused may request a change of venue for reasons of prejudice, convenience, plea, or sentence. Besides his venue rights, an accused is entitled to trial by an impartial jury. Inflammatory pre-trial publicity and other circumstances may hopelessly taint the pool of potential jurors. Nevertheless, before granting a change of venue, the courts will ordinarily exhaust alternative measures such as examination of potential jurors to ensure their impartiality. Beyond prejudice, a court may also grant a change of venue for the convenience of the accused, the government, the victim, or the witnesses. It rarely does. Finally, with the government's concurrence, the court may grant a defendant's request to plea or be sentenced in the district in which they are found. "Venue" ordinarily refers to both where a crime may be tried and the district from which the trial jury must be drawn, although technically the latter is more properly referred to as vicinage. |
Keeping an economy growing at a rate compatible with the full utilization of resources over the long run in an environment in which price inflation is stable has been an age-old goal for macroeconomic policy. Monetary policy and the institutional arrangements for carrying it out have long been regarded as important to achieving this goal. Such has been the importance accorded money in this respect, that numerous monetary arrangements and policies have been proposed which, if adopted, their proponents argue, would make such a goal attainable. These arrangements include the gold standard, the real bills doctrine, a compensated dollar, 100% reserve requirement banking, a fixed growth rate rule for the money supply, a bimetallic standard, a currency board, free floating exchange rates and inflation targeting, to name but a few in what Professor Stanley Fischer has called "the unending search for monetary salvation." The current policy prescription in fashion among economists that promises to promote such a goal is termed central bank independence (hereafter CBI) which, although it has several possible definitions, has come increasingly to focus on institutional arrangements, as well as the central bank's "mandate and ability to focus single mindedly on the attainment of price stability." The high inflation in the western world in general during the 1970s, and the difference in the inflation experience of individual industrial countries which were, on the whole, subjected to similar external economic shocks, motivated some economists to investigate the possible linkage between the rate of inflation and the institutional and political arrangements governing the establishment and functioning of central banks. A major conclusion of these studies is that CBI is an important part of the explanation for why some countries have had much lower inflation rates on average than others. The more "independent" the central bank, these studies conclude, the lower tend to be the average rate of inflation and volatility of inflation experienced by that country. The reason for these results is that independence supposedly enhances the credibility of the central bank and increased credibility gives rise to reinforcing behavior via the expectations of economic agents, be they consumers, suppliers of labor and capital, or firms supplying output. Thus, shifts in central bank policy are transmitted more rapidly into changes in wages, interest rates, and prices and, thus, output and employment, than would be the case in the absence of strong credibility. A minority of the studies even claims that the better governance, lower inflation, and greater macroeconomic stability provided by CBI have a positive effect on economic growth. Some newer studies question the methodology underlying these results, and claim that the relationship between inflation and CBI is weaker than the early studies found. The evidence is mixed on whether central bank independence has a cost in terms of lower output growth or greater output variability. These empirical studies have not gone unnoticed by policy makers. In some ways, the Federal Reserve is more independent than many of its peers. In other ways, it is less. For example, some studies have defined a price stability goal as enhancing independence, and there has been periodic congressional interest in giving the Fed such a goal . If CBI proponents are correct, the Fed's independence could be enhanced at little cost and much benefit to the U.S. economy. As Table 1 shows, the decade of the 1970s stands out in the post-World War II era as one of especially high inflation, although the inflation experience of individual countries is by no means similar even though they were as a group subjected to a similar range of external economic shocks, especially the two major increases in world oil prices. The differences in average inflation rates among these nations motivated a number of economists to investigate the possible role played by the institutional and political arrangements governing the establishment and functioning of central banks, since increases in the supply of money are an essential element in explaining inflation. If central banks (hereafter CBs) played an important role in the differences in national inflation rates, they did so for one of two reasons, according to the theoretical literature that was developed at the time. An inflationary bias on the part of CBs was attributed either to a requirement that they provide government with revenue (via the inflation tax) or to a desire on the part of the government to reduce unemployment through a monetary surprise or unanticipated shock. Since the United States government derives very little revenue from the inflation tax, any inflation bias on the part of the Federal Reserve must be attributed to a desire by the government to reduce unemployment. It is widely believed that a short run tradeoff exists between inflation and unemployment, known as the Phillips curve. The ability of monetary policy to reduce unemployment in the short run is a well known fact amply demonstrated in the United States and elsewhere. It is generally attributed by economists to the shift in policy being a surprise or unexpected event, since anticipated monetary changes would have been incorporated into wage and price expectations. Since it is also widely believed by economists that the employment effects of such monetary surprises are only temporary, their longer run consequence is a higher inflation rate. Hence, central banks that try to exploit the tradeoff described by the Phillips curve, for whatever reason, will impart an inflationary bias to their national economies. From an economic point of view, cycles produced by monetary surprises are suboptimal and this serves to underpin policy designed to create and fortify bank central independence devoted to stability. CBI proponents believe that independent central banks were less likely to attempt to exploit the Phillips curve tradeoff, and would provide their economies with lower inflation rates as a result. The basic methodology of the academic studies involves the use of linear regression which is a statistical technique that attempts to estimate mathematically how important central bank independence and various parameters of that independence are to such important indicators of economic performance as the rate of inflation, the variability of inflation, the growth rate of output, the variability of the growth rate of output, and real interest rates. To make such computations, the above definitions of central bank independence must be turned into something that can be measured. The major studies that have attempted to measure CBI, with an objective of constructing a ranking of CBs by the degree of their measured independence, begin by looking at the legal provisions of their charters. They do so because the charter is supposed to set forth what its framers intended. Thus, the charter usually specifies the policy objective or objectives of the CB, the procedure for the appointment of the governor or governing body of the CB, the period of tenure of these officials, the conditions under which they can be removed, the procedures for resolving conflicts between CB officials and political authorities, and the monetary instruments under the control of the CB. Bade and Parkin (hereafter BP) is the first study to construct a CBI index. They defined what they call the financial and policy characteristics of CB charters. As shown below, the less influence the government has on the CB, the higher is the rank given that CB. The scale for each of the two sets of characteristics runs from 1 to 4. They use a sample of 12 countries in their study. The four financial characteristics are the following: 1. Government approves the budget of the CB, determines the board members' salaries, and the allocation of its profits; 2. The CB determines its own budget allocations, but the government determines the board members' salaries and the allocation of its profits; 3. The CB determines its budget and board members' salaries while the allocation of its profits are determined by statute; or 4. The CB determines its budget, board members' salaries, and profit allocation. The four policy characteristics are the following: 1. The government is the final policy authority, has officials on the CB board, and appoints all board members; 2. Like (1) but with no government officials on the CB board; 3. The CB is the final policy authority, but all appointments to the CB board are made by the government; or 4. Same as (3) except some appointments to the board are made independently of the government. The German and Swiss CBs are the most independent CBs in their sample. They give each a 4 rating for the financial and policy characteristics of their charters. They give the U.S. Federal Reserve a financial rating of 2 and a policy rating of 3. Grilli, Masciandaro, and Tabellini (hereafter GMT) construct two CBI indexes, which distinguish between the political and economic independence of CBs. They define political independence to mean the ability of the CB to define its policy objectives free from government influence. Any institutional or legal feature or custom that enhances this ability increases the political independence of the CB. Economic independence is defined to mean that the CB has the freedom to choose the instruments with which to pursue its final goal or goals. Their index of political independence gives equal weight to eight factors. The maximum score a central bank can obtain is eight, which requires a "yes" answer to each question. Such a score suggests a highly independent CB, according to GMT. The eight questions are 1. Is the CEO of the CB appointed by a body other than the government? 2. Is the CEO's term more than five years? 3. Are the other governing board members appointed by a body other than the government? 4. Are their terms for more than five years? 5. Is there an absence of mandatory provisions for government representatives to serve on the governing board? 6. Is there an absence of a requirement that the government must approve monetary policy? 7. Is there a provision that the CB pursues a goal of price stability? 8. Are there charter provisions that strengthen the CB's position in conflicts with the government. They give the U.S. Federal Reserve a score of 5 out of a possible 8 (the reason being that "no" answers are given to the first three questions). Both the German and Dutch CBs get a rating of 6, the highest, while the Swiss CB gets a 5. Seven factors, each also given an equal weight, are used to measure the degree of economic independence and they are heavily dependent on the degree to which the CB is obliged to finance government budgets. Briefly, five of the seven factors are the degree to which direct credit to the government is not automatic, given at market interest rates, for temporary periods of time, and in limited amounts; whether the CB does not participate in the primary market for public debt, and whether the CB can set its own discount rate. The other two factors are related to the regulatory obligations of the CB. According to this index, the Federal Reserve obtains a score of 7 (as do the CBs of Switzerland, Germany, and Canada). A more complex set of indexes has been developed in several papers by Cukierman; Cukierman, Webb, and Neyapti (hereafter CWN); and Cukierman and Webb. The first index these authors compile consists of 16 legal characteristics taken from CB charters and involves both political and economic factors. These sixteen characteristics are, in turn, grouped into four clusters related to the appointment, dismissal and legal term of the CB's CEO; the institutional location of the final authority for monetary policy and procedures for resolving conflicts between the CB and government; the degree to which price stability is the primary objective of policy; and the limits that restrict government from borrowing from the CB. The individual components are not equally weighted and each country's CB receives an overall rating in the index that falls between 0 and 1. It is possible to separate this complex index into various subindexes that correspond closely to the distinction made by GMT between political and economic independence, a separation that is, in fact, made by CWN for computation purposes. The United States ranks as the fifth most independent bank on their index, out of 21 advanced economies. The Germans and Swiss are most independent in their index as well. Areas in which the United States is ranked as lacking independence include the relatively short term of the chairman, the executive branch's ability to unconditionally dismiss the Fed's chairman, the multiple goals of Fed policy, the Fed's lack of influence over the government budget process, and the Fed's ability to buy government securities on the primary market. It is useful to note that while several of these factors are legally allowed, they are unlikely to ever occur in practice. This is a drawback of indices based on the legal code—statute may not correspond with practice. The legal nature of the charter may not be the ultimate measure of CBI. In the words of Prof. Cukierman: "The basic objective difficulty in characterizing and measuring CB independence is that it is determined by a multitude of legal, institutional, cultural, and personal factors, many of which are difficult to quantify and some of which are unobservable to the general public." Hence, CWN compile a second index based on a survey of the opinion of monetary experts in CBs about the true nature of the independence of their institutions. As a third CBI index, CWN use the turnover rate of CB CEOs, and Cukierman and Webb use such an index in a political context relating turnover to major political changes. This index is thought to be more illustrative in the developing world, since frequent turnover in the advanced economies is rare. Debelle and Fischer (DF) disagree semantically with the CBI literature, and devise their own variation on the GMT index. Recall that one aspect of GMT's definition of political independence is the presence of a price stability goal. DF argue that defining a price stability goal as enhancing independence is inconsistent. By imposing a strict and measurable goal on the central bank, the government restricts the CB's latitude to shape monetary policy as it sees fit. Put another way, if the CB decided that temporarily directing monetary policy at growth rather than inflation was in the nation's interest, under a price stability goal, it would not be "independent" to pursue that goal. The rest of the literature (with the exception of DF) argues that a price stability goal enhances independence by giving the CBs an institutional buffer against political interference in pursuit of "monetary surprises." Nevertheless, the definition of a price stability goal as an aspect of political independence is well-established and consistently used in the CBI literature and will be adhered to in this report. Because of their disagreement with GMT, DF create their own CBI index consisting of three parts. They use a political independence index based on the GMT definition of political independence excluding the price stability goal. The price stability goal is placed in its own index called goal independence. In contrast to the rest of the literature, they define a CB as having goal independence if there is no price stability goal, and lacking goal independence if price stability is the sole goal of monetary policy. They make no effort to measure other factors that could deprive a CB of goal independence, such as a fixed exchange rate regime, although they acknowledge that such factors would have that effect. The third part of the DB index is referred to as instrument independence . They describe instrument independence as meaning that the CB can achieve its ultimate goal or goals in any way it chooses, whether the government or the CB has assigned those goals. Thus, for example, it could exercise discretion in how rapidly the money supply was permitted to grow or it could fix interest rates at whatever level it thought was necessary. It would not be obliged to finance the government (a common constraint on many central banks), follow a fixed rule for increasing the money supply, keep interest rates low, or maintain a fixed exchange rate. They use GMT's economic independence index, excluding factors related to the CB regulatory duties, as their measure of instrument independence. Curiously, this measure of instrument independence relates to only two of the factors they mention: the CB's freedom to set interest rates and the absence of a requirement that the CB finance the government's budget deficit. While goal and instrument independence (as well as political and economic independence) are conceptually distinct, there are circumstances in which if one is mandated the other is mandated as well. One could not, for example, impose a goal of price stability on a CB while simultaneously imposing on it a requirement to finance a government budget deficit. It would also be illogical to impose on a CB the requirement that it keep the money supply growing at a constant percent per year or to keep the exchange rate constant vis-a-vis other currencies while requiring it to finance a budget deficit. The literature on central bank independence is extensive. The discussion below is not comprehensive, but focuses on a few of the key papers in depth to give a flavor for the literature as a whole. It concludes with the results of two literature reviews that give an overview of the literature's general findings. BP used both their Financial and Policy indexes, compiled for 12 CBs and covering the period 1955-1983, in their pioneering study of the effect of CBI on inflation. The major conclusion of this study is stated by Parkin: "In studying the relationship between central bank types and inflation performance it was discovered that just one of the central bank categories stands out as delivering significantly different—and lower—inflation than the others. This is a policy type 4—central banks that are independent in the two senses that the central bank is the final monetary authority and has power to make some of the Board appointments (Germany and Switzerland). Differences in financial types are in no significant way associated with differences in inflation performance and variations over the first three policy types are also associated with no significant differences in inflation behavior." The study established that Switzerland and Germany, the only two policy type 4 countries, have an average inflation rate that was less than half as high as the other 10 countries in their sample. While these results are interesting and served to kindle research in this topic, they should be read with great care. In establishing their results, BP commingle observations from two different international exchange rate regimes. The relevance of this factor is discussed in the Methodological Criticisms section below. GMT compute the degree of political and economic independence, as defined above, for each of the 18 countries listed in Table 1 . The scatter of observations for each measure of independence becomes the data set for the two independent variables used in their regressions. The dependent variable is the average inflation rates for these same countries. Individual regressions are computed on data averaged over the decades of the 1950s, 1960s, 1970s and 1980s and for the entire period 1950-1989. They find that their measure of economic independence is inversely related to average inflation rates in a statistically significant way during the decade of the 1970s and 1980s and over the entire period 1950-1989. Political independence is inversely related to inflation over all four periods and the entire period, but it is only statistically significant over the decade 1970-1979. The authors interpret these results to mean that since the degree of central bank independence is negatively related to the average rate of inflation in a statistically significant way, "monetary institutions matter." Although this general conclusion may be true, the GMT results must be interpreted carefully. Those from the entire period, 1950-1989, are of questionable value because, like the Bade and Parkin results, they are derived from data taken from two quite different international exchange rate regimes, the Bretton Woods regime of fixed exchange rates and the subsequent era of floating exchange rates (for a discussion, see the section on methodological criticisms). It is interesting in this respect that the GMT results show that neither economic nor political independence is statistically significant in explaining the inflation performance of the 16 countries in their sample during the decades 1950-1959 and 1960-1969. This is what one might reasonably expect during the fixed exchange rate era. Contrary to the conclusion of the authors, the results for 1970-1979 and 1980-1989 suggest that the inflation performance of these countries is not so much related to the policy goal and methods of choosing CB governors and their terms of office (their measure of political independence) as it is to the requirement that the CB not be used to finance the government's budget deficit, their measure of economic independence. The political independence variable is not statistically significant for the 1980-1989 period and is only weakly significant for the 1970-1979 period. Thus, regardless of the CB's degree of political independence, countries that maintain reasonable budget balance or have good prospects of financing their budget deficits from private saving, may remove the pressures from their CBs, making it possible for the CBs to concentrate monetary policy on achieving low inflation. One aspect of the GMT inflation-CB independence results is of interest. They are able to explain a high proportion of the difference in the inflation experience of their sample group of countries with their central bank independence variables. For the decades of the 1970s and 1980s, the R-squared ranged from .66 to about .75 (and for the period 1950-1989, nearly .8). The reason this result is interesting is that increases in the supply of money are widely acknowledged to be the proximate cause of inflation since a continuous rise in the price level, the essence of inflation, is generally only possible with a continuous rise in money growth relative to the growth of output. If the degree of central bank independence is the ultimate cause of inflation, these regressions are able to explain a great deal. The evidence adduced by some other investigators reported below is not this strong. A final aspect of their work that has attracted attention is that central bank independence has no adverse effects on the crucial performance parameters of the economy. The improved inflation performance that supposedly comes with CB independence does not come at a cost of lower output growth or greater variation in that growth for both measures of CB independence are statistically insignificant in explaining both these parameters of performance (see their table 16, p. 374). Alesina and Summers (hereafter AS) create an index that is a combination of the BP policy index and the two indexes of GMT. The GMT combined index of political and economic independence for each CB is converted to the BP range of 1 to 4 and is then averaged with the BP Policy index for that same central bank to produce the AS index of central bank independence. The U.S. Federal Reserve rates a 3 on the BP Policy index, a 12 on the combined GMT index, and a 3.5 on the AS index. Alesina and Summers use a sample of 16 developed countries (virtually the same sample as that in Table 1 ) with data spanning the period 1955-1988. They conclude: "... the monetary discipline associated with central bank independence reduces the level and variability of inflation but does not have either large benefits or costs in terms of real macroeconomic performance. These conclusions are drawn from a series of scatter diagrams, one for each measure of economic performance. The variable common to each scatter diagram is their CBI index. The index they use, as explained above, is a combination of the BP policy index and the sum of both of the GMT indexes converted to a BP scale of 1 to 4. As with the previous study, it is possible to argue that the conclusions drawn by AS are at best tentative in nature. This is so for several reasons. First, these results are established by looking at scatter diagrams. There is no attempt to control for other factors that could be driving the results. No empirical evidence that the posited relationships are statistically significant is presented. Even if they are significant, there is no evidence presented about the importance of CBI to the measures of economic performance. Second, the data are averaged across exchange rate regimes. As noted above, the constraints placed on CB behavior by a fixed exchange regime are quite different from those placed by a flexible rate regime. Third, since AS use the combined GMT index, and GMTs measure of economic independence dominates that index, their results may be showing that a constraint placed on CB financing of government is the important factor explaining the behavior of their measures of economic performance; more so than those elements, for example, that are designed to isolate the governing boards of CBs from political interference. It may well be a misstatement to conclude, as they do, that greater CBI is conducive to low inflation without any deleterious effect on other characteristics of economic performance. A more qualified statement focusing on constraints placed on CB lending to governments may be more consistent with their evidence. This study is based on a very large sample of central banks conveniently grouped by the authors into those for industrial and those for developing countries. The group of industrial countries is similar to those listed in Table 1 and used by BP, GMT and AS. The results reported below are only for the industrial subsample of central banks. The data apply to a combined period running from 1950 to 1989. The first test uses linear regression to explain the inflation behavior among the industrial countries in which the major explanatory variables are the disaggregated components of their first or legal CBI index and the turnover rate of CB CEOs, their third index. Fearful that statutory CBI measured by their index may not be honored in practice, they hypothesize that the turnover rate for the central bank's CEO may give an indication of CBI in practice. Not a single variable in these two indexes is statistically significantly different from zero (at conventional 1% to 5% levels of significance). However, when the measure of legal independence is entered in its aggregated form, it is statistically significant while the index of CEO turnover is not (at conventional levels). This tells us that for industrial countries, the rate of inflation experienced by the group is negatively related to CWN's measure of CBI that is derived from the legal aspect of the bank's charters. (The R 2 s for these regressions are in the .25 to .35 range.) As the authors conclude: "Laws do make a difference." But what laws do they have in mind? Those that ensure that the banks governors are independent from political influence or those that circumscribe lending by the CB to the government or various firms and enterprises? Or both? Actually, it turns out to be those associated with lending to the government. CWN take from the legal index those components pertaining to limits on CB lending to the government or to various firms and enterprises. This subindex is similar to the GTB index of economic independence. After additional regressions, they conclude that this subindex drives the result for the industrial countries. "The other components of the legal independence variable—CEO, policy formation, and objectives—do not make any significant contribution to explaining inflation (in industrial countries)." In this regard their findings are similar to those of GBT for a smaller sample of developed countries. Unfortunately, they provide neither the coefficient value of this variable nor the R 2 of the equation. They do tell us that the variable is statistically significant, however. As an additional test, CWN explore what relationship exists between inflation variability (or uncertainty) and CBI. For the industrial countries, neither the aggregated legal CB index or the turnover rate of CB CEOs is statistically significant at conventional 1% to 5% levels of significance. The basic study by CWN has been extended by Cukierman, Kalaitzidakis, Summers and Webb to investigate the effect of central bank independence on other performance indicators of the economy: output growth, investment, and real interest rates. They find that neither the legal independence index nor the index of CB CEO turnover helps explain the variations in growth rates over the period 1965-1989 within this group of industrial countries. They do find, however, that the legal independence index has a significant negative effect on the variability of real interest rates and, if Ireland is excluded from the sample, a significantly positive effect on the level of real interest rates. The last result is contrary to expectations. The authors speculate that it is due to the use of the short term rate on saving deposits as a proxy for a more market oriented short term rate. DF are interested in adducing evidence on whether CBs with no goal independence, but with economic independence, as they define each term, have a better inflation record than those with goal independence and no economic independence. They create four indexes from those constructed by GMT and CWN to provide a range of evidence on this issue. Their first index is formed by using only one feature of the GMT political independence index: the presence of a statutory requirement that the CB pursue monetary stability as a goal. They classify this index as goal independence, and classify banks as less independent if their mandate is more restricted (e.g., price stability as the sole goal). This is the opposite usage from the other indices in this report. The remainder of the GMT political independence index is their second index. Their third index consists of five components of the GMT economic independence index (they leave out the two components pertaining to the supervisory responsibilities of CBs). Their fourth index is the overall CWN index. DB run five regressions for the 17 countries listed in Table 1 covering the years 1950-1989. The only variable that is consistently statistically significant is the abbreviated GMT index of economic independence, confirming the results found in the other studies that central bank financing of the government's budget deficit is the most important cause of inflation. The first DF index is statistically significant only when it is the sole independent variable in the regression. It is not significant when it is one of several independent variables in a regression. The adjusted R 2 for these regressions is approximately 0.45. Note also that these results are obtained from data that are averaged across different exchange rate regimes. Froyen and Waud (hereafter FW) begin by noting that two of the leading macroeconomic models can provide an explanation for a short run trade-off between inflation and output (unemployment). Their interest is whether CBI can play a role in explaining this tradeoff. They use two CBI measures: (1) the Alesina and Summers index which, as noted above, is the derived from the BP policy index and the adjusted total GTM index converted by AS to a BP scale, and (2) the legal central bank index computed by Cukierman. For their sample, they use the same 16 industrial countries used by AS with observations spanning the period from the mid-1950s through the 1980s. For the entire sample period, they find that the two measures of CBI play no role in the tradeoff. The calculated regression coefficients of the two variables are not statistically different from zero. When the sample is confined to the observations subsequent to 1972 (essentially the flexible exchange rate period), the results are quite different. Both measures of CBI are statistically different from zero and both show that CBI improves the tradeoff. That is, for a given change in aggregate demand, the growth in output is larger and the inflation rate is lower in countries with more independent central banks (with independence as measured above). Moreover, the fit of the regression line to the data is improved dramatically (with the R 2 increasing from .48 to .64 and .54). The authors are quick to point out, however, that the results are consistent with the view that greater central bank independence may have resulted in a less activist monetary policy and, because of that, a better output-inflation tradeoff. Were this improved tradeoff to have been exploited, policymakers may soon find out, according to FW, that it is no better than in those countries where more activist policy has been exercised. Note that the findings in this study may have little to do with activist monetary policy or its absence. What precisely the AS index measures is uncertain. The index is not broken down by FW to show whether certain aspects of the index were driving the results. For example, it could be that the improved inflation-output tradeoff is the result of some central banks' not having to finance the budget deficits of government or provide finance to certain classes of borrowers. It may have little to do with such factors as the independence of central bank governors from the political process. Fuhrer uses linear regressions to test the influence of central bank independence on inflation, the variability of inflation, and economic growth when holding other macroeconomic conditions constant. He performs his calculations using both the Cukierman weighted CBI index and the Alesina-Summers (AS) index. His regressions cover the period 1950-1989, making his calculations vulnerable to the critique that they intermingle different exchange rate regimes. For OECD countries, the relationship between inflation and CBI as defined by Cukierman is statistically insignificant in both bivariate regressions and when holding other macroeconomic conditions constant. In the bivariate regression, the R 2 is only .016, meaning that over 98% of the variation in the data cannot be explained by CBI. Using the AS countries and definitions, Fuhrer replicates AS's findings that in a bivariate regression the CBI-inflation relationship is statistically significant, albeit with an R 2 of only .084. However, Fuhrer demonstrates that when controlling for other macroeconomic factors, the CBI-inflation relationship becomes statistically insignificant and the R 2 becomes very high. In some regressions, the sign on the CBI variable is positive, suggesting that great CBI increases inflation. Fuhrer's research suggests that the strong relationship between CBI and low inflation promoted by Alesina and Summers is an artifice of the data. Fuhrer derives similar results when estimating the relationship between CBI and the variability of inflation. Measured by the Cukierman index, the relationship is statistically insignificant in all regressions and in one specification, the sign is unexpectedly positive rather than the negative. In the bivariate regression, the R 2 is .026. For the AS countries and definitions, the sign is correct for all specifications and statistically significant in the bivariate regression. But when controlling for other macroeconomic factors, the statistical significance of CBI disappears. This suggests that the relationship between CBI and inflation found by other authors may be due to the correlation of CBI with factors that the other authors excluded. Fuhrer's regressions between CBI and economic growth casts doubt on others' evidence that CBI offers a "free lunch" by allowing a country to achieve lower inflation without lower growth. Again, most of the evidence is statistically insignificant, but in most of the regressions there is a negative relationship between CBI and growth, including the two specifications in which CBI is statistically significant. All of the growth regressions were characterized by low R 2 values, suggesting that the determinants of growth are more complex and poorly understood than the determinants of inflation and inflation variability. Campillo and Miron test the effects of CBI on inflation when controlling for a number of other variables thought to influence inflation, such as political instability, openness to trade, and per capita income using cross-sectional analysis. They use the CBI index created by Cukierman, Webb, and Neyapti. Their measurement of inflation is the average rate from 1973 to 1994, thus avoiding the problem of commingling exchange rate regimes discussed above. For 18 high-income countries, CBI has a large, negative, and statistically significant effect on inflation. One of the main arguments in favor of CBI is that it should increase the credibility of the central bank. Credibility is presumed to have beneficial effects on a country's macroeconomic performance. Specifically, it is often assumed that greater credibility will make disinflationary episodes (periods when the central needs to tighten policy to lower the inflation rate) have less of a negative effect on the economy. But Posen argues that central bank independence has two countervailing effects on the costs of disinflation. First, there is the usual effect chronicled above: greater central bank credibility leads to individuals adjusting their inflationary expectations more quickly to a change in monetary policy. When prices adjust more quickly, disinflation becomes less costly: tighter money supply leads to a smaller decline in output. But Posen argues that there is a second effect working against the first: if individuals believe that CBI makes variable inflation less likely, they would be more willing to use nominal contracts to set wages and prices. As the use of contracts becomes more prevalent, prices and wages are less able to adjust. In essence, people worry less about inflation when it is low, and so expectations adjust more slowly. This would make a disinflation more costly because output must fall more to make prices adjust. Because of these countervailing effects, he argues, it is not evident whether greater credibility improves macroeconomic performance. Posen uses a series of regressions to explore these questions. He defines CBI by the Cukierman-Webb-Neyapti index and his observations are based on 17 OECD countries from 1950 to 1989, with one observation for each decade. First, he tests the hypothesis that CBI makes disinflations less costly. He attempts to separate the two countervailing effects by adding a separate variable for nominal wage rigidity. The CBI variable is highly statistically significant, but it has the wrong sign: increasing CBI makes disinflation much more costly in terms of higher unemployment. However, few other variables are controlled for and the adjusted R 2 tend to be moderate, ranging from 0.249 to 0.517. Posen then tests the hypothesis that CBI makes nominal wages more rigid. The results tend not to be statistically significant and have low and even negative adjusted R 2 s. Moreover, the sign of the CBI variable is not consistent across different specifications: in some cases, CBI increases wage rigidity, in other cases it decreases rigidity. A major problem with these tests, as Posen concedes, is that there is no consensus around a straightforward method for measuring nominal wage rigidity, and competing measures are not closely correlated to each other. But the inconclusive evidence that CBI increases nominal wage rigidity actually strengthens the case for CBI, since it suggests that the fear that greater CBI would make disinflation more costly is not a strong enough factor to be measurable. Posen also empirically tests whether greater CBI makes disinflations faster because expectations adjust more quickly when central banks are more credible. The evidence here is inconclusive, with very low (sometimes negative) adjusted R 2 s and a relationship between CBI and the length of disinflation that is mostly statistically insignificant. In recent years, the literature on central bank independence has multiplied. In 1996, Eijffinger and de Haan surveyed 17 empirical studies on the effects of CBI on inflation that included developed countries. (Six of the 17 studies are discussed at length in this report.) Fifteen of the 17 studies found that CBI lowers inflation, while the other two found that the relationship was not significant. Some of the studies confirm that the link between CBI and inflation was weaker during the Bretton Woods period (prior to the early 1970s), when the primary objective of central banks was the maintenance of fixed exchange rates, and inflation stability was a secondary objective. Of the studies that examined the relationship between CBI and inflation variability, seven found that CBI decreases variability, two found that it did not, and three had mixed results. Most of the studies that examined the relationship between growth and CBI found no relationship. In 2001, Berger, de Haan, and Eijiffinger surveyed 30 more empirical studies written since the 1996 survey on central bank independence that include developed economies. They describe the literature as "extensive evidence suggesting that CBI helps to reduce inflation," particularly for advanced economies. Of the 30, 15 of the studies reviewed reaffirm that CBI lowers inflation. However, eight studies did not find a link between inflation and CBI, or found that the correlation is caused by some third variable. (Three studies had mixed results and four did not address the question.) Some studies found that CBI has a more (statistically and economically) robust effect on inflation in certain time periods than others and for certain measures of CBI. While the newer studies confirm the findings of the earlier ones on balance, scholarly dissent on the CBI issue is growing. The independence of CBs is now touted as important in a country's quest for low inflation. A number of studies have established the relationship, and claim that it occurs without deleterious effects on such important indicators of economic performance as real output growth, the variability of that growth, investment, and the level and variability of real interest rates. There are, however, a number of different definitions attached to the term "central bank independence." As the different indexes show, the term encompasses a range of meanings from the methods of selecting and isolating the governing board from political influence, to determining the CB's objectives, and whether CBs can be used to finance government budget deficits. The review of the empirical evidence suggests that for industrial countries a case can be made that the rate of inflation is negatively related to those provisions of CB charters that circumscribe CB lending to governments. It is difficult to make a case, however, for factors such as the selection of the governing board and its isolation from the political process or use of inflation targeting. Although evidence from DF suggests that a formal price stability goal may be of some importance to the established relationship, it is not robust. Thus, the evidence for industrial countries supports a highly selective use of the term "central bank independence." Based on this evidence, it would, perhaps, be more accurate to say that when a nation's treasury has only limited access to the resources of its central bank, low inflation is likely to result. Moreover, the CBI literature has been criticized in a number of ways that are described in the next section. An econometric study is only as good as the assumptions underlying it. Legitimate questions have been raised about the way these studies have been conducted that casts doubts on their findings. The empirical work reviewed above suggests the direction of causation prevailing in the minds of their authors. The estimating equation the authors use to establish their empirical results reflects this view. Clearly, in these studies, movements or differences in the various CBI indexes are viewed as explaining or causing, in part, the different behavior observed across industrial countries in the inflation rate, the variance in that rate, output growth, the variance in output growth, investment, real interest rates, etc. While few individuals would doubt that political institutions, events, and developments can have a profound effect on how well an economy functions, many would argue that causation can, in fact, run in the opposite direction from that implicitly posited in the above studies or that two way causality may be present (which is, incidently, acknowledged by the authors of these studies). Thus, for example, a fear of inflation can lead countries to establish and maintain very independent central banks and forbid them to directly or indirectly lend to government. To be more specific, as Walsh points out, "high inflation, if viewed as an indication of failed central bank policy, might lead to the replacement of the central banker—in this case high CEO turnover is not necessarily a reflection of low CB independence causing inflation." Alternatively, a desire for economic stability can also cause political institutions to emerge and evolve in ways that ensure such an outcome. In this case, CB independence can be thought of as being correlated with an omitted variable, "responsible governance," that is the true cause of low inflation. If this is the case, governments who lack "responsibility" could make their central banks statutorily independent and still not achieve low inflation. For example, Posen theorizes that what matters most in achieving low inflation is effective support by an important constituency, such as the financial sector. One of the policy changes such a constituency might demand to achieve low inflation is central bank independence, attributing spurious causation to CBI. Thus, a general methodological criticism directed against all of these studies is that they have not demonstrated convincingly that causation runs in the direction they have hypothesized. Hence, institutional reforms along lines suggested by these authors may not yield the benefits suggested by this body of empirical work. Forder raises other methodological criticisms of the studies. The studies all define independence by ranking the central banks on the basis of a number of legal characteristics. CBs that possess more of these characteristics are ranked as more independent. He argues that the studies arbitrarily look for legal characteristics of central banks that all low inflation countries happen to share. There is no a priori attempt to define which characteristics are necessary for independence and which characteristics are more important than others. He argues that the studies have tended to arbitrarily assume that characteristics uncorrelated to inflation are not important for independence, and vice versa, making the studies self-fulfilling prophecies of the hypothesis that independence reduces inflation. For example, it is not clear that a price stability goal should be defined as independence since it limits the CB's discretion, but since it is correlated with low inflation, it bolsters the findings that independence matters. He points out that—besides Germany and Switzerland—there is no consensus among the different studies as to which countries have an independent central bank. If different studies cannot agree on what makes a CB independent, how can the studies prove that independence leads to low inflation? The strong relationship between independence and low inflation in Germany and Switzerland, and the absence of a strong relationship elsewhere, raises the question of whether there is some other factor that caused low inflation in those two countries. In fact, both countries had a long series of nearly balanced budgets during the period 1950s-1980s, removing a source of upward pressure on interest rates. Bernanke et al. offer another explanation: both countries targeted the growth rate of the money supply well before other countries had adopted restrictive mandates such as a sole goal of price stability. Either of these factors, rather than independence, could be the true cause of their low inflation. Nor is there any attempt in many of the studies to evaluate whether the statutory independence granted to the banks is maintained in reality. For example, two different countries could grant their banks the same statutory autonomy from the elected government, but in practice one government could pressure the CB from behind the scenes to influence policy while the other respected its independence. In these studies, the two central banks would be ranked equally independent. Cukierman and Webb try to get around this problem by looking at the turnover rate of the CB CEO and survey evidence, but the results from this study are inconclusive. Survey evidence about specialists' perceptions of a central bank's independence have almost no correlation to CWN's legal definition of independence. This indicates that legal measures of statutory independence may be misleading. Finally, the studies could be questioned on econometric grounds. The studies assign numerical values to non-numerical legal characteristics. For example, for the question of how the chairman of the CB is appointed, CWN assign a value of 1 if appointed by the board of the central bank, 0.75 if appointed by the board, legislature, and executive, 0.5 if appointed by the legislature, 0.25 if appointed by the executive collectively, and 0 if appointed by one or two members of the executive. The studies then use the ordinary least squares method to regress those numerical values on inflation to test for correlation. The econometric problem with this method is that the numerical values may not be proportionately related. For example, for a regression to be econometrically valid, a central bank that receives a grade of 2 should be twice as independent as a bank that receives a grade of 1, and have twice the estimated effect on inflation. But since the values are based on non-numeric characteristics, there is no way of knowing whether it is reasonable to assume that a a CB with a grade of 2 would have twice the effect on inflation as a CB with a grade of 1. The weighting of the various characteristics will also be important in the regression results. It may be that only a couple of characteristics really define independence. If those factors are equally weighed with all characteristics, the index will not reflect true independence and the regression results will be biased. Furthermore, there are econometric problems with the sample itself. If limited to advanced economies, then the sample will be small and homogeneous, and thus may not offer enough variation in terms of CBI and economic outcomes to yield meaningful regression results. If developing countries are included, the sample becomes large and diverse, but runs the risk of finding spurious correlation between inflation and CBI by omitting more important factors than CBI (corruption, weak legal system, market interference, etc.) that explain the diversity of economic outcomes. Finally, a time-series study is only valid if the relationship between the variables is stable over time. Much of the evidence is tainted because it is obtained from an analysis that commingles data from fixed and flexible exchange rate periods. And there is substantial reason to believe that the different exchange rate regimes can affect the permissible range of CB behavior. The fixed exchange rate regime was in existence from 1950 through the early 1970s, whilst subsequent years would have been in the flexible rate period. Under a fixed rate regime, central bank independence, as measured by BP and others, doesn't really mean much. Regardless of whether the central bank is directed to maintain a low inflation rate or a constant price level, it must, above all else, maintain a fixed exchange rate. So long as this goal has primacy, it is of little importance how its price level directive is framed. Under a flexible rate regime, an inflation goal can be pursued without the constraint of the exchange rate requirement. For the same reason, evidence obtained from European countries that fixed their exchange rate to the Deutschmark in recent decades should be discounted. It should also be noted that central bank independence changes over time in ways that some of the studies may not capture. For instance, the central banks of New Zealand and Great Britain have become much more independent over the last decade. Much has been made of the empirical finding that central bank independence is negatively associated with the rate of inflation and that this comes as a "free lunch" in terms of no adverse effects on some very important and desirable performance characteristics of an economy. Yet, as demonstrated above, the phrase "central bank independence" is quite imprecise. As used in the literature, the phrase applies to three aspects of independence: 1. the degree to which the CB's governing board is isolated from the political process; 2. the degree to which central banks can refuse to monetize public debt, i.e., finance the government; 3. the degree to which price stability has a primacy as the ultimate goal of central bank activity. When these three aspects of independence were tested against the rate of inflation, for example, (1) and (3) were often combined into one variable. Only Debelle and Fischer used meaning (3) as a separate independent variable. And they found that it had a negative role to play in explaining inflation that was sometimes statistically significant. Thus, the DF result lends some support to those who seek to redefine the mandate of the Federal Reserve, or in the words of DF, to take away goal independence from the Federal Reserve (the other indices would classify (3) as increasing independence). This, of course, presupposes that causality runs in the direction assumed by DF. The variables included in (1) were seen to have no statistically significant effect on the indicators of economic performance. From this, one could conclude that to add the Secretary of the Treasury, for example, to the Board of Governors of the Federal Reserve would, presumably, have no measurable effect on the indicators of economic performance. A variable designed to capture the essence of definition (2) did turn up in all of the studies as statistically significant. Presently, however, the Federal Reserve is forbidden to purchase other than seasoned U.S. government securities. It cannot directly purchase new Treasury issues. The empirical studies suggest that this feature of U.S. law contributes to a low rate of inflation. Proponents argue that the empirical evidence suggests that Congress may, in the discharge of its oversight responsibilities for monetary policy, want to make the policy goal of the Federal Reserve more specific. It may, they argue, wish to replace the current multi-goal directive with one directing the Federal Reserve to achieve and maintain price level stability, characteristic (3). Some would argue that the evidence is not robust enough, and the direction of causality is incorrect, to base such a policy change on, however. The emphasis in much of the body of research reviewed above is to establish the importance of central bank independence as a factor explaining differences in the rates of inflation among countries as well as differences in other major indicators of economic performance. This is accomplished by the use of linear regression. To appreciate the conclusions reached by these researchers, it will be helpful to have an elementary understanding of this research tool. Equations estimated by linear regression take their form from some hypothesized relationship in which the behavior of one or more variables (the independent variables) is held to influence some other variable (the dependent variable). The application of regression analysis involves fitting a straight line to a group of observations, usually a sample selected from the universe of those variables, that are suggested by the hypothesized relationship. The straight line is fitted such that the deviations of the actual observations from those suggested by the straight line are minimized. The value of the slope of that line then gives the effect of the independent variable (or variables) on the dependent variable. While the calculated value of the slope of the line may be positive or negative (or even zero), it's true value may not be statistically significantly different from zero. Because this is so, it will be necessary to briefly discuss what is meant by a calculated value being "statistically significant." To understand statistical significance, let us say that the calculated effect of the independent variable on the dependent variable is .10. Thus, changes in the independent variable by one unit change the dependent variable by .10. This assumes, of course, that the value .10 is really different from zero. Recall, that it was calculated, not from the universe of the independent variable, but from a sample taken from that universe. Thus, it is possible that our assumption that the true value of the effect of this variable on the dependent variable is different from zero is wrong. It is, however, possible to control for making this type of error—that is, for accepting as true a relationship that is, in fact, not true. It is common to set the control factor at 1 to 5 chances in 100 of accepting the hypothesis that the variable is different from zero when it is not. If the calculated value of the independent variable lies within a range that limits the error to 1% to 5%, it is said to be statistically significant (or statistically significantly different from zero). Since the purpose of this study is to establish the importance of central bank independence as a factor affecting a range of variables by which we judge economic performance, one other summary statistic must be explained: goodness of fit or R 2 . The R 2 is designed to measure the fraction of the variation of the dependent variable that is explained by the variation of the independent variable(s). The R 2 ranges in value between 0 and 1. The higher the R 2 is, the larger is the proportion of the variation in the dependent variable that is explained by the variation of the independent variable(s). | Keeping an economy growing over the long run at rates sufficient to provide full employment for labor and capital with low inflation or a stable price level has been an important goal for economic policy. Money and monetary policy have figured importantly in achieving this goal. Currently, it is argued, central bank independence is important to achieving this end. Many small factors contribute to central bank independence, and so the literature does not yield a consistent definition of it. Rather, the emphasis is on three aspects of independence, the degree to which (1) the governing board of the central bank is isolated from the political process; (2) central banks can refuse to finance government budget deficits; and (3) price stability has primacy as the ultimate goal of central bank activity. Various indices of central bank independence have been compiled and used in empirical work to see how closely independence is related to such important performance characteristics of an economy as the rate of inflation, the growth of output, investment, and real interest rates. For industrial countries, central bank independence indices embodying definitions (2) and (3) appear to be closely related to low inflation and low variability of inflation without having any effect on output and its variability, investment, and real interest rates. In particular, factor (2) seems to be driving the results, and the various measures of factor (1) have a negligible effect, a finding that the authors tend to neglect. Since the Federal Reserve cannot directly finance the U.S. government, factor (2) is not an issue for Congress. However, the results obtained with an index embodying (3) are of relevance to the conduct of monetary policy in the United States. These results may be used to support efforts to redefine the objective of monetary policy to focus it exclusively on price stability. Critics of these studies point to three major methodological problems and one empirical problem. First, causation may be opposite to that posited. The desire for economic stability, for example, may lead to independent central banks. Thus, causation should run the other way around (or it may run in both directions). Second, central bank independence may arise because an important and influential constituency in a democratic society favors low inflation. Thus, the ultimate reason why inflation is low in some countries is the strength of important constituencies who favor low inflation. And these studies fail to measure this pressure. In a sense, they have captured only the proximate reason for low inflation, not the ultimate reason. Third, questions have been raised about the way that the authors transform non-numeric characteristics of independence into quantitative results. Finally, the data on which some of these empirical estimates are based are tainted in the sense that the samples commingle observations from the fixed and flexible exchange rate periods. The performance of central banks is quite different in each regime regardless of how its stated objective reads. This report will be updated periodically. |
Most Americans with private group health insurance are covered through an employer, or through the employer of a family member. In 2012, about 61% of private employers offered health insurance coverage to their full-time employees, and most employers extended those health benefits to the families of their workers. A recent study by the Robert Wood Johnson Foundation found that in 2012, 59.5% of insured Americans had their insurance through an employer. When workers lose their jobs, they can also lose their health insurance. If that health insurance is family coverage, then a worker's family members can also become uninsured. Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA; P.L. 99-272 ) requires employers who offer health insurance to continue coverage for their employees under certain circumstances. Congress enacted the legislation to expand access to coverage for at least those people who became uninsured as a result of changes in their employment or family status. Although the law allows employers to charge 102% of the group plan premium, this can be less expensive than similar coverage available in the individual insurance market. The law affects private sector employer group health plans through amendments to the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code. COBRA continuation coverage for employees of state and local governments is required under amendments to the Public Health Service Act. Continuation coverage similar to COBRA is provided to federal employees and employees of the Washington, DC, district government through the law authorizing the Federal Employees Health Benefits program under Title 5 of the U.S. Code . Before enactment of COBRA, if an employee's job was terminated (voluntarily or involuntarily), the insurance offered by the employer also ceased, usually within 30 to 60 days. Women were especially vulnerable to loss of insurance coverage if they became unemployed, widowed, or divorced. Although some employers offered the option of buying into the group plan, there was no certainty of that option. In 1985, 10 states had laws requiring insurance policies sold in their states to include a continuation of coverage option for laid-off workers. However, self-insured employers (employers that assume the risk of the health care costs of their employees rather than using private insurers) were not regulated by these state-mandated benefit laws; self-insured plans were regulated at the federal level under ERISA. Health insurance coverage for these affected workers and their families was not consistently available. "COBRA" refers to Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, P.L. 99-272 . The regulations for COBRA are written by the Department of Labor (DOL) and the Internal Revenue Service (IRS). This section provides a simplified explanation of who qualifies and how, what the responsibilities of the employer are, and what the employee is responsible for. More detailed information is available from DOL's COBRA Continuation Coverage, Employee Benefits Security Administration, at http://www.dol.gov/ebsa/cobra.html . Under COBRA, employers who provide health insurance benefits must offer the option of continued health insurance coverage at group rates to qualified employees and their families who are faced with loss of coverage due to certain events. Coverage generally lasts 18 months but, depending on the circumstances, can last for longer periods. COBRA requirements also apply to self-insured firms. An employer must comply with COBRA even if it does not contribute to the health plan; it needs only maintain such a plan to come under the statute's continuation requirements. COBRA covers all employers, with the following exceptions: Small employers. Employers with fewer than 20 employees are not covered under COBRA. An employer is considered to meet the small employer exception during a calendar year if on at least 50% of its typical business days during the preceding calendar year it had fewer than 20 employees. Church plans. Federal, state, and local governments. Although federal employees are not covered under COBRA, they and employees of the Washington, DC, district government have been entitled to temporary continuation of coverage (TCC) under the Federal Employees Health Benefits Program (FEHB) since 1990. Continuation coverage for state and local employees is mandated under the Public Health Service Act with provisions very similar to COBRA's protections. See 42 U.S.C. Section 300bb-1 et seq. In general, a qualified beneficiary is an employee covered under the group health plan who loses coverage due to termination of employment or a reduction in hours; a retiree who loses retiree health insurance benefits due to the former employer's bankruptcy under Chapter 11; a spouse or dependent child of the covered employee who, on the day before the "qualifying event" (see below), was covered under the employer's group health plan; or any child born to or placed for adoption with a covered employee during the period of COBRA coverage. Circumstances that trigger COBRA coverage are known as "qualifying events." A qualifying event must cause an individual to lose health insurance coverage. Losing coverage means ceasing to be covered under the same terms and conditions as those available immediately before the event. For example, if an employee is laid off or changes to part-time status resulting in a loss of health insurance benefits, this is a qualifying event. Events that trigger COBRA continuation coverage include termination (for reasons other than gross misconduct) or reduction in hours to the point where the employee no longer qualifies for the benefit. Spouses and dependent children can experience the following qualifying events leading to their loss of health insurance coverage: the death of the covered employee, divorce or legal separation from the employee, the employee's becoming eligible for Medicare, and the end of a child's dependency under a parent's health insurance policy. Under the following circumstances, a covered employer must offer a retiring employee access either to COBRA or to a retiree plan that satisfies COBRA's requirements for benefits, duration, and premium: If a covered employer offers no retiree health plan, the retiring employee must be offered COBRA coverage. If the employer offers a retiree health plan but it is different from the coverage the employee had immediately before retirement the employer must offer the option of COBRA coverage in addition to the offer of the alternative retiree plan. If the retiring employee opts for the alternative coverage and declines COBRA coverage, then she or he is no longer eligible for COBRA. If the employer's retiree health plan satisfies COBRA's requirements for benefits, premium, and duration, the employer is not required to offer a COBRA option when the employee retires, and the coverage provided by the retiree plan can be counted against the maximum COBRA coverage period that applies to the retiree, spouse, and dependent children. If the employer terminates the plan before the maximum coverage period has expired, COBRA coverage must be offered for the remainder of the period. The only other access a retiree has to COBRA coverage is when a former employer terminates the retiree health plan under Chapter 11 bankruptcy reorganization. This option would be available only to those retirees who are receiving retiree health insurance. In this case, the coverage can continue until the death of the retiree. The retiree's spouse and dependent children may purchase COBRA coverage from the former employer for 36 months after the retiree's death. The continuation coverage must be identical to that provided to "similarly situated non-COBRA beneficiaries." The term similarly situated is intended to ensure that beneficiaries have access to the same options as those who have not experienced a qualifying event. For example, if the employer offers an open season for non-COBRA beneficiaries to change their health plan coverage, the COBRA beneficiary must also be able to take advantage of the open season. By the same token, COBRA continuation coverage can be terminated if an employer terminates health insurance coverage for all employees. The duration of COBRA coverage can vary, depending on the qualifying event. In general, when a covered employee experiences a termination or reduction in hours of employment, the continued coverage for the employee and the employee's spouse and dependent children may continue for 18 months. Retirees who lose retiree health insurance benefits, due to the bankruptcy (a reorganization under Chapter 11) of their former employer, may elect COBRA coverage that can continue until their death. The spouse and dependent children of the retiree may continue the coverage for an additional 36 months after the death of the retiree. For all the other qualifying events listed above (death of employee, divorce or legal separation from employee, employee becoming eligible for Medicare, the end of a child's dependent status under the parents' health policy), the coverage for the qualified beneficiaries may be continued for 36 months. Different provisions apply to disabled individuals. If the Social Security Administration (SSA) makes a determination that the date of an individual's onset of disability occurred during the first 60 days of COBRA coverage or earlier, the employee and the employee's spouse and dependents are eligible for an additional 11 months of continuation coverage. This is a total of 29 months from the date of the qualifying event (which must have been a termination or reduction in hours of employment). This provision was designed to provide a source of coverage while individuals wait for Medicare coverage to begin. After a determination of disability, there is a five-month waiting period for Social Security disability cash benefits and another 24-month waiting period for Medicare benefits. See the section below regarding the premium for this additional 11 months. Under some conditions, COBRA coverage can end earlier than the full term. Although coverage must begin on the date of the qualifying event, it can end on the earliest of the following: the first day for which timely payment of the premium is not made (payment is timely if it is made within 30 days of the payment due date and payment cannot be required before 45 days after the date of election (see below)); the date on which the employer ceases to maintain any group health plan; the first day after the qualified beneficiary becomes actually covered (and not just eligible to be covered) under another employer's group health plan, unless the new plan excludes coverage for a preexisting condition; or the date the qualified beneficiary is entitled to Medicare benefits, if this condition is specified in the group health plan. If a COBRA-covered beneficiary receiving coverage through a region-specific plan (such as a managed care organization) moves out of that area, the employer is required to provide coverage in the new area if this can be done under one of the employer's existing plans. For example, if the employer's plan is through an insurer licensed in the new area to provide the same coverage available to the employer's similarly situated non-COBRA employees. Further, if this same coverage would not be available in the new area, but the employer maintains another plan for employees who are not similarly situated to the beneficiary (such as a plan offered to management or another group within the firm) that would be available in the new area, then that alternative coverage must be offered to the beneficiary. If, however, the only coverage offered by the employer is not available in the new area, the employer is not obliged to offer any other coverage to the relocating beneficiary. COBRA coverage varies for Medicare beneficiaries depending on whether they become eligible for COBRA before or after they become eligible for Medicare. Medicare law requires that certain employers (those with 20 or more employees) provide their employees who are Medicare beneficiaries with the same coverage offered to their other employees. This includes family coverage, if it is offered. If a working Medicare beneficiary experiences a qualifying event (e.g., retirement, job termination), he or she becomes eligible for 18 months of COBRA coverage from the date of the qualifying event. If the beneficiary's family members lose coverage because of the qualifying event, they would be eligible for COBRA coverage for up to 36 months from the date on which the employee became eligible for Medicare . For example, if an employee becomes eligible for Medicare in January 2013 and then retires 12 months later in January 2014, the covered family members would be eligible for 24 months of COBRA coverage, rather than 36 months. However, no matter when the second qualifying event occurs, COBRA coverage for qualified family members can never be less than 18 months. On the other hand, if an individual is receiving COBRA benefits and becomes eligible for Medicare during the 18 month period, COBRA coverage can be terminated early (see above, under " Duration of Coverage "). In this case, the individual's covered family members can continue their COBRA coverage for up to 36 months from the date of the original qualifying event. Employers, employees, and the employer's health plan administrators all have to meet requirements for notifying each other regarding COBRA. At the time an employee first becomes covered under a health plan, the plan administrator must provide written notification to the employee and his or her spouse regarding COBRA rights if a qualifying event should occur. If a qualifying event occurs, other notices are required. The employer must notify the plan administrator of the event within 30 days of the death of the employee, a termination, or reduction in hours, the employee's becoming entitled to Medicare, or the beginning of bankruptcy proceedings. Within 14 days of receiving the employer's notice, the plan administrator must notify, in writing, each covered employee and his or her spouse of their right to elect continued coverage. The employee must notify the employer or plan administrator within 60 days of a divorce or legal separation of a covered employee or a dependent child's ceasing to be a dependent of the covered employee under the policy. COBRA beneficiaries who are determined by the SSA to have been disabled within the first 60 days of COBRA coverage must notify the plan administrator of this determination to be eligible for the additional 11 months of coverage. They must provide this notice within 60 days of receiving the SSA's decision. A qualified individual must choose whether to elect COBRA coverage within an election period. This period is 60 days from the later of two dates: the date coverage would be lost due to the qualifying event or the date that the beneficiary is sent notice of his right to elect COBRA coverage. The beneficiary must provide the employer or plan administrator with a formal notice of election. Coverage is retroactive to the date of the qualifying event. The employee or other affected person may also waive COBRA coverage. If that waiver is then revoked within the election period, COBRA coverage must still be provided. However, coverage begins on the date of the revocation rather than the date of the qualifying event. The Trade Act of 2002 ( P.L. 107-210 ) provided a temporary extension of the election period for those individuals who qualified for the Health Coverage Tax Credit (HCTC). Under the provision, qualified individuals who did not elect COBRA coverage during the regular election period can elect continuation coverage within the first 60-day period beginning on the first day of the month when they were determined to have met the qualifications. Employers are not required to pay for the cost of COBRA coverage. They are permitted to charge the covered beneficiary 100% of the premium (both the portion paid by the employee and the portion paid by the employer, if any), plus an additional 2% administrative fee. For disabled individuals who qualify for an additional 11 months of COBRA coverage, the employer may charge 150% of the premium for these months. The plan must allow a qualified beneficiary to pay for the coverage in monthly installments, although alternative intervals may also be offered. Some states require insurers to offer group health plan beneficiaries the option of converting their group coverage to individual coverage. Conversion enables individuals to buy health insurance from the employer's plan without being subject to medical screening. Under the Health Insurance Portability and Accountability Act (HIPAA; P.L. 104-191 ), a person moving from the group to individual insurance market is guaranteed access to health insurance coverage either under federal requirements or an acceptable alternative state mechanism. The beneficiary must have exhausted all COBRA coverage before moving to the individual market. Although the policy must be issued, the premium might be higher than the premium under a group plan. Despite the higher premiums, the conversion option may be attractive to a person who would otherwise have difficulty obtaining health insurance because of a major illness or disability. Private group health plans are subject to an IRS excise tax for each violation involving a COBRA beneficiary. In general, the tax is $100 per day per beneficiary for each day of the period of noncompliance. ERISA also contains civil penalties of up to $100 per day for failure to provide the employee with the required COBRA notifications. State and local plans covered under the Public Health Service Act are not subject to the same financial penalties provided under the tax code or ERISA. However, state and local employees have the right to bring an "action for appropriate equitable relief" if they are "aggrieved by the failure of a state, political subdivision, or agency or instrumentality thereof" to provide continuation health insurance coverage as required under the act. COBRA was enacted to provide access to group health insurance for people who lose their employer-sponsored coverage, and thus to help reduce the number of uninsured. However, the law has limitations in its effectiveness in covering persons leaving the workforce and, from the point of view of both employees and employers, has costs that can be burdensome. Many COBRA beneficiaries are concerned about the cost of COBRA coverage. A Kaiser study provides figures for the average premiums for employer-sponsored health insurance coverage. The average annual premium for employer-sponsored health insurance in 2012 was $5,615 for single coverage and $15,745 for family coverage. Covered-current employees contribute on average 18% of the premium for single coverage and 28% of the premium for family coverage. Under COBRA, former employees may be required to pay up to 102% of the premium. This can be a hardship for newly unemployed individuals. Employers also express concerns about costs. Spencer & Associates, in its 2009 survey, reported that average claim costs for COBRA beneficiaries exceeded the average claim for an active employee by 53%. The average annual health insurance cost per active employee was $7,190, and the COBRA cost was $10,988. The Spencer & Associates analysts contend that this indicates that the COBRA population is sicker than active-covered employees and that the 2% administrative fee allowed in the law is insufficient to offset the difference in actual claims costs. It could be that the monthly expense of COBRA benefits contributes to "adverse selection" among the pool of potential beneficiaries. Healthy individuals may decide against COBRA benefits, while sicker individuals, anticipating medical expenses that would exceed the monthly premium, opt in. The Affordable Care Act (ACA) did not eliminate COBRA, and it made no direct changes to COBRA benefits. However, effective in 2014, ACA enacts health insurance reforms, establishment of newly established health insurance exchanges, and premium credits for certain individuals. When the newly established health insurance exchanges are operational in 2014, it is expected that higher-quality health insurance will be available to uninsured individuals for purchase. If that is the case, will COBRA benefits still be relevant, or will the newly unemployed prefer to purchase policies on the exchange? How the ACA provisions will impact demand for COBRA coverage may vary by individual. In the absence of premium credits, some young and healthy individuals may find COBRA coverage more affordable than coverage in the exchange, whereas the opposite might occur for older workers. In addition, access to premium credits for individuals with income up to 400% of the federal poverty level may improve affordability of coverage. Employers, health care policy groups, and benefit advisors see an ongoing role for COBRA. They expect that employees will see value in continuing their employer benefits, despite the cost: COBRA will still provide a ready bridge for those who expect to be re-employed with new health benefits. People with pre-existing conditions and a network of health care providers may feel better served by their COBRA coverage. The Affordable Care Act requires employers to provide "Summaries of Benefits and Coverage" to their employees. This will make it easier for employees to compare their health benefits under COBRA with the other options available to them. The status of the exchanges and the quality/cost of the products sold on the exchanges are still unknown. Statistical data on COBRA beneficiaries are sparse; however, some data are collected. The Medical Expenditure Panel Survey, Agency for Healthcare Research and Quality, U.S. Department of Health and Human Services, provides an annual estimate of COBRA beneficiaries based on survey data: 2011: 2,616,000 2010: 3,443,000 2009: 3,190,000 2008: 2,832,000 Charles D. Spencer & Associates, a company that provides employee benefits analysis, surveyed 120 employers who subscribe to its service regarding COBRA, capturing information on the 2008 plan year for about 1.6 million workers. Its 2009 COBRA survey found that less than 10% of those who were eligible for COBRA benefits elected to take them, down significantly from the 2006 survey that showed about 27% of those eligible elected coverage. Average length of COBRA coverage was the lowest since the survey started in 1994. The average beneficiary under an 18-month qualifying event kept COBRA coverage for 7.5 months, down from 8.3 months in 2006 and 10.1 months in 1999. The average beneficiary under a 36-month qualifying event kept coverage for 14.2 months, down from 16.6 months in 2006 and 23.4 months in 1999. COBRA is a method for retaining health insurance coverage, but many workers are excluded: Individuals who declined their employer-sponsored benefits do not qualify for COBRA. Workers who did not qualify for their employer-sponsored benefits, hourly and seasonal employees for example, do not qualify for COBRA benefits. The small employer exception exempts employers with fewer than 20 employees from providing COBRA coverage. COBRA coverage is not extended to individuals who work for an employer, regardless of size, that does not offer group health insurance. COBRA does not provide for continuation of coverage for family members unless an employer offers a family option. If an employer declares bankruptcy under Chapter 7 or simply discontinues operation, COBRA is not an option for employees who might otherwise have been eligible for COBRA benefits. In 2009, The Commonwealth Fund estimated that about 66% of currently working Americans, or about 79 million workers, would qualify for COBRA benefits if they became unemployed. Currently, COBRA provides an exception for employers with fewer than 20 employees. According to the Census Bureau's Statistics of U.S. Business , in 2010, approximately 5.2 million firms employed 20.5 million people, or about 18% of employees covered in the survey. These workers would not be covered by COBRA because their employer had fewer than 20 employees at that firm. According to The Commonwealth Fund, in 2007, 5% of insured adults aged 19 to 64 were ineligible for COBRA because their employer-sponsored insurance was provided through a firm with fewer than 20 employees. Forty states and the District of Columbia have attempted to address this issue through "mini-COBRA" laws, which require that continuation coverage be offered to employees in smaller firms. However, in some states, the continuation coverage may be offered for a shorter period or provide fewer benefits than federal COBRA law requires. Almost all Americans over the age of 65 qualify for Medicare—the federal health insurance program for the elderly. But many people retire before age 65. In 2012, the Social Security Administration reported that nearly 60% of Social Security beneficiaries retired before the age of 65. These retirees, separated from employment, are often separated from their former source of health insurance. Some retirees obtain health insurance coverage through retiree plans offered by their former employers, but the number of employers who offer retiree plans has been falling. In 2008, 22% of workers were employed at a private establishment that offered health benefits to early retirees, down from 31% in 1997, and 17% of workers were employed at a private establishment that offered health benefits to Medicare-eligible retirees, down from 28% in 1997. The 2010 Kaiser annual employer survey reported that the percentage of employers with 200+ employees who offered retiree health benefits had dropped from 66% in 1988 to 28% in 2010. Small firms are even less likely to offer such coverage: 3% of firms with 3 to 199 workers offered retiree plans in 2010. For retirees who are under the age of 65, and the near-elderly, those aged 55 to 65, separated from employment, COBRA coverage can be an important source of health insurance: the 18 months of COBRA benefits provide a bridge to Medicare for those who are close to the age of 65. When COBRA benefits run out, the near-elderly can have unique problems finding health insurance coverage on the individual market. Currently, there is no legislation in the 113 th Congress to amend COBRA. In the 112 th Congress, legislation to extend COBRA coverage to additional people, domestic partners for example, or expand COBRA coverage, to span the time between retirement and Medicare eligibility for example, was introduced, but no major action was taken. Throughout 2008-2009, the unemployment rate in the United States climbed from 5% to a peak of 10% in October 2009. A slow recovery was predicted and many who lost their jobs anticipated a long period of being either underemployed or unemployed. As a result, many who were eligible to continue their employer-sponsored health insurance did not elect coverage under COBRA, leaving their families at risk. The 111 th Congress addressed this problem by creating a temporary COBRA premium subsidy under Title III of the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ). The subsidy was limited to 15 months and covered 65% of the COBRA premium. The individuals had to pay the remaining balance. This provision has since expired. The COBRA subsidy, as amended by subsequent laws, was available to individuals who met the income test and who were involuntarily terminated on or after September 1, 2008, and before June 1, 2010. | Health insurance helps to protect individuals and families against financial loss. Having health insurance also promotes access to regular health care. Most Americans with private health insurance are covered through an employer, or through the employer of a family member. A recent study by the Robert Wood Johnson Foundation found that in 2012, 59.5% of insured Americans had their insurance through an employer. When an employee is terminated, his or her employer-sponsored health insurance usually ends within 30 to 60 days. If that health insurance is family coverage, then a worker's family members can also become uninsured. Even if the worker finds another job with health benefits, a family can experience long periods of uninsurance, as they wait to qualify for the new benefit. This same problem is also faced by families that experience a reduction in hours in the workplace, the death of a worker, or a divorce. In 1985, Congress passed legislation to provide the unemployed temporary access to their former employer's health insurance. Under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA; P.L. 99-272), an employer with 20 or more employees who provided health insurance benefits must provide qualified employees and their families the option of continuing their coverage under the employer's group health insurance plan in the case of certain events. The former employee is responsible for paying the entire premium. Employers who fail to provide the continued health insurance option are subject to penalties. COBRA coverage usually lasts for 18 months, but it can be extended up to a total of 36 months, depending on the nature of the triggering event. Those who take up their COBRA benefits are required to pay up to 100% of the premium, which averaged $15,745 for a family in 2012, plus an additional 2% for the administrative costs incurred. COBRA can be an important source of health insurance for the recently unemployed, but it also benefits the disabled, the retired, the divorced, and their families. For example, spouses and dependent children can also qualify for COBRA benefits in the event of divorce or the death of the family member with employer-sponsored health coverage. Since 2009, about 3 million individuals and families have used COBRA benefits each year. Critics argue that COBRA addresses the health insurance problems of only a small number of Americans, and that the high cost of premiums makes COBRA coverage unaffordable to many who need it. Others maintain that COBRA has resulted in extra costs for employers, as well as the added administrative burden of providing benefits to people no longer working for them. Implementation of Affordable Care Act provisions, such as the health insurance exchanges, insurance reforms, and premium subsidies for lower-income individuals in 2014, may make COBRA benefits less valuable for certain individuals and families. This report provides background on COBRA, a brief explanation of the program, its origins, issues, and how the Affordable Care Act might impact COBRA. |
Federal government agencies and programs work to accomplish widely varying missions. These agencies and programs use a number of public policy approaches, including federal spending,tax laws, tax expenditures, (1) and regulation. (2) In FY2004, estimated federal spending was $2.3 trillion,and taxexpenditures totaled approximately $1 trillion. Estimates of the off-budget costs of federalregulations have ranged in the hundreds of billions of dollars, and corresponding estimates ofbenefits of federal regulations have ranged from the hundreds of billions to trillions of dollars. (3) Given the scope and complexity of these various efforts, it is understandable that citizens,their elected representatives, civil servants, and the public at large would have an interest in theperformance and results of government activities. Evaluating the performance of governmentagencies and programs, however, has proven difficult and often controversial: Actors in the U.S. political system (e.g., Members of Congress, the President,citizens, interest groups) often disagree about the appropriate uses of public funds; missions, goals,and objectives for public programs; and criteria for evaluating success. One person's key programmay be another person's key example of waste and abuse, and different people have differentconceptions of what "good performance" means. Even when consensus is reached on a program's appropriate goals andevaluation criteria, it is often difficult and sometimes almost impossible to separate the discreteinfluence that a federal program had on key outcomes from the influence of other actors (e.g., stateand local governments), trends (e.g., globalization, demographic changes), and events (e.g., naturaldisasters). Federal agencies and programs often have multiple purposes, and sometimesthese purposes may conflict or be in tension with one another. Finding and assessing a balanceamong priorities can be controversial and difficult. The outcomes of some agencies and programs are viewed by many observersas inherently difficult to measure. Foreign policy and research and development programs have beencited as examples. There is frequently a time lag between an agency's or program's actions andeventual results (or lack thereof). In the absence of this eventual outcome data, it is often difficultto know how to assess if a program is succeeding. Many observers have asserted that agencies do not adequately evaluate theperformance or results of their programs -- or integrate evaluation efforts across agency boundaries-- possibly due to lack of capacity, management attention and commitment, or resources. (4) In spite of these and other challenges, (5) in the last 50 years both Congress and the President haveundertaken numerous efforts -- sometimes referred to as performance management, performancebudgeting, strategic planning, or program evaluation -- to analyze and manage the federalgovernment's performance. Many of those initiatives attempted in varying ways to use performanceinformation to influence budget and management decisions for agencies and programs. (6) The Bush Administration'srelease of PART ratings along with the President's FY2004 and FY2005 budget proposals, and itsplans to continue doing so for FY2006 and subsequent years, represent the latest of these efforts. The PART was created by OMB within the context of the Bush Administration's broaderBudget and Performance Integration (BPI) initiative, one of five government-wide initiatives underthe President's Management Agenda (PMA). (7) According to the President's proposed FY2005 budget, the goal ofthe BPI initiative is to "have the Congress and the Executive Branch routinely consider performanceinformation, among other factors, when making management and funding decisions." (8) In turn, [the PART] is designed to help assess the managementand performance of individual programs. The PART helps evaluate a program's purpose, design,planning, management, results, and accountability to determine its ultimate effectiveness. (9) The PART evaluates executive branch programs that have funding associated with them. (10) The Bush Administrationsubmitted approximately 400 PART scores and analyses along with the President's FY2004 andFY2005 budget proposals, (11) with the intent to assess programs amounting to approximately20% of the federal budget each fiscal year for five years, from FY2004 to FY2008. For FY2004,OMB assessed 234 programs. For FY2005, a further 173 programs were assessed. (12) For these two yearscombined, OMB said that about 40% of the federal budget, or nearly $1.1 trillion, had been"PARTed." In releasing the PART, the Bush Administration asserted that Congress's current statutoryframework for executive branch strategic planning and performance reporting, the GovernmentPerformance and Results Act of 1993 (GPRA), [w]hile well-intentioned ... did not meet its objectives. Through the President's Budget and Performance Integration initiative, augmented by the PART, theAdministration will strive to implement the objectives of GPRA. (13) As discussed later in this report, this move and the PART's perceived lack of integration with GPRAwas controversial among some observers, in part because OMB, and by extension the BushAdministration, were seen as "substituting [their] judgment" about agency strategic planning andprogram evaluations "for a wide range of stakeholder interests" under the framework established byCongress under GPRA. (14) Under GPRA, 5 U.S.C. § 306 requires an agency whendeveloping its strategic plan (15) to consult with Congress and "solicit and consider the views andsuggestions of those entities potentially affected by or interested in such a plan." Some observershave recommended a stronger integration between PART and GPRA, thereby more stronglyintegrating executive and congressional management reform efforts. (16) OMB developed seven versions of the PART questionnaire for different types ofprograms. (17) Structurally, each version of the PART has approximately 30 questions that are divided into foursections. Depending on how the questionnaire is filled in and evaluated, each section provides apercentage "effectiveness" rating (e.g., 85%). The four sections are then averaged to create a singlePART score according to the following weights: (1) program purpose and design, 20%; (2) strategicplanning, 10%; (3) program management, 20%; and (4) program results/accountability, 50%. Under the overall supervision of OMB and agency political appointees, OMB's programexaminers and agency staff negotiate and complete the questionnaire for each "program" -- therebydetermining a program's section and overall PART scores. In the event of disagreements betweenOMB and agencies regarding PART assessments, OMB's PART instructions for FY2005 stated that"[a]greements on PART scoring should be reached in a manner consistent with settling appeals onbudget matters." (18) Under that process, scores are ultimately decided or approved by OMB political appointees and theWhite House. When the PART questionnaire responses are completed, agency and OMB staffprepare materials for inclusion in the President's annual budget proposal to Congress. According to OMB's most recent guidance to agencies for the PART, the definition of program will most often be determined by a budgetary perspective. That is, the "program" thatOMB assesses with the PART will most often be what OMB calls a program activity , or aggregationof program activities , as listed in the President's budget proposal: One feature of the PART process is flexibility for OMBand agencies to determine the unit of analysis -- "program" -- for PART review. The structure thatis readily available for this purpose is the formal budget structure of accounts and activitiessupporting budget development for the Executive Branch and the Congress and, in particular,Congressional appropriations committees.... Although the budget structure is not perfect for programreview in every instance -- for example, "program activities" in the budget are not always theactivities that are managed as a program in practice -- the budget structure is the most readilyavailable and comprehensive system for conveying PART results transparently to interested partiesthroughout the Executive and Legislative Branches, as well as to the public at large. (19) The term program activity is essentially defined by OMB's Circular No. A-11 as the activities andprojects financed by a budget account (or a distinct subset of the activities and projects financed bya budget account), as those activities are outlined in the President's annual budget proposal. (20) As noted later, thisbudget-centered approach has been criticized by some observers, because this budget perspective didnot necessarily match an agency's organization or strategic planning. For each program that has been assessed, OMB develops a one-page "Program Summary"that is publicly available in electronic PDF format. (21) Each summary displays four separate scores, as determined byOMB, for the PART's four sections. OMB also made available for each program a detailed PART"worksheet" to briefly show how each question and section of the questionnaire was filled in,evaluated, and scored. (22) OMB states that the numeric scores for each section are used to generate an overalleffectiveness rating for each "program": [The section scores] are then combined to achieve anoverall qualitative rating of either Effective, Moderately Effective, Adequate, or Ineffective. Programs that do not have acceptable performance measures or have not yet collected performancedata generally receive a rating of Results Not Demonstrated. (23) The PART's overall "qualitative" rating is ultimately driven by a single numerical score. However,none of OMB's FY2005 budget materials, one-page program summaries, or detailed worksheetsdisplays a program's overall numeric score according to OMB's PART assessment. OMB stated thatit does not publish these single numerical scores, because "numerical scores are not so precise as tobe able to reliably compare differences of a few points among different programs.... [Overall scores]are rather used as a guide to determine qualitative ratings that are more generally comparable acrossprograms." (24) However,these composite weighted scores can be computed manually using OMB's weighting formula. (25) The only PART effectiveness rating that OMB defines explicitly is "Results NotDemonstrated," as shown by the excerpt above. (26) The Government Accountability Office (GAO, formerly theGeneral Accounting Office) has stated that "[i]t is important for users of the PART information tointerpret the 'results not demonstrated' designation as 'unknown effectiveness' rather than as meaningthe program is 'ineffective.'" (27) The other four ratings, which are graduated from best to worst,are driven directly by each program's overall quantitative score, as outlined in the following table. Table 1. OMB Rating Categories for thePART Source : OMB's website, at http://www.whitehouse.gov/omb/part/2004_faq.html , "PARTFrequently Asked Question" #29. This website appears to be the only publicly available locationwhere OMB indicates how OMB translated numerical scores into overall "qualitative" ratings. OMB has stated that it wants to make the PART process and scores transparent, consistent,systematic, and objective. To that end, OMB solicited and received feedback and informalcomments from agencies, congressional staff, GAO, and "outside experts" on ways to change theinstrument before it was published with the President's FY2004 budget proposal in February2003. (28) In an effortto increase transparency, for example, OMB made the detailed PART worksheets available for eachprogram. To make PART assessments more consistent, OMB subjected its assessments to aconsistency check. (29) That review was "examined," in turn, by the National Academy of Public Administration(NAPA). (30) To makethe PART more systematic, OMB established formal criteria for assessing programs and created aninstrument that differentiated among the seven types of programs (e.g., credit programs, research anddevelopment programs). With regard to the goal of achieving objectivity, OMB made changes to the draft PARTbefore its release in February 2003 with the President's budget. For example, OMB eliminated adraft PART question on whether a program was appropriate at the federal level, because OMB foundthat question "was too subjective and [assessments] could vary depending on philosophical orpolitical viewpoints." (31) However, OMB went further to state: While subjectivity can be minimized, it can never becompletely eliminated regardless of the method or tool. In providing advice to OMB Directors,OMB staff have always exercised professional judgment with some degree of subjectivity. That willnot change.... [T]he PART makes public and transparent the questions OMB asks in advance ofmaking judgments, and opens up any subjectivity in that process for discussion and debate. (32) OMB career staff are not necessarily the only potential sources for subjectivity in completing PARTassessments. Subjectivity in completing the PART questionnaire and determining PART scorescould potentially also be introduced by White House, OMB, and other political appointees. Furthermore, in a guidance document for the FY2005 and FY2006 PARTs, OMB has notedthat performance measurement in the public sector, and by extension the PART, have limitations,because: information provided by performance measurement isjust part of the information that managers and policy officials need to make decisions. Performancemeasurement must often be coupled with evaluation data to increase our understanding of whyresults occur and what value a program adds. Performance information cannot replace data onprogram costs, political judgments about priorities, creativity about solutions, or common sense. Amajor purpose of performance measurement is to raise fundamental questions; the measures seldom,by themselves, provide definitive answers. (33) In OMB's guidance for the FY2006 PART, OMB stated that "[t]he PART rel[ies] on objective datato assess programs." (34) Former OMB Director Mitchell Daniels Jr. also reportedly stated, with release of the President'sFY2004 budget proposal, that "[t]his is the first year in which ... a serious attempt has been made toevaluate, impartially on an ideology-free basis, what works and what doesn't." (35) Other points of viewregarding how the PART was used are discussed later in this report, in the section titled "Third PartyAssessments of the PART." In the President's FY2005 budget proposal, OMB stated that PART ratings are intended to"affect" and "inform" budget decisions, but that "PART ratings do not result in automatic decisionsabout funding." (36) InOMB's guidance for the FY2004 PART, for example, OMB said: FY 2004 decisions will be fundamentally grounded inprogram performance, but will also continue to be based on a variety of other factors, includingpolicy objectives and priorities of the Administration, and economic and programmatic trends. (37) In addition, OMB's FY2006 PART guidance states that [t]he PART is a diagnostic tool; the main objective ofthe PART review is to improve program performance. The PART assessments help linkperformance to budget decisions and provide a basis for making recommendations to improveresults. (38) The President's budget proposals for FY2004 and FY2005 both indicated that the PART processinfluenced the President's recommendations to Congress. (39) An analysis of the Bush Administration's FY2005 PART assessments by the PerformanceInstitute, a for-profit corporation that has broadly supported the President's Management Agenda,stated that "PART scores correlated to funding changes demonstrates an undeniable link betweenbudget and performance in FY '05." (40) The Performance Institute noted that the President made thefollowing budget proposals for FY2005: Programs that OMB judged "Effective" were proposed with average increasesof 7.18%; "Moderately Effective" programs were proposed with average increases of8.27%; "Adequate" programs were proposed with decreases of1.64%; "Ineffective" programs were proposed with average decreases of 37.68%;and "Results Not Demonstrated" programs were proposed with average decreasesof 3.69%. The Performance Institute further asserted that the PART had captured the attention of federalmanagers, resulted in improved performance management, resulted in better outcome measures forprograms, and served as a "quality control" tool for GPRA. (41) The company also assertedthat Congress, which had not yet engaged in the PART process, should do so. The PART. According to a news report, oneprominent scholar in the area of program evaluation offered a mixed assessment of the PART: Some critics call PART a blunt instrument. But HarryR. Hatry, the director of the public-management program at the Urban Institute, a Washington thinktank, said the administration appears to be making a genuine effort to evaluate programs. He serveson an advisory panel for the PART initiative. "All of this is pretty groundbreaking," he said. Mr.Hatry argues that it's important to examine outcomes for programs, and that spending decisionsought to be more closely tied to such information. That said, he did caution about how far PARTcan go. "The term 'effective' is probably pushing the word a little bit," he said. "It's almostimpossible to extract in many of these programs ... the effect of the federal expenditures." Ultimately, while Mr. Hatry is enthusiastic about adding information to the budget-making process,he holds no illusions that this will suddenly transform spending decisions in Washington. "Politicalpurpose," he said, "is all over the place." (42) Scholars have also begun to analyze the PART using sophisticated statistical techniques,including regression analysis. (43) One team investigated "the role of merit and politicalconsiderations" in how PART scores might have influenced the President's budget recommendationsto Congress for FY2004 and FY2005 for individual programs. (44) In summary, they foundthat PART scores were positively correlated with the President's recommendations for budgetincreases and decreases (i.e., a higher PART score was associated with a higher proposed budgetincrease, after controlling for other variables). The team also found what they believed to be someevidence (i.e., statistically significant regression coefficients) that politics may have influenced thebudget recommendations that were made, and how the PART was used, for FY2004, but not forFY2005. They also found what they believed to be evidence that PART scores appeared to haveinfluence for "small-sized" programs (less than $75 million) and "medium-sized" (between $75 and$500 million) programs, but not for large programs. (45) PART and Performance Budgeting. Observershave generally considered the PART to be a form of "performance budgeting," a term that does nothave a standard definition. (46) In general, however, most definitions of performance budgetinginvolve the use of performance information and program evaluations during a government's budgetprocess. Scholars have generally supported the use of performance information in the budgetprocess, but have also noted a lack of consensus on how the information should be used and thatperformance budgeting has not been a panacea. In state governments, for example: Practitioners frequently acknowledge that the processof developing measures can be useful from a management and decision-making perspective. Budgetofficers were asked to indicate how effective the development and use of performance measures hasbeen in effecting certain changes in their state across a range of items, from resource allocationissues, to programmatic changes, to cultural factors such as changing communication patterns amongkey players.... Many respondents were willing to describe performance measurement as "somewhateffective," but few were more enthusiastic.... Most markedly, few were willing to attach performancemeasures to changes in appropriation levels.... Legislative budget officers ranked the use ofperformance measures especially low in [effecting] cost savings and reducing duplicative services....Slightly more than half the respondents "strongly agreed" or "agreed" when asked whether theimplementation of performance measures had improved communication between agency personneland the budget office and between agency personnel and legislators. (47) Another scholar asserted that, among other things, "[p]erformance budgeting is an old idea with adisappointing past and an uncertain future," and that "it is futile to reform budgeting without firstreforming the overall [government] managerial framework." (48) GAO recently undertook a study of how OMB used the PART for the FY2004 budget. (49) Specifically, GAOexamined: (1) how the PART changed OMB's decision-making process in developing thePresident's FY2004 budget request; (2) the PART's relationship to the [Government Performanceand Results Act] planning process and reporting requirements; and (3) the PART's strengths andweaknesses as an evaluation tool, including how OMB ensured that the PART was appliedconsistently. (50) GAO asserted that the PART helped to "structure and discipline" how OMB usedperformance information for program analysis and the executive branch budget developmentprocess, (51) made OMB'suse of performance information more transparent, and "stimulated agency interest in budget andperformance integration." (52) However, GAO noted that "only 18 percent of the [FY2004PART] recommendations had a direct link to funding matters." (53) GAO also concluded "themore important role of the PART was not in making resource decisions but in its support forrecommendations to improve program design, assessment, and management." (54) More fundamentally, GAO contended that the PART is "not well integrated with GPRA --the current statutory framework for strategic planning and reporting." Specifically, GAO said: OMB has stated its intention to modify GPRA goals andmeasures with those developed under the PART. As a result, OMB's judgment about appropriategoals and measures is substituted for GPRA judgments based on a community of stakeholderinterests.... Many [agency officials] view PART's program-by-program focus and the substitutionof program measures as detrimental to their GPRA planning and reporting processes. OMB's effortto influence program goals is further evident in recent OMB Circular A-11 guidance that clearlyrequires each agency to submit a performance budget for fiscal year 2005, which will replace theannual GPRA performance plan. (55) Notably, GPRA's framework of strategic planning, performance reporting, and stakeholderconsultation prominently includes consultation with Congress. Furthermore, GAO said: Although PART can stimulate discussion onprogram-specific performance measurement issues, it is not a substitute for GPRA's strategic,longer-term focus on thematic goals, and on department- and governmentwide crosscuttingcomparisons. Although PART and GPRA serve different needs, a strategy for integrating the twocould help strengthen both. (56) GAO performed regression analysis on the Bush Administration's PART scores and fundingrecommendations. (57) In particular, GAO estimated the relationship of overall PART scores on the President'srecommended budget changes for FY2004 (measured by percentage change from FY2003) for twoseparate subsets of the programs that OMB assessed with the PART for FY2004. For mandatory programs, GAO found no statistically significant relationship between PART scores and proposedbudget changes. (58) For discretionary programs as an overall group, GAO found a statistically significant, positiverelationship between PART scores and proposed budget changes. (59) However, when GAO ranseparate regressions on small, medium, and large discretionary programs, GAO found a statisticallysignificant, positive relationship only for small programs. GAO also came to the following determinations: OMB made sustained efforts to ensure consistency in how programs wereassessed for the PART, but OMB staff nevertheless needed to exercise "interpretation and judgment"and were not fully consistent in interpreting the PART questionnaire (pp. 17-19). Many PART questions contained subjective terms that contributed tosubjective and inconsistent responses to the questionnaire (pp. 20-21). (60) Disagreements between OMB and agencies on appropriate performancemeasures helped lead to the designation of certain programs as "Results Not Demonstrated" (p.25). (61) A lack of performance information and program evaluations inhibitedassessments of programs (pp. 23-24). The way that OMB defined program may have been useful for a PARTassessment, but "did not necessarily match agency organization or planning elements" andcontributed to the lack of performance information (pp. 29-30). (62) In response to these issues, GAO recommended that OMB take several actions, includingcentrally monitoring agency implementation and progress on PART recommendations and reportingsuch progress in OMB's budget submission to Congress; continuing to improve the PART guidance;clarifying expectations to agencies on how to allocate scarce evaluation resources; attempting togenerate early in the PART process an ongoing, meaningful dialogue with congressionalappropriations, authorization, and oversight committees about what OMB considers the mostimportant performance issues and program areas; and articulating and implementing an integrated,complementary relationship between GPRA and the PART. (63) In OMB's response, OMBDeputy Director for Management Clay Johnson III stated "We will continually strive to make thePART as credible, objective, and useful as it can be and believe that your recommendations will helpus to that. As you know, OMB is already taking actions to address many of them." (64) In addition, GAO suggested that while Congress has several opportunities to provide itsperspective on performance issues and performance goals (e.g., when establishing or reauthorizinga program, appropriating funds, or exercising oversight), "a more systematic approach could allowCongress to better articulate performance goals and outcomes for key programs of major concern"and "facilitate OMB's understanding of congressional priorities and concerns and, as a result,increase the usefulness of the PART in budget deliberations." Specifically, GAO suggested that Congress consider the need for a strategy that couldinclude (1) establishing a vehicle for communicating performance goals and measures for keycongressional priorities and concerns; (2) developing a more structured oversight agenda to permita more coordinated congressional perspective on crosscutting programs and policies; and (3) usingsuch an agenda to inform its authorization, oversight, and appropriations processes. (65) Previous sections of this report discussed how the PART is structured, how it has been used,and how various actors have assessed its design and implementation. This section discusses potentialcriteria for evaluating the PART or other program evaluations, which might be considered byCongress during the budget process, in oversight of federal agencies and programs, and regardinglegislation that relates to program evaluation. (66) Should Congress focus on the question of criteria, the programevaluation and social science literature suggests that three standards or criteria may be helpful: theconcepts of validity , reliability , and objectivity . Validity has been defined as "the extent to which any measuring instrumentmeasures what it is intended to measure." (67) For example, because the PART is supposed to measure theeffectiveness of federal programs, its validity turns on the extent to which PART scores reflect theactual "effectiveness" of those programs. (68) Reliability has been described as "the relative amount of random inconsistencyor unsystematic fluctuation of individual responses on a measure"; that is, the extent to which severalattempts at measuring something are consistent (e.g., by several human judges or several uses of thesame instrument). (69) Therefore, the degree to which the PART is reliable can be illustrated by the extent to which separateapplications of the instrument to the same program yield the same, or very similar,assessments. Objectivity has been defined as "whether [an] inquiry is pursued in a way thatmaximizes the chances that the conclusions reached will be true." (70) Definitions of the wordalso frequently suggest concepts of fairness and absence of bias. The opposite concept is subjectivity , suggesting, in turn, concepts of bias, prejudice, or unfairness. Therefore, making ajudgment about the objectivity of the PART or its implementation "involves judging a course ofinquiry, or an inquirer, against some rational standard of how an inquiry ought to have been pursuedin order to maximize the chances of producing true findings " (emphasis in original). (71) Although these three criteria can each be considered individually, in application they may prove tobe highly interrelated. For example, a measurement tool that is subjectively applied may yield resultsthat, if repeated, are not consistent or do not seem reliable. Conversely, a lack of reliable results maysuggest that the instrument being used may not be valid, or that it is not being applied in an objectivemanner. In these situations, further analysis is typically necessary to determine whether problemsexist and what their nature may be. With regard to the PART, the Administration has made numerous assessments regardingprogram effectiveness. But how should one validly , reliably , and objectively determine a programis effective ? Should Congress wish to explore these issues regarding the PART or other evaluations,Congress might assess the extent to which the assessments have been, or will be, completed validly,reliably, and objectively. Different observers will likely have different views about the validity, reliability, andobjectivity of OMB's PART instrument, usage, and determinations. Nonetheless, some previousassessments of the PART suggest areas of particular concern. For example, in its study of the PART,GAO reported that one of the two reasons why programs were designated by the Administration as"results not demonstrated" (nearly 50% of the 234 programs assessed for FY2004) was that OMBand agencies disagreed on how to assess agency program performance, as represented by "long-termand annual performance measures." (72) Different officials in the executive branch appeared to havedifferent conceptions of what the appropriate goals of programs, and measures to assess programs,should be -- raising questions about the validity of the instrument. It is reasonable to conclude thatactors outside the executive branch, including Members of Congress, citizens, and interest groups,may have different perspectives and judgments on appropriate program goals and measures. UnderGPRA, stakeholder views such as these are required to be solicited by statute. Under the PART,however, the role and process for stakeholder participation appears less certain. Other issues that GAO identified could be interpreted as relating to the PART instrument's validity in assessing program effectiveness (e.g., OMB definitions of specific programs inconsistentwith agency organization and planning); its reliability in making consistent assessments anddeterminations (e.g., inconsistent application of the instrument across multiple programs); and its objectivity in design and usage. To illustrate with some potential examples of objectivity issues,subjectivity could arguably be resident in a number of PART questions, including, among others,when OMB conducted its assessment for FY2005: (73) whether a program is "excessively" or "unnecessarily" ... "redundant orduplicative of any other Federal, State, local, or private effort" [question 1.3, p. 22]; (74) whether a program's design is free of "major flaws" [question 1.4, p. 23]; (75) whether a program's performance measures "meaningfully" reflect theprogram's purpose [question 2.1, p. 25]; (76) and whether a program has demonstrated "adequate" progress in achievinglong-term performance goals [question 4.1, p. 47]. Use of such terms that, in the absence of clear definitions, are subject to a variety of interpretationscan raise questions about the objectivity of the instrument and its ratings. In one of its earliest publications on the PART, OMB said that "[w]hile subjectivity can beminimized, it can never be completely eliminated regardless of the method or tool. (77) OMB went on to say,though, that the PART "makes public and transparent the questions OMB asks in advance of makingjudgments, and opens up any subjectivity in that process for discussion and debate." That said, thePART and its implementation to date nevertheless appear to place much of the process for debatingand determining program goals and measures squarely within the executive branch. | Federal government agencies and programs work to accomplish widely varying missions. These agencies and programs employ a number of public policy approaches, including federalspending, tax laws, tax expenditures, and regulation. Given the scope and complexity of theseefforts, it is understandable that citizens, their elected representatives, civil servants, and the publicat large would have an interest in the performance and results of government agencies and programs. Evaluating the performance of government agencies and programs has proven difficult andoften controversial. In spite of these challenges, in the last 50 years both Congress and the Presidenthave undertaken numerous efforts -- sometimes referred to as performance management,performance budgeting, strategic planning, or program evaluation -- to analyze and manage thefederal government's performance. Many of those initiatives attempted in varying ways to useperformance information to influence budget and management decisions for agencies and programs. The George W. Bush Administration's release of the Program Assessment Rating Tool (PART) isthe latest of these efforts. The PART is a set of questionnaires that the Bush Administration developed to assess theeffectiveness of different types of federal executive branch programs, in order to influence fundingand management decisions. A component of the President's Management Agenda (PMA), the PARTfocuses on four aspects of a program: purpose and design; strategic planning; program management;and program results/accountability. The Administration submitted PART ratings for programs alongwith the President's FY2004 and FY2005 budget proposals, and plans to continue doing so forFY2006 and subsequent years. This report discusses how the PART is structured, how it has been used, and how variouscommentators have assessed its design and implementation. The report concludes with a discussionof potential criteria for assessing the PART or other program evaluations, which Congress mightconsider during the budget process, in oversight of federal agencies and programs, and inconsideration of legislation that relates to the PART or program evaluation generally. Proponents have seen the PART as a necessary enhancement to the Government Performanceand Results Act (GPRA), a law that the Administration views as not having met its objectives, inorder to hold agencies accountable for performance and to integrate budgeting with performance. However, critics have seen the PART as overly political and a tool to shift power from Congress tothe President, as well as failing to provide for adequate stakeholder consultation and publicparticipation. Some observers have commented that the PART has provided a needed stimulus toagency program evaluation efforts, but they do not agree on whether the PART validly assessesprogram effectiveness. This report will be updated as events warrant. |
On October 9, 2006, North Korea (formally the Democratic People's Republic of Korea) announced it conducted a nuclear test. After several days of evaluation, U.S. authorities confirmed that the underground explosion was nuclear, but that the test produced a low yield of less than one kiloton. The test followed a pattern of North Korean provocations and escalations, including the launch of several short-, medium-, and long-range missiles in July 2006. Since the United States threatened financial sanctions on banks that do business with North Korea in September 2005, Pyongyang had boycotted the Six-Party Talks (with South Korea, Japan, China, and Russia), the multilateral forum dedicated to eliminating North Korea's nuclear weapons program. Since the end of the Agreed Framework in 2002, experts estimate that North Korea may have added about six to eight more weapons' worth of plutonium to a fissile material stockpile. President Bush and other U.S. officials immediately condemned the test and called for a swift response from the United Nations Security Council (UNSC). At the U.N., the United States pushed for punitive sanctions and drafted a resolution that was eventually unanimously adopted. In a hastily-arranged trip to the region, Secretary of State Rice reiterated the U.S. security commitment to South Korea and Japan and urged China and South Korea to implement key measures of the U.N. resolution. North Korean officials reportedly told Russian officials the test of the explosive device would have a range of yield between 5 and 15 kilotons; another report suggests that North Korea told Chinese officials they planned to carry out a 4-kiloton test. Seismic information available from the Korea Institute of Geoscience and Mineral Resources in South Korea indicates that an explosion equivalent to an earthquake measuring a 3.58 magnitude occurred at 10:35 a.m. on October 9 in the vicinity of Musudan-ri, North Hamgyong Province. Most experts have correlated the size of the seismic disturbance with a sub-kiloton explosion, raising doubts about the effectiveness of the North Korean nuclear weapons design. On October 16, 2006, the U.S. Director of National Intelligence issued a statement confirming that a nuclear test was conducted, with a yield under 1 kiloton, in the vicinity of P'unggye. Several experts have suggested that the nuclear test might have fallen short of the anticipated yield because of imprecise manufacturing. According to one account, U.S. intelligence estimates that the blast was in the range of 200 tons of TNT, or 0.2 kt. By comparison, a simple plutonium implosion device normally would produce a larger blast, perhaps 5 to 20 kilotons. The first nuclear tests conducted by other states have ranged from 9 kt (Pakistan) to 60 kt, but tests by the United States, China, Britain and Russia were in the 20kt-range. On December 8, 2006, President Bush officially determined that North Korea had detonated a nuclear explosive device, as required by section 102(b)(1) of the Arms Export Control Act (P.L. 90-629). On December 11, 2006, Chinese officials announced that the multilateral negotiations would resume on December 18, 2006. In the weeks preceding, U.S. negotiators had reportedly offered some specific details on what assistance North Korea could expect (although those details were not made public). The United States further agreed to put the financial sanctions on the agenda, while North Korea dropped its demand that the sanctions be lifted as a precondition for the talks. For more details on the Talks, see CRS Report RL33590, North Korea ' s Nuclear Weapons Development and Diplomacy , by [author name scrubbed]. This report complements several other existing CRS reports. For more information on North Korea's nuclear weapons program history, development, and current status, see CRS Report RL33590, North Korea ' s Nuclear Weapons Development and Diplomacy , by [author name scrubbed] and CRS Report RS21391, North Korea ' s Nuclear Weapons: Latest Developments , by [author name scrubbed]. For further details on sanctions, see CRS Report RL31696, North Korea: Economic Sanctions , by [author name scrubbed]; on missiles, see CRS Report RS21473, North Korean Ballistic Missile Threat to the United States , by [author name scrubbed]; on counterfeiting issues, see CRS Report RL33324, North Korean Counterfeiting of U.S. Currency , by [author name scrubbed]. Further reports are also available on the North Korean economy, U.S. and international assistance to North Korea, general U.S.-Korean relations, and chronologies of events related to North Korea. In the 109 th Congress, Congress became more involved in, and at times critical of, U.S. policy toward North Korea. In late September and early October 2006, Congress enacted two pieces of legislation on North Korea. The John Warner National Defense Authorization Act for FY2007 ( H.R. 5122 / P.L. 109-364 ), requires the President to appoint a Policy Coordinator for North Korea within 60 days of enactment and report to the President and Congress within 90 days on recommendations. It also requires the executive branch to report to Congress every 180 days in fiscal years 2007 and 2008 on the status of North Korea's nuclear and missile programs. The North Korea Nonproliferation Act of 2006 ( P.L. 109-353 ) adds North Korea to the Iran-Syria Nonproliferation Act ( P.L. 106-178 ; P.L. 109-112 ), authorizing sanctions on third party "persons" for weapons-of-mass-destruction-related transfers to and from North Korea. In particular, this could affect North Korea's missile trade. In response to the test, the UNSC unanimously supported a U.S.-drafted resolution, Res. 1718, that calls the test "a clear threat to international peace and security," bans trade in heavy weapons and luxury goods, authorizes countries to inspect cargo bound to and from North Korea to look for weapons of mass destruction or related materials, and requests that countries freeze funds related to North Korea's non-conventional weapons programs. It also calls on North Korea to refrain from conducting additional nuclear or ballistic missile tests, rejoin the Nuclear Nonproliferation Treaty (NPT), suspend its ballistic missile program and eventually abandon its nuclear weapons in a complete, verifiable, and irreversible manner. Compared to the original U.S. draft, the final resolution was weakened in several key areas at the insistence of China and Russia, both permanent members of the UNSC. China insisted that the language request, but not require , that countries inspect cargo going into and out of North Korea and that the resolution explicitly rule out the use of military force. A more robust military embargo was scaled back to include only heavy military equipment such as tanks and missiles. Following passage of Res. 1718, North Korea declared it considered the imposition of sanctions an act of war. It is unclear how the sanctions will affect North Korea, already among the most isolated and poor countries in the world with limited global trade. Many experts argue that sanctions are ineffective at changing the fundamental political goals of governments. In addition, Res. 1718 bans trade in certain items, rather than a complete embargo, which some say lends itself to circumvention. The sanction regime depends heavily on individual states' compliance with the guidelines. For example, each state can determine what items are considered "luxury goods." China has sought to balance its wish to send a stern message to Pyongyang with its determination to avoid sparking a destabilizing military conflict. Beijing has made clear its overriding goal of preventing the collapse of the North Korean regime, which it fears would interrupt its surging economic development and bring thousands of North Korean refugees across the border into China. Analysts point out that China is also motivated by a desire to keep North Korea as a "buffer state" between it and the U.S. troops stationed in South Korea. Chinese officials maintain that the UNSC resolution should "create conditions conducive to the peaceful resolution of this issue through dialogue and negotiation." According to press reports, after the passage of the resolution, Chinese officials began inspecting trucks bound for North Korea more closely. Questions have arisen on whether China will enforce the sanctions regime on air or ship trade, and Beijing said it would not stop North Korean-bound ships to conduct inspections for illegal weapons and missiles as the resolution requests. Chinese officials insist that they are implementing the U.N. resolution, but that "normal trade" with North Korea should not be disrupted. Economists argue that the only definitively effective punishment on North Korea would be the suspension of energy aid from China; China reportedly supplies about 70% of North Korea's fuel. After the test, reports citing Chinese trade statistics showed a marked decline of oil exports to North Korea in September, prompting speculation that Beijing may have been punishing Pyongyang for the July missile tests and/or warning it not to test a nuclear device as threatened. Chinese officials subsequently denied any cutoff, however, and customs data showed a resumption of crude oil to North Korea in October. Some analysts suggest that Beijing could be employing a more subtle form of pressure by sending fewer refined oil products, but there is no overwhelming evidence that China has tried to punish North Korea by restricting energy trade. The South Korean government vowed to support the UNSC resolution and called for Pyongyang to return to the Six-Party Talks, but also said it will not suspend cooperation with North Korea on the Kaesong Industrial Park (where South Korean firms employ North Korean workers at a complex in the North, about one hour from Seoul) and the Mt. Kumgang tourism site. The two joint projects are believed to provide Pyongyang with several million dollars a year in hard currency. A spokesman for the Ministry of Foreign Affairs said, "We will go ahead with the economic cooperation programs in harmony with the resolution," but would not specify if Seoul planned to expand the Kaesong plant as scheduled. The planned expansion would reportedly provide the North Korean regime with an estimated $500 million annually by 2012. Despite pressure from the Bush Administration following the test, South Korea declined to join the U.S.-led Proliferation Security Initiative (PSI—see Options section), citing fears of engaging in military action by boarding North Korean ships. Undersecretary of State Nicholas Burns criticized the South Koreans for not doing more to send a message to North Korea. Japan has imposed its own unilateral sanctions—more restrictive than those called for in the UN resolution—that ban all North Korean ships from entering Japanese ports and restrict imports and most North Korean nationals from entering Japan. In addition, Japan adopted a list of items that fall under the "luxury goods" category, including caviar, jewelry, and watches. Officials in Tokyo have also vowed to assist the U.S. military in stopping North Korean cargo ships for inspections, despite the country's pacifist constitution. Japan's reaction follows a pattern of Tokyo taking increasingly hardline positions on North Korea. Following the July 2006 missile tests by North Korea, Japan led the UNSC to issue a resolution condemning the tests and announced its own unilateral measures that froze bank remittances to North Korea. Japan, which long had been North Korea's second largest trading partner, is now believed to be the North's fifth largest partner (behind China, South Korea, Thailand, and Russia.) Determining the motivations of a government as opaque and secretive as North Korea is exceedingly difficult, but analysts have put forth a range of possibilities to explain why the Pyongyang regime decided to test a nuclear weapon now. As with many foreign policy decisions, the calculation was probably a combination of factors. Some analysts have argued that the nuclear test was a desperate effort by the North Koreans to secure bilateral negotiations with the United States and, once in negotiations, have more leverage. The Bush Administration has steadfastly refused to engage in direct talks with North Korean negotiators outside of the Six-Party Talks process, although U.S. officials assert that much of the multilateral forum is devoted to speaking directly with the North Koreans. Selig Harrison, an Asian expert with exceptional access to DPRK officials, argues that top North Korean officials want bilateral talks in order to implement the denuclearization agreement concluded at the last round of the Six-Party Talks in Beijing in September 2005. This argument assumes that North Korea is sincere in its intent to eliminate its nuclear weapons program in exchange for economic and diplomatic incentives, or, if not, the North's intent should be tested. The "Joint Statement of Principles" issued at the September 2005 round of the Six-Party Talks was seen as a groundbreaking agreement that outlined a clear path to a negotiated resolution. In the statement, the six parties unanimously agreed to the peaceful denuclearization of the Korean Peninsula, and North Korea committed to abandoning its nuclear weapons programs, returning to the NPT, and allowing IAEA safeguards. The other five parties offered energy and humanitarian assistance. The United States and North Korea agreed to take steps toward normalization of relations, which for the United States would include resolution of concerns with the North's ballistic missile programs and human rights record. According to some analysts, the promise of establishing diplomatic relations with Washington was the key element for the North Korean delegation. The nuclear test could have been motivated by the regime's deep insecurity and fear of an attack by the United States, a fear that has consumed the country for generations since the Korean War. After being labeled as part of the "axis of evil" by President Bush in 2002, North Korea may have drawn a lesson from the invasion of Iraq: that Iraq was targeted because it was believed to be pursuing a nuclear weapons program, but had not yet succeeded. Pyongyang's planners may believe that developing and demonstrating a nuclear capability will deter a U.S. attack. North Korea may believe that the rest of the world will adjust to it being a nuclear power after the initial rounds of condemnation, similar to the experiences of Pakistan and India after testing nuclear weapons in 1998. An unclassified 2003 CIA assessment provided to the Senate Select Committee on Intelligence offered this analysis: "A test would demonstrate to the world the North's status as a nuclear-capable state and signal (Kim Jong-il's) perception that building a nuclear stockpile will strengthen his regime's international standing and security posture." Although internal pressures are exceedingly difficult to measure in secretive North Korea, the test may have been intended to appease hardliners in the regime. In the wake of the partially failed missile tests in July 2006, the military leadership in North Korea may have pressed for another indication of their resolve. Given the North's impoverished state, leader Kim Jong-il needs to maintain the support of the military in order to hold on to power. Another domestic factor could have been the need for North Korea to assert itself as South Korea was winning wide recognition because of the ascension of Foreign Minister Ban Ki-Moon as UN Secretary General. Since the division of the peninsula in 1945, Pyongyang has competed with Seoul for legitimacy as the government of the Korean people. Many of these dynamics have played out at the UN, where both countries are recognized as sovereign states. Most observers believe that nuclear testing is important to validate a design for an implosion device, whether using plutonium or highly-enriched uranium (HEU). However, in 2003, the CIA had assessed that given North Korea's long experience in high explosives testing, nuclear tests would not be required to validate simple fission weapons. Even if North Korea has also received a copy of Chinese HEU implosion device blueprints apparently provided by Pakistani scientist A.Q. Khan to Libya, it is likely that technical experts would want to test it. That said, it is not clear that North Korea has any HEU at present. More likely, North Korea desired to test an implosion device using plutonium, whether it was an indigenous or foreign design; several media reports state that U.S. intelligence agencies have concluded the device was plutonium. Some experts have suggested that the small yield of the test might indicate that North Korea was attempting to test a more sophisticated design (composite pits or boosted fission devices), but more data would be necessary to draw such a conclusion. Even if this were the case, one such nuclear test would not indicate whether North Korea had the capability to place nuclear warheads on ballistic missiles. Given that the device did not appear to produce the desired yield, North Korean scientists may desire to test again to improve the weapon's design. The short-term implications of North Korea's nuclear test are clear: whether a technical success or failure, North Korea's willingness to carry out a test in the face of significant opposition indicates that it is willing to endure the potential consequences. The psychological impact of crossing this particular diplomatic "red-line" is significant, with ramifications for medium and long-term regional and global stability. Some implications are discussed below. Absent information on what nuclear weapons North Korea actually has or what its intentions are, it is difficult to assess the North Korean nuclear threat to the region and to the United States. However, different scenarios of capabilities and intentions may illuminate the kinds of threat that could emerge. Capabilities and intentions may not always match; one may drive the other, or there may be no attempt to seek to match the two. In addition to the threat of its own weapons capabilities, North Korea may pose a threat in terms of its willingness to provide technology, materials or weapons to rogue states, such as Iran or Syria, or terrorist organizations or individuals. As noted above, North Korea may have had several motivations for testing, which may also inform the larger questions of developing its nuclear arsenal. While prestige, leverage in diplomatic negotiations, and domestic political considerations, may only require, for now, a rudimentary or even symbolic nuclear capability, security considerations and technical pride could push North Korea to develop a more sophisticated arsenal. At present, North Korea might now have the capability to deliver a crude nuclear device within the region, using ground transportation, ships, or airplanes. North Korea undoubtedly has the capability to deliver a radiological dispersal device in the region, although arguably it had this capability before the nuclear test. According to most informed observers, North Korea does not now have the capability to marry nuclear warheads with long-range missiles that would reach the mainland of the United States. If North Korea sought to achieve that capability, it would undoubtedly need to conduct further nuclear tests. There is no reliable information about how North Korea might use nuclear weapons, particularly with respect to potential escalation within a conventional conflict. Most official North Korean statements about a nuclear capability point to the need to provide for a deterrent against the United States. According to the CIA, in April 2003, "North Korea publicly claimed that the Iraq war shows only tremendous deterrent force can avert war and that failure to resolve the nuclear issue through dialogue would force the North to mobilize all potentials, almost certainly a reference to nuclear weapons." In March 2005, the North Korean Foreign Ministry stated that "reality proves that our possession of nuclear weapons guarantees balance of power in the region and acts as a strong deterrent against the outbreak of war and for maintaining peace." In March 2006, the Foreign Ministry stated that "our strong revolutionary might put in place all measures to counter a possible U.S. pre-emptive strike," according to the Korean Central News Agency, and that "pre-emptive strike is not the monopoly of the United States." The ministry added, "We made nuclear weapons because of a nuclear threat from the United States." From a military perspective, North Korea could be seeking either a nuclear deterrent against a potential conventional force attack, or nuclear retaliation either against a nuclear attack (a so-called "second-strike" capability) or against a conventional attack (potentially a "first-use" capability). Perceptions of how nuclear weapons might be used will help shape the development of capabilities, although it may not entirely drive the process. Thus, if North Korea is seeking a capability that requires it to threaten the U.S. mainland, the future development of its forces would focus on developing robust and reliable nuclear warheads small enough to fit in an ICBM nose-cone. As some observers have suggested, the threat that North Korea poses may not fit into the traditional contexts of deterrence. Potential scenarios include "demonstration" detonations to deter U.S. intervention, transfers to terrorist groups that would use such weapons against states other than the United States, and transfers to rogue states. Many regional experts fear that the nuclear test will stimulate an arms race in the region. Geopolitical instability could prompt Northeast Asian states with the ability to develop nuclear weapons relatively quickly to move forward, creating a cascading effect on other powers in the region. One scenario envisioned would start with a Japanese decision to develop a nuclear weapons program in the face of a clear and present danger from North Korea. South Korea, still wary of Tokyo's intentions based on Japan's imperial past, could follow suit and develop its own nuclear weapons program. If neighboring states appear to be developing nuclear weapons without drawing punishment from the international community, Taiwan may choose to do the same to counter the threat from mainland China. In turn, this could prompt China to increase its own arsenal, which could have impact on further development of programs in South Asia. Alternatively, South Korea could "go nuclear" first, stimulating a similar chain of reactions. Most nonproliferation experts believe that Japan, using existing but safeguarded stocks of plutonium, could quickly manufacture a nuclear arsenal. South Korea and Taiwan would take longer, although there is evidence of past experiments with plutonium processing for both countries. Japan is not likely to move forward precipitously with nuclear weapons development. Japan has abided by the self-imposed "three non-nuclear principles," which ban the possession, production, or import of nuclear arms. With memories of Hiroshima and Nagasaki still vivid, the Japanese public remains largely resistant to arming themselves with nuclear weapons. Many Tokyo strategists may recognize that "going nuclear" could actually undermine their security by further eroding the global nonproliferation regime and reinforcing mistrust in the region. Under the terms of the U.S.-Japan alliance, Japan and South Korea remain protected under the "nuclear umbrella." Secretary of State Condoleezza Rice reiterated the firm U.S. commitment to defend Japan and South Korea against any threat from North Korea during her trip to the region following the nuclear test. Some observers have suggested that the threat of Japan going nuclear was intentionally emphasized in order to pressure Beijing and Seoul to be more firm on North Korea. However, discussion about nuclear weapons development is more likely to appear in government statements after North Korea's defiant move: the week after the test, Foreign Minister Taro Aso and the ruling party policy chief Shoichi Nakagawa suggested that Japan should debate the possibility, adding that nuclear weapons would not violate the constitution. Earlier, in September 2006, former Japanese Prime Minister Yasuhiro Nakasone suggested that Japan should study the possibility of going nuclear given the presence of other nuclear-armed states in the region. After Rice's assurances, however, Aso stated that Japan has no intention of developing nuclear weapons, reinforcing many analysts' contention that Japan's current policy could dissolve if the U.S. commitment to the bilateral alliance wavers. Aside from the nuclear question, new Prime Minister Shinzo Abe's agenda of strengthening Japan's overall defense posture—a policy that has been encouraged by the United States—may gain further support. U.S. officials have repeatedly stated that North Korea must not cross the "red-line" of further proliferation of its WMD capabilities, whether to other states or non-state actors. There have been few instances of states sharing their nuclear capabilities or weapons knowingly with other states, if President Musharraf is to be believed that A.Q. Khan acted alone in his nuclear black market activities. The United States considered sharing nuclear missiles with India after China's 1964 nuclear test, but it can be argued that by then, the United States had tens of thousands of weapons, and there was no norm established yet of nonproliferation, as embodied in the 1970 Nuclear Nonproliferation Treaty. In 2002, the CIA told Congress that traditional state recipients of WMD technology "may follow North Korea's practice of supplying specific WMD-related technology and expertise to other countries or non-state actors." However, the report specifies only that North Korea has provided ballistic-missile-related equipment, components, material, and expertise, rather than nuclear-related items. North Korea is an established exporter of ballistic missiles, and many observers, including in the U.S. government, equate North Korea's willingness to supply those items with a willingness to sell nuclear weapons or fissile material. Others argue that nuclear weapons are a special case and confer special prestige; that a state would cheapen its hard-earned prestige by disseminating that capability; that a nonproliferation norm has been in place for over thirty years and that a state like North Korea would likely, in the first few years, conserve its nuclear material and weapons for its own deterrent (or aggressive) purposes. Some observers have suggested that as North Korea's arsenal grows, it might be more inclined to "share the wealth." At present, the Yongbyon five MWe reactor reportedly produces about six kg of plutonium per year, enough for about one weapon. Should North Korea finish the two reactors under construction, which are not close to completion, it could augment that stockpile considerably. Kim Jong-il could see a growing nuclear stockpile as a wasting asset or as a source of hard currency. However, transferring nuclear weapons or fissile material is inherently risky because of the loss of control over the recipient's actions, particularly if the material can later be tracked back to a source (such as North Korea). It is not entirely clear that it is possible to positively identify a source of material, although it is possible, with considerable cooperation from nuclear weapon states, to eliminate some sources, thus narrowing the possibilities. A Pyongyang official reportedly suggested during talks in April and August 2003 between North Korean negotiator Li Gun and former Assistant Secretary of State James Kelly that North Korea would "demonstrate" its nuclear weapons or "transfer" weapons abroad. According to one report, "Mr. Li told Mr. Kelly that the communist state would 'export nuclear weapons, add to its current arsenal or test a nuclear device'." On September 1, 2003, North Korean officials issued a statement that North Korea did not intend to sell nuclear weapons or export nuclear material to terrorists. Nonetheless, this continues to be a U.S. concern. North Korea was added to the U.S. list of state sponsors of terrorism in 1988 and remains on the list, although it is not known to have sponsored any terrorist acts since 1987. According to the State Department, North Korea continued to maintain ties to terrorist groups in 2005, has sold conventional weapons to several terrorist groups (in 2000, a State Department report specified that North Korea had sold weapons to the Moro Islamic Liberation Front, a militant Islamic group located in the Southern Philippines), and reportedly continues to provide safe haven to terrorists (specifically, four remaining members of the Red Army, an ultra-leftist wing of Japan's radical student movement in the 1960s). In 2000, however, North Korea and the United States signed a joint statement in which "the two sides agreed that international terrorism poses an unacceptable threat to global security and peace, and that terrorism should be opposed in all its forms." In 2001, North Korea also signed the Convention for the Suppression of Financing of Terrorism and a party to the Convention Against the Taking of Hostages. Nonetheless, North Korea's history of officially sanctioned kidnapping, missile sales to states of concern, and activities in drug smuggling and money counterfeiting are seen by many as indicators that Kim Jong-il would be equally open to selling nuclear materials, technology, or weapons to terrorist groups. In addition to the effect a burgeoning North Korean nuclear weapons capability will have on states in the region as they reassess their security, the North Korean test may hold some lessons for those outside the region that are perhaps inclined to develop the same capabilities. The need for a strong response to the test is not only rooted in the desire to roll back North Korea's capabilities, but also in the need to demonstrate political resolve and clear consequences to a state's disregard for international norms. However, it can be argued that lessons have already been drawn from North Korea's proliferation before the test, and that they are not good ones: that would-be proliferators who participate in multilateral incentive programs will not live up to their commitments (such as the Agreed Framework), that there is equal, if not more, bargaining leverage outside the regime than within it, and that there are no practical consequences to withdrawing from the NPT, as North Korea did in 2003. A key question is how states of concern view the situation as it has unfolded. Is North Korea perceived to have been "allowed" to withdraw from the NPT with no punitive action by the international community until North Korea tested a nuclear device? Or, is North Korea now perceived by states such as Iran and Syria as the "victim" of discriminatory UN Security Council actions that have the potential to collapse its economy? Iranian President Ahmadinejad stated on October 16, 2006 that "some Western countries have turned the UN Security Council into a weapon to impose their hegemony and issue resolutions against countries that oppose them," but that Iran would not be intimidated. Ultimately, the extent to which the inspections curb Pyongyang's ability to export and import WMD-related items, and any potential impact on North Korea's economic viability, will influence those perceptions. U.S. concerns with North Korea's nuclear weapons program may not be limited to how the current regime uses it. Control over the North's nuclear arsenal may be uncertain in the event of a collapse, particularly if there is a chaotic aftermath. If control of the government is unclear, North Korean military officials may rashly launch nuclear weapons in one scenario, particularly as a punishing attack on Japan if they perceive to have nothing left to lose. In a more prolonged period of uncertain leadership, nuclear weapons or material could be transferred to other foreign entities. In an eventual reunification of the peninsula under Seoul's control, in another scenario more questions arise about whether the Korean government would be willing to relinquish its nuclear weapons, given the uncertain geopolitical conditions that the region would face. The most fundamental U.S. goals of the confrontation with North Korea are to prevent the further proliferation of weapons of mass destruction and to prevent an attack—either nuclear or conventional—on the United States or on its allies in the region. Both actions would dramatically diminish U.S. security. The Bush Administration appears to be divided on how to best achieve these goals, with one group favoring negotiation to shape North Korea's behavior and another group advocating measures that will weaken the regime and ultimately lead to its collapse. Pursuing U.S. objectives through the Six-Party Talks is complicated by the fact that other states have calculated their own national interests with regard to North Korea differently. Japan's goals converge most closely with U.S. objectives: to bolster its own security from the threat of a North Korean missile attack and to resolve the issues surrounding the abduction of several Japanese citizens by North Korea in the 1970s and 1980s. For China and South Korea, the political instability and economic consequences of a collapse of North Korea may represent the worst outcome. Pursuit of U.S. goals is dependent on some degree of cooperation from Beijing and Seoul. The nuclear test by Pyongyang has compelled China and South Korea to agree to harsher measures, but it is unlikely to alter their ultimate objective of preventing the collapse of North Korea. The options outlined below are not intended to be exhaustive, but to provide a spectrum of alternatives. The approach taken by the United States may combine elements of several of the possible strategies. The current Bush Administration North Korea policy is to work through the Six-Party process to ensure the dismantlement of North Korea's nuclear weapons program. The policy involves a combination of diplomatic and economic pressures on the regime. In addition to focusing on the nuclear issue, U.S. officials have increased their criticism of North Korea's human rights record and its criminal activities, particularly counterfeiting. Critics of the U.S. policy argue that the Administration appears to be divided between those who favor a negotiated solution and others who favor regime change, and that this division has at times paralyzed the policy-making process toward North Korea. Other observers believe that the division masks an overall weak and passive policy that reflects North Korea's low priority in comparison to Middle East conflicts and international terrorism issues. Some analysts maintain that North Korea, as a paranoid and isolated regime, will never be willing to give up its nuclear weapons. Some security analysts may argue that accepting North Korea into the "nuclear club" and pressing for it to become a "responsible" nuclear power is in the best interest of the international community. In that scenario, North Korea could be asked to make nonproliferation commitments in exchange for tacit acceptance of its nuclear weapons status, in much the same way that the United States has "accepted" the nuclear status of India, Pakistan, and Israel. However, the language used by U.S. officials—calling a nuclear North Korea "intolerable" and "unacceptable"—indicates that the Administration is unlikely to take this approach. Pakistan and India angered the United States and others after testing nuclear weapons in 1998 and now are U.S. allies for a variety of geopolitical purposes. However, there is widespread belief among U.S. government officials that North Korea, as a major U.S. adversary under an unpredictable and dangerous regime, cannot be trusted with nuclear weapons. Moreover, unlike Pakistan and India, North Korea, like Iran, joined the NPT and then violated it. While this distinction may have no practical value, it appears to have diplomatic significance. Pro-engagement advocates argue that the United States should take a new approach by agreeing to the long-standing North Korean request for direct bilateral relations and offering more reciprocity for a nuclear settlement, including the normalization of diplomatic relations. Under this plan, as North Korea suspended all nuclear and missile tests and froze its plutonium production programs, negotiations on normalization of relations between the two countries would commence. As North Korea advanced toward the verifiable dismantlement of its nuclear programs, incentives such as removal of the measures that restrict North Korean access to the international banking system, energy assistance programs, and removal from the U.S. list of state sponsors of terrorism might be offered. This approach would resemble the implementation of the 2005 Six-Party Talks agreement, but would begin with direct talks between U.S. and North Korean negotiators. Proponents of this option argue that although the United States has limited coercive measures remaining, it has ample positive leverage for pushing forward on an agreement with North Korea. Pursuing this option is based on the belief that either North Korea is willing to give up its nuclear weapons, or that the multilateral coalition will be stronger if the United States tries a bilateral approach first, indicating its good faith to the other parties. Most observers agree that the Bush Administration is unlikely to pursue this path because it believes that bilateral negotiations would reward the North Koreans for bad behavior (although officials maintain that much of the multilateral forum is devoted to speaking directly with the North Koreans), that North Korea would continue its recalcitrant behavior in order to extract more benefits from any deal, and that multilateral talks provide the best leverage. North Korea may wish to maximize the propaganda benefits of the negotiations, including painting the U.S. officials as groveling and pleading for peace before Kim Jong-il. In the aftermath of the test, some analysts speculated that the Six-Party Talks were dead as a forum for negotiation. However, U.S. and regional officials continue to refer to the multilateral negotiations as the best way forward. If North Korea remains recalcitrant, or institutes another boycott of the Talks, the other parties could meet to pursue a joint strategy forward that specifically responds to the tests. Although the United Nations Security Council measures achieve global involvement, the participants in the Six-Party Talks have the most interest and leverage. Meetings of the five parties would likely focus on harmonizing the strategies, including pressing China and South Korea to adopt measures and strengthen sanctions that keep up pressure on the North Korean regime to return to the negotiations. Observers point out that the biggest challenge may be maintaining sustained punitive measures from South Korea and China once the initial crisis has died down. This approach would require the United States and Japan to maintain their pledge to resolve the problem through diplomatic means, as China and South Korea oppose the threat of military action. As diplomatic progress in the Six-Party Talks faltered over the past several years, the Bush Administration has developed several programs designed to increase pressure on the regime. These initiatives target the influx of cash and goods to Pyongyang—particularly those acquired through illicit or illegal activities—that allow the regime to hold on to power and to develop weapons programs. Strengthening these programs may convince the regime to return to negotiations by threatening Kim Jong-il's hold on power. Encouraging South Korea and China to participate in these activities would increase the likelihood of changing Pyongyang's behavior. On the other hand, squeezing North Korea could push it to proliferate weapons and nuclear material more quickly out of economic desperation. Some experts dispute that illegal activities such as counterfeiting and drug smuggling constitute a major part of the North Korean economy. Since September 2005, the United States has pursued unilateral measures to financially isolate North Korea. In September 2005, the Administration identified Banco Delta Asia, a Macao-based bank, as an institution that allowed money laundering and counterfeiting activities with North Korea. As a result of this action and a series of Treasury Department-directed warnings about the risk of doing business with North Korean companies that might be tied to Pyongyang's nuclear or other WMD programs, several banks, including many in China, have suspended business with North Korean companies. Continuing law enforcement activities and using unilateral U.S. financial leverage on international banks and financial institutions represents one way the United States can squeeze the North Korean regime. To reinforce the message, the U.S. government could identify and impose sanctions on another bank—perhaps one in mainland China—suspected of allowing North Korean firms to maintain accounts that facilitate illegal activities. The United States could also make explicit what some analysts say is the unspoken message of the warnings so far: that the U.S. government may prohibit U.S. banks from dealing with financial institutions that have any links with groups that are tied to terrorism or rogue states. One option that has been widely discussed is strengthening of the Proliferation Security Initiative (PSI). PSI, begun in 2003, is an effort to improve capabilities to interdict WMD-related materials, technology, and equipment, particularly as they are shipped to or from countries of concern such as North Korea and Iran. Although many hail PSI as a new initiative, it is, in reality, a slightly more robust version of interdiction efforts that have been carried out for many years. One new feature is the conclusion of bilateral ship-boarding agreements, which can facilitate short-notice inspections of cargo but still require the authorization of the country under whose flag the ship is sailing. Although several observers have suggested that UN Res. 1718 legitimizes PSI, the resolution does not authorize interception or confiscation of cargo and so serves only to focus, not strengthen, efforts. In the region, only Japan is a member of PSI. South Korea announced that it would not join PSI out of fears of engaging in a military skirmish with the North Koreans, but that it may take part in PSI activities on a case-by-case basis. China has expressed reservations about the legal standing of PSI, and Chinese officials remarked at a press conference in December 2004 that "There are also many concerns in the international community about the legitimacy and effectiveness of PSI interdictions and consequences that may arise therefrom. The PSI participants should take this into serious consideration." Some observers have noted that China's resistance to PSI may be influenced by its dependence on Middle East oil and gas, making it reluctant to cede interdiction rights to U.S. and allied navies, and by a wariness of how PSI might affect the relative balance of Chinese and U.S. power in the region. Until North Korea's nuclear test, it appeared as if China's reluctance to join PSI would make it very difficult for other states in the region to join in. However, the nuclear test and imposition of sanctions by the UN Security Council may make it politically easier for other states in the region to join. The United States could adopt an official policy of regime change in North Korea, which would necessarily mean abandoning the Six-Party Talks and actively working to undermine the ruling government—either directly or through a collapse of the North Korean economy. Current U.S. policy already has elements of this, but declaring a regime change policy, even without threatening military action, would create large divisions with Seoul and Beijing. Because the United States may not have the economic leverage to squeeze North Korea to collapse, it would have to try to coerce China and South Korea to discontinue their aid and economic cooperation programs that serve as a lifeline to Pyongyang. Further legal and financial measures, like those outlined in the above section, to choke off the flow of money and goods treasured by the elite class of North Korea could pinch those who support Kim Jong-il. With Chinese and South Korean support, many maintain that the measures could either make the regime fail or convince the leaders to give up nuclear weapons. Some commentators have suggested threatening Seoul and Beijing that their overall bilateral relationship with Washington is at risk. For Seoul, this might mean threatening to withdraw U.S. troops from South Korea and pulling support for the bilateral Free Trade Agreement currently in negotiation. For Beijing, it may mean a reconsideration of the "One China" policy and a scaling back of the extensive economic relationship. Critics of this approach point to the potentially massive ramifications of hurting relations with China, a major factor in the global economy, and with South Korea, a U.S. treaty ally that hosts over 30,000 U.S. troops. Adopting a more punitive policy toward North Korea would align Washington more closely with Tokyo, possibly exacerbating already tense relations in northeast Asia. With explicit divisions, the somewhat uneasy peace may be disrupted, and the U.S. military may no longer be seen as a stabilizing force in the region. Critics also argue that squeezing the regime too tightly may push them to proliferate nuclear weapons and technology to willing buyers, including terrorist groups that may be targeting the United States or U.S. interests. There is a range of military options that might be considered, either as direct action or as a threat. Most analysts rule out the possibility of an all-out invasion to bring down the regime, citing the possibility of devastating North Korean retaliation on either South Korea or Japan, the uncertainty of Chinese reaction, the burden on the U.S. military, and the global costs of war in an economically vibrant region. When the Clinton Administration considered military action on North Korea's nuclear facilities in 1993, estimates of human casualties from an invasion totaled 52,000 U.S. military and nearly half a million South Korean soldiers dead or wounded, with an untold number of civilian deaths. The possibility of launching a "surgical" strike to take out North Korea's known nuclear facilities is also considered unlikely to be completely successful, given North Korean's penchant for concealing activities underground, the lack of information about additional nuclear facilities, and the fear of a military response from Pyongyang. Similar fears of reprisal argue against a pre-emptive strike on Pyongyang's long-range missile capability, as recommended by former Defense Secretary William Perry as North Korea was threatening to test the Taepodong missile in July 2006. A number of prominent commentators have suggested using the threat of direct retaliation in the event that North Korea transfers nuclear material. These commentators argue that the proliferation of a nuclear weapon or material to a terrorist group may pose the biggest threat to U.S. security. Following North Korea's announcement of a test, President Bush stated that "The transfer of nuclear weapons or material by North Korea to states or non-state entities would be considered a grave threat to the United States, and we would hold North Korea fully accountable for the consequences of such action." Labeled "nuclear accountability" by Graham Allison and "expanded deterrence" by Robert Galluci, this approach would require expanded U.S. nuclear forensic capability. At present, it is uncertain whether a nuclear event could be attributed to a single source with 100% assurance. Drastic responses (i.e., nuclear retaliation) could be deemed less than credible given such uncertainties. Some commentators have suggested that the United States should cede leadership of the current diplomatic efforts, arguing that the U.S. military is overstretched and badly needed in other parts of the world, particularly Iraq and Afghanistan. By concluding a peace agreement with North Korea and withdrawing U.S. troops from South Korea, the United States would forfeit resolution of the problem to the regional powers, with China taking the lead. Even if the United States maintained its forces in Japan and elsewhere in Asia, and concentrated on expanding its air and naval power to contain any potential threat from China, the move would substantially alter the geopolitical landscape of the region. Ceding leadership on the North Korean issue would likely also mean giving up dominant stake in deciding how a new regional order may unfold in the event of Korean unification or other geopolitically significant scenarios. CRS Report RL33567, Korea-U.S. Relations: Issues for Congress , by [author name scrubbed]. CRS Report RL33590, North Korea ' s Nuclear Weapons Development and Diplomacy , by [author name scrubbed]. CRS Report RS21391, North Korea ' s Nuclear Weapons: Latest Developments , by [author name scrubbed]. CRS Report RL31900, Weapons of Mass Destruction: Trade Between North Korea and Pakistan , by [author name scrubbed]. CRS Report RS21582, North Korean Crisis: Possible Military Options , by [author name scrubbed]. CRS Report RL31696, North Korea: Economic Sanctions , by [author name scrubbed]. CRS Report RL33324, North Korean Counterfeiting of U.S. Currency , by [author name scrubbed]. CRS Report RS21834, U.S. Assistance to North Korea: Fact Sheet , by [author name scrubbed]. CRS Report RL31785, Foreign Assistance to North Korea , by [author name scrubbed]. CRS Report RL32493, North Korea: Economic Leverage and Policy Analysis , by [author name scrubbed] and [author name scrubbed]. CRS Report RS21473, North Korean Ballistic Missile Threat to the United States , by [author name scrubbed]. CRS Report RL32167, Drug Trafficking and North Korea: Issues for U.S. Policy , by [author name scrubbed]. CRS Report RL33389, North Korea: A Chronology of Events in 2005 , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. CRS Report RL32743, North Korea: A Chronology of Events, October 2002-December 2004 , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. | On October 9, 2006, North Korea announced it conducted a nuclear test. After several days of evaluation, U.S. authorities confirmed that the underground explosion was nuclear, but that the test produced a low yield of less than one kiloton. As the United Nations Security Council met and approved a resolution condemning the tests and calling for punitive sanctions, North Korea remained defiant, insisting that any increased pressure on the regime would be regarded as an act of war. China and South Korea, the top aid providers to and trade partners with the North, supported the resolution itself, but have been unwilling to cut off other economic cooperation and aid considered crucial to the regime. The sanction regime depends heavily on individual states' compliance with the guidelines. Economists argue that the only definitively effective punishment on North Korea would be the suspension of energy aid from China, which reportedly supplies about 70% of North Korea's fuel. Determining the motivations of a government as opaque and secretive as North Korea is exceedingly difficult, but analysts have put forth a range of possibilities to explain why the Pyongyang regime decided to test a nuclear weapon. Possible motivations include an attempt to engage the United States in bilateral talks, to ensure the security of the regime, and to satisfy hard-line elements within the Pyongyang government, as well as technical motivations for carrying out a nuclear test. The short-term implications of North Korea's nuclear test are clear: whether a technical success or failure, North Korea's willingness to carry out a test in the face of significant opposition indicates that it is willing to endure the potential consequences. Analysts fear that the medium and long-term implications could include a more potent nuclear threat from Pyongyang, a nuclear arms race in Asia, and the transfer of nuclear weapons or material to states or groups hostile to the United States. There are also strong concerns about the impact on the global nonproliferation regime, particularly to other states poised to develop their own nuclear weapon programs. The most fundamental U.S. goals of the confrontation with North Korea are to prevent the proliferation of weapons of mass destruction and to prevent an attack—either nuclear or conventional—on the United States or on its allies in the region. The options available to U.S. policymakers to pursue these goals include the acceptance of North Korea as a nuclear power, bilateral or multilateral negotiations, heightened legal and economic pressure on North Korea, adoption of a regime change policy through non-military means, military action or threats, and withdrawal from the conflict. This report will be updated as circumstances warrant. |
The United States and Mexico share a nearly 2,000-mile border and multiple rivers, including the Colorado River and the Rio Grande. Predominantly located in the United States, the Colorado River crosses the U.S.-Mexico border and empties into the Gulf of California. The Rio Grande's headwaters are in the United States, its significant tributaries lie in both the United States and Mexico, and its riverbed is the U.S.-Mexico border in Texas. These shared surface waters, which are shown in Table 1 , are important to many border community economies and water supplies. In 1944, the United States and Mexico entered into the Treaty on Utilization of Waters of the Colorado and Tijuana Rivers and of the Rio Grande (hereinafter 1944 Water Treaty), which established the International Boundary and Water Commission (IBWC) to oversee the U.S.-Mexico border and water treaties. To date, Congress has been involved in binational water sharing pursuant to the 1944 Water Treaty primarily through oversight. This includes oversight of IBWC's actions to manage the Colorado River's water and infrastructure to improve water availability during drought and to restore and protect riverine ecosystems. On multiple occasions since 1994, Mexico has not met its Rio Grande water delivery obligations to the United States within the five-year period prescribed by the 1944 Water Treaty. Since 2014, Congress has directed the U.S. Department of State to report annually on Mexico's deliveries and on efforts to improve Mexico's treaty compliance. This report examines binational sharing of the Colorado River and the Rio Grande and addresses the evolution and framework of the IBWC and binational boundary and water treaties; Colorado River water sharing background and recent developments; and Rio Grande water sharing background and recent developments. Appendix A provides detailed information regarding the reporting requirements established by Congress for the Rio Grande in ill and report language since 2014. Appendix B provides information on drought conditions in North America in recent years. Appendix C provides information on binational transboundary aquifers, which contain shared groundwater. Beginning with the 1848 Treaty of Guadalupe Hidalgo, which ended the Mexican-American War, the United States and Mexico entered into a series of treaties to establish their official borders. The Treaty of Guadalupe Hidalgo identified portions of the Rio Grande and Colorado Rivers as comprising parts of the border. In 1889, the United States and Mexico created the International Boundary Commission (IBC) to interpret and apply border agreements. In 1895, in light of reports that the United States' westward expansion was creating water shortages, Mexico claimed that the United States was violating international law by diverting the Rio Grande excessively. Although the U.S. Attorney General opined that the United States had not breached its international obligations, the United States agreed to deliver 60,000 acre-feet (AF) of water from the Rio Grande annually to Mexico in exchange for Mexico relinquishing its claims to Rio Grande waters forming the U.S.-Mexico border between El Paso and Fort Quitman, TX (1906 Convention). In the 1944 Water Treaty, the United States and Mexico allocated water in the Rio Grande basin below Fort Quitman, TX, and in the Colorado River basin; they also authorized the IBC to oversee U.S.-Mexico water-allocation treaties, renaming it the IBWC. Overseeing border demarcation, water allocation administration, and flood control, the IBWC regulates sanitary measures and works that the United States and Mexico construct at the U.S.-Mexico border. The IBWC consists of U.S. and Mexican Sections, each led by an engineer commissioner, two principal engineers, a legal adviser, and a foreign affairs secretary. The U.S. Section of the IBWC (USIBWC) is headquartered in El Paso, TX, and the Mexican Section is located in Ciudad Juárez, Chihuahua. The USIBWC is a federal agency, operating under the Department of State's foreign policy guidance. The President appoints the USIBWC commissioner, the tenure of which has ranged from a few months to 27 years. Historically, the position has not been subject to Senate confirmation. The IBWC typically is funded through Annual Department of State, Foreign Operations, and Related Programs appropriations acts. Mexico's Ministry of Foreign Affairs oversees the Mexican Section of the IBWC. The 1944 Water Treaty authorizes the IBWC to develop rules and to issue proposed decisions, called minutes , regarding matters related to the treaty's execution and interpretation. Once issued, a proposed minute is forwarded within three days to the government of each country for approval. If neither country announces its disapproval within 30 days, the minute is considered adopted. If either government disapproves, the matter is removed from IBWC control and the two governments negotiate the issue. If the two governments reach an agreement, the IBWC must take any further acts "as may be necessary to carry out such agreement." The Department of State is the U.S. agency that responds to proposed minutes and negotiates resolutions. Minutes adopted pursuant to the 1944 Water Treaty have addressed a range of issues, including the operation and maintenance of cross-border sanitation plants, water conveyance during droughts, dam construction, and water salinity problems. Because the IBWC also has jurisdiction over certain issues related to binational border treaties, minutes address boundary demarcation matters. The 1944 Water Treaty authorizes the executive branch to agree to minutes, which are considered binding executive agreements between the United States and Mexico. In consenting to the 1944 Water Treaty, however, the Senate provided that the IBWC and the Secretary of State cannot commit the United States to build works at U.S. expense without Congress's prior approval. Accordingly, Congress has passed legislation authorizing construction of public works and projects pursuant to the 1944 Water Treaty. The 1944 Water Treaty defines the basic water-distribution arrangements between the United States and Mexico as For the Colorado River basin, the United States provides Mexico with 1.5 million AF of water annually. For the Rio Grande basin below Fort Quitman, TX, Mexico and the United States each have a right to one-half of the Rio Grande main channel flow. Mexico has a right to two-thirds of the flows from the Rio Grande's Conchos, San Diego, San Rodrigo, Escondido, and Salado Rivers and the Las Vacas Arroyo tributaries (Mexican Tributaries). The United States has a right to flows from tributaries that feed the Rio Grande in the United States and one-third of the Mexican Tributaries flows, which must average at least 350,000 AF per year, measured in five-year cycles. If Mexico fails to meet its minimum Rio Grande flow obligations for a five-year cycle because of extraordinary drought —a term not defined in the 1944 Water Treaty or in any minute—it must replace the deficiency during the next five-year cycle. Minute 234 established that Mexico may repay a water debt using its Mexican Tributaries water allotment or water stored in international reservoirs, such as the Falcon Dam and Amistad Dam, located on the Rio Grande on the border of Texas and Mexico. If Mexico fails to meet its minimum Rio Grande flow obligations for a five-year cycle and the countries dispute that an extraordinary drought existed, Article 24(d) of the 1944 Water Treaty provides certain mechanisms for dispute resolution. First, the IBWC has authority "to settle all differences that may arise between the two Governments with respect to ... application of the Treaty, subject to the approval of the two Governments." If the commissioners cannot resolve a dispute, the United States and Mexico address it through diplomatic channels. Article 24 also allows the countries to seek recourse through any "general or special agreements which the two Governments have concluded for the settlement of controversies." Article 9 of the 1944 Water Treaty provides the IBWC with some flexibility regarding diverting water from the Rio Grande. For example, if an extraordinary drought occurs in one country, the IBWC may permit water to be withdrawn from the other country to help alleviate drought conditions. Further, the IBWC may allow one country to use the other's water if this can be accomplished "without injury to the latter and can be replaced at some other point on the river." Temporary IBWC-authorized water diversions from one country to another do not establish permanent rights to divert. Under Article 9 of the 1944 Water Treaty, the IBWC also maintains records on water belonging to Mexico and the United States. The 1944 Water Treaty establishes a hierarchy of preferred water uses: (1) domestic and municipal uses; (2) agriculture and stock raising; (3) electric power; (4) other industrial uses; (5) navigation; (6) fishing and hunting; and (7) any other beneficial uses, which may be determined by the commission. Some have critiqued this hierarchy for not providing water for ecological purposes. In addition, the 1944 Water Treaty does not expressly establish water quality requirements; it establishes only the water quantity requirements outlined above. A protocol accompanying the 1944 Water Treaty establishes that works, such as dams and conveyance structures located wholly in one country and used only partly for treaty compliance, shall be constructed and operated by the federal agencies of that country, consistent with the treaty and in cooperation with the IBWC. Subsequent minutes, such as Minute 319 and Minute 323, provide for integrated operations in specific circumstances. This report discusses Mexico's reservoir operations and treaty obligations in the " Rio Grande Basin Below Fort Quitman, TX " section below, which focuses on Mexico's Rio Grande water delivery shortfalls. In addition to allocating water, the 1944 Water Treaty, among other things, (1) provides for construction of certain dams and channels along the rivers, (2) requires the IBWC to establish flood control studies and plans, (3) provides for the IBWC to study and plan for hydroelectric energy generation along the rivers, and (4) requires the IBWC to regulate maintaining and operating reservoirs. These treaty requirements are beyond the scope of this report. Although the 1944 Water Treaty empowered the IBWC to issue proposed minutes on treaty interpretation and execution, the United States and Mexico resolved some post-1944 border disputes through new treaties. In 1963, the nations concluded the Chamizal Convention, which resolved a long-standing border dispute relating to weather-related shifts to the Rio Grande's channel at the border of El Paso, TX, and Ciudad Juárez, Chihuahua. Although the United States and Mexico agreed to create an international arbitration panel to resolve which nation owned a disputed tract of land—known as the Chamizal tract—that shifted to the north bank of the Rio Grande, the United States rejected the arbitration panel's decision. The nations eventually resolved the dispute in the Chamizal Convention by relocating the Rio Grande channel and transferring more than 400 acres to Mexico on the south side of the river. The Chamizal Convention charged the IBWC with physically relocating the channel and with the "maintenance, preservation, and improvement of the new channel." Congress implemented the Chamizal Convention into U.S. law through the American-Mexican Chamizal Convention of 1964. The Rio Grande and the Colorado River changed course in other locations during the 20 th century, leading to further disputes over sovereignty and land ownership at the border. In 1970, the United States and Mexico concluded a treaty (1970 Boundary Treaty) to resolve "all pending boundary differences between the two countries." Under this treaty, portions of the Rio Grande and the Colorado River remain international boundaries between the United States and Mexico. The treaty also creates mechanisms for the nations and the IBWC to minimize shifts in the boundary rivers' channels and to resolve disputes resulting from such changes. Among other things, the 1970 Boundary Treaty prohibits the United States and Mexico from constructing "works" that would deflect or obstruct the normal flow of the rivers. It also requires each nation to remove and pay damages for prohibited works that the IBWC determines have caused "adverse effects" and authorizes the IBWC to recommend improvement projects to stabilize the rivers' channels. In addition, the 1970 Boundary Treaty established maritime boundaries in the Gulf of Mexico and the Pacific Ocean. Congress implemented the 1970 Boundary Treaty into domestic law through the American-Mexican Boundary Treaty Act of 1972. As depicted in Figure 2 , the Colorado River and its tributaries flow through seven U.S. states (Arizona, California, Colorado, Nevada, New Mexico, Utah, and Wyoming) and forms the border between the Mexican states of Baja California Norte and Sonora, before emptying into the Gulf of California. Ninety-seven percent of the basin is in the United States. Disputes have occurred over the use of Colorado River water supplies for most of the past century. Although many of these disputes have related to state allocations within the United States, issues also have arisen between the United States and Mexico over water quality, availability, and conservation. In the first half of the 20 th century and when the United States and Mexico were negotiating the 1944 Water Treaty, there were varying estimates of the average volume of flow in the Colorado River. Many of the estimates fell between 16 million AF and 17 million AF annually, although other estimates were higher and lower. The U.S. Department of the Interior's Bureau of Reclamation has estimated the long-term average natural flow of the river between 1906 and 2016 at 14.8 million AF. At the same time, natural flows from 2000 to 2016 (i.e., during the current ongoing drought) were estimated to be 12.4 million AF. Since the 1.5 million AF in flows reaching Mexico generally has been a constant requirement since the 1944 Water Treaty, lower overall flows on the river mean the United States retains less of the river's natural flows than originally estimated. In December 2012, the Bureau of Reclamation published a study documenting that the demand for the basin's water in the United States in some years exceeds supply. The study projected that the demand-supply imbalance would worsen in coming decades. Although discussion of Colorado River water issues within the United States is beyond the scope of this report, concern about meeting future U.S. demands is significant to discussions about water sharing with Mexico. The following treaty-implementation issues in the Colorado River basin are discussed in more detail below: salinity, instream flows for environmental restoration, Minute 319, and Minute 323 (which replaced Minute 319). Although the United States has consistently delivered Mexico's annual minimum allotment of Colorado River water, disputes have arisen about the quality of the water. In the 1960s, salinity in the Colorado River rose dramatically. Mexico was receiving water that was too salty for human, livestock, or agricultural uses. The IBWC facilitated agreement by both countries to Minute 218, which took effect in 1965 for a period of five years and required the United States to extend a drainage channel to reduce salinity. Five years later, Mexican farmers remained angry about the salinity issue. After the Mexican government threatened to take the water dispute to the International Court of Justice, the United States agreed to a new minute, Minute 242 (Permanent and Definitive Solution to the International Problem of the Salinity of the Colorado River), in 1973. Per Minute 242, the United States agreed to construct additional channels to control salinity, fund cleanup of the Mexicali Valley lands damaged by the accumulation of salts, and keep salinity levels of delivered water below a certain level. Minute 242 remains in force, and the United States continues to comply with its provisions. Although the IBWC-backed resolution to this crisis proved successful, the agreement took a long time and required external pressure. Prior to significant expansion of the basin's water consumption, the Colorado River Delta, at the terminus of the Colorado River, covered 9,650 square miles in the United States and Mexico. The Mexican portion of the delta (where the majority of the delta is located) contains wetlands, woodlands, and desert areas, which are home to many endangered species; part of Mexico's delta is a designated United Nations Biosphere Reserve. Diversion of water resulting in reduced river flows into the delta, conversion of river floodplain to agricultural lands, and groundwater pumping have contributed to the degradation of 90% of the delta's wetlands. Environmental advocates recommend that annual flows accompanied by short-duration, high-volume releases (known as pulses or pulse flows ) of water every four years would help restore the wetlands. These environmental stakeholders have argued that environmental protection should be part of how the United States and Mexico share the river's water. Other stakeholders are less supportive of these restoration efforts. Some are concerned that such efforts may reduce the water available for U.S. users. Others do not want to support these efforts until issues with Mexico's water deliveries in the Rio Grande basin have been addressed (discussed in " Stakeholder Perspectives " of " Rio Grande Basin " section). The issue of instream flows for environmental protection entered bilateral discussions at the IBWC in the late 1990s. Bilateral discussions in the basin coalesced around improved management of and conservation of both the Colorado River and its delta. Both governments, along with state officials and conservation groups, worked with the IBWC to develop an agreement that would allocate water to Mexico based on whether there was a surplus or a drought and would allow for joint investments to create greater environmental protection, as well as greater water conservation (i.e., ability to store water) for Mexico. These discussions led to Minute 319, which was replaced by Minute 323 in September 2017. Both minutes are discussed below. Minute 319 (Interim International Cooperative Measures in the Colorado River Basin through 2017 and Extension of Minute 318 Cooperative Measures to Address the Continued Effects of the April 2010 Earthquake in the Mexicali Valley, Baja California) was signed on November 20, 2012, and was set to expire on December 31, 2017. It was replaced by Minute 323 in September 2017. Minute 319 allowed for temporary adjustments to water deliveries to Mexico based on basin drought or surplus water conditions, joint investments to create greater environmental protection, measures to incentivize water conservation, and greater water storage for Mexico in upstream reservoirs. Some viewed Minute 319, when taken together with two prior and related minutes, as recognizing environmental uses as a beneficial use for the basin's treaty waters. Key elements of the agreement included the following: extending provisions of Minute 318 (Cooperative Measures to Address the Continued Effects of the April 2010 Earthquake in the Mexicali Valley, Baja California) to allow Mexico to defer delivery of its Colorado River water allocation while the country repairs earthquake-damaged infrastructure; delivering additional water (i.e., above the 1.5 million AF annual delivery required by the 1944 Water Treaty) to Mexico when water levels are high in Lake Mead; reducing deliveries to Mexico during water shortage conditions in the Colorado River basin (i.e., Mexico's annual water deliveries would be reduced if Lake Mead elevations indicated shortage conditions, similar to reduction by the U.S. lower basin states); creating a mechanism by which U.S. water deliveries to Mexico could be held in U.S. reservoirs for subsequent delivery; continuing to address salinity concerns per Minute 242; and implementing a pilot program of jointly funded water efficiency and conservation projects in Mexico. Under the Minute 319 pilot program, stored water was used for a pulse flow from March 23, 2014, to May 18, 2014. The water releases were intended to simulate a spring flood. The high releases meant that, after multiple years of the river not reaching its estuary, the instream flows were sufficient for the river to reconnect with its estuary. The releases and the impacts on instream flow, stream topography, salinity, groundwater, vegetation, birds, and aquatic species were monitored by a binational team of experts. The goal of the pilot program's pulse flow was to improve understanding of water management alternatives for ecosystem restoration. The IBWC released an interim report providing preliminary results in 2016 based on data through early December 2015. The report's interim observations included the following: 4,000 acres of the channel and adjacent lands were inundated, resulting in connectivity from the dam to the river's estuary for the first time since 1997; bird diversity and abundance improved in the floodplain in 2014 and in 2015; active management of riparian sites would be needed for improved restoration of native riparian species; and more freshwater would be required to enhance the fish and zooplankton in the upper estuary. Under Minutes 318 and 319, Mexico deferred delivery and stored some of its water under the 1944 Water Treaty in Lake Mead. According to the then-USIBWC commissioner, Mexico's deferred deliveries added to the volume of water stored in the reservoir (i.e., raised the lake's water elevation). Related efforts, including but not limited to actions under Minute 318 and Minute 319, resulted in nearly 10 additional feet of water elevation in Lake Mead at the end of 2016, according to the Bureau of Reclamation, which is the federal agency responsible for operating Lake Mead. These water conservation efforts, including the water in storage as a result of Minutes 318 and 319, helped to keep the projected January 1 elevations of Lake Mead higher than 1,075 feet above sea level during the life of the agreements. If the projection had shown a water elevation below 1,075 feet, the following would have occurred: reductions in Colorado River water deliveries for the lower basin states would have been triggered, and reductions in Colorado River water delivered to Mexico pursuant to Minute 319. In the absence of Minute 319, Mexico would have experienced reductions in the U.S. delivery of Colorado River water only if the extraordinary drought provision for the Colorado River basin in the 1944 Water Treaty had been triggered. That is, without Minute 319, the U.S. lower basin states would not have benefited from Mexico sharing in cutbacks during basin shortage conditions unless the extraordinary drought treaty condition had been met. Similarly, without Minute 319, these U.S. states would not have benefited from higher Lake Mead elevations resulting from delayed deliveries by Mexico of its water under the 1944 Water Treaty. Minute 323 (Extension of Cooperative Measures and Adoption of a Binational Water Scarcity Contingency Plan in the Colorado River Basin) extends or replaces key elements of Minute 319. Minute 323 resulted from more than two years of negotiations among federal and state authorities from both governments, with binational input from water users, scientists, academics, and nongovernmental organizations. The officials from the two countries signed Minute 323 on September 21, 2017, and it is to be enforced through December 31, 2026. Although Minute 323 is based in part on provisions from Minute 319, Minute 323 also contains additional sections on variability of flows arriving in Mexico and initiates a Binational Water Scarcity Contingency Plan. Minute 323 aims to provide water supply certainty and adequate planning opportunities and is expected to benefit both sides of the border, according to the IBWC. Minute 323 established resolutions on the following: extending provisions of Minute 319 to deliver additional water to Mexico when water levels are high in Lake Mead; extending provisions of Minute 319 to reduce deliveries to Mexico during water shortage conditions in the Colorado River basin, including additional planning, reporting, and coordination measures to reduce future risk to both countries of low elevation in Lake Mead reservoir; establishing a Binational Water Scarcity Contingency Plan, under which each country saves specified volumes of water at certain low reservoir elevations for recovery when reservoir conditions improve; creating Mexico's Water Reserve, whereby U.S. water deliveries to Mexico can be held in U.S. reservoirs in the event of potential emergencies or as a result of water conservation projects in Mexico, to be available for subsequent delivery; continuing to address salinity concerns per Minute 242; identifying measures related to variability of flows arriving in Mexico; providing water and funding for habitat restoration and related monitoring; investing in water conservation and new water sources projects to allocate some of the additional water flows for environmental purposes; and noting ongoing consultations for design, construction, operation, and maintenance of the All-American Canal, which eventually would need to be addressed in a separate minute. Minute 323 does not explicitly authorize pulse flows, which were seen most recently in 2014. Instead of providing for pulse flows, Minute 323 provides for 210,000 AF of water over the course of the agreement for environmental purposes; the water for environmental purposes is to be provided equally by both countries and a binational coalition of nongovernmental organizations. The United States will generate its share of water for the environment solely through its commitment in Minute 323 to contribute $31.5 million over the course of the agreement for water conservation projects in Mexico, including $16.5 million anticipated to come from the Bureau of Reclamation. Although these water conservation activities will occur in Mexico, U.S. water agencies will receive a portion of the water generated in return for their monetary contributions, totaling 109,100 AF of water for use in the United States. Similar to Minutes 318 and 319, Minute 323 will allow Mexico to defer delivery of some of its water under the 1944 Water Treaty and store it in Lake Mead, to be released later for delivery to Mexico. The minute extends cooperative measures addressed in Minutes 318 and 319 concerning emergency storage, establishes a revolving account for Mexican water storage in the United States, and provides the opportunity to generate an "Intentionally Created Mexican Allocation" (i.e., a credited pool of Mexican storage) through additional deferred deliveries. Collectively, these components are referred to as Mexico ' s Water Reserve . Another major goal of Minute 323 is to establish cooperative efforts to avoid severe water shortages (i.e., amounts in addition to the commitments under Minute 319 that were extended in Minute 323). This aim is seen in the Binational Water Scarcity Contingency Plan, under which each country has committed to save specified volumes of water at certain low reservoir conditions for later use. Mexico would contribute water savings proportionally equivalent to the United States' reductions. These measures will occur only if the United States adopts a Lower Basin Drought Contingency Plan (LBDCP). According to Minute 323, the plan would be triggered if the projected January 1 Lake Mead elevation (as of the prior August) is at or below 1,090 feet above sea level. As of August 2018, the projection for the Lake Mead elevation in January 2019 was 1,078.9 feet. Thus, the projected January 2019 elevation would trigger the Binational Water Scarcity Contingency Plan restrictions if the LBDCP were to be in effect. Although both governments have signed and approved Minute 323, all U.S. basin states and Congress must finalize and approve the LBDCP for the provisions to take full effect. Some believe U.S. investment in water conservation in Mexico in exchange for additional water usage will decrease the already-reduced amount of water available for irrigation in Mexico. Others see the Minute 323 efforts to increase water levels in Lake Mead as critical to preventing future water shortages and sustaining cooperation between the two countries. Water sharing in two portions of the binational Rio Grande basin has distinct characteristics. In the Rio Grande basin between the El Paso-Juárez Valley and Fort Quitman, TX, water sharing is determined in large part by the 1906 Convention. In the El Paso-Juárez Valley, the United States is required to deliver water to Mexico. In the Rio Grande basin below Fort Quitman, TX, to the Gulf of Mexico, water sharing is established in large part by the 1944 Water Treaty. In this portion of the basin, Mexico is obligated to deliver water to the United States. Figure 3 depicts the Rio Grande basin and its tributaries, including the Rio Conchos, which historically is the most significant Rio Grande tributary downstream of Fort Quitman. Water demands in the Rio Grande basin regularly exceed supply. This imbalance becomes particularly apparent during droughts. Both parts of the Rio Grande basin can experience multiyear droughts (see the drought monitor figures in Appendix B for drought conditions in the basin in September for each of 2011 through 2018). Reduced water availability due to hydrologic conditions and below-target or unpredictable deliveries from Mexico can affect water supplies for the U.S. population and the economy in the U.S. border counties of the Rio Grande. U.S. interests have been particularly concerned by Mexico not meeting its five-year cycle delivery obligations on multiple occasions since 1994. Dry conditions have contributed to U.S. deliveries to Mexico in the El Paso-Juárez Valley falling below the 60,000 AF annual requirement established by the 1906 Convention for six of the seven years from 2012 to 2018. Since the start of the current five-year cycle for the Rio Grande below Fort Quitman, TX, in October 2015, the role that dry conditions have had in shaping Mexico's deliveries is less clear. In the first year of the cycle, Mexico fell 15% below its water-delivery obligations under the 1944 Water Treaty. In the second year of the cycle, Mexico made up its deficit and exceeded the cumulative target for the first two years. The third year of the five-year cycle ended in October 2018. IBWC indicates that Mexico delivered to the United States less than 350,000 AF in the third year of the cycle. However, Mexico's higher deliveries in the second year resulted in cumulative deliveries for the first three years of the cycle being almost 98% of the three-year delivery target of 1.05 million AF. In recent years, Congress has engaged in Rio Grande water issues by increasing its oversight of water deliveries, principally by requiring periodic reporting by the Department of State. As part of its broader effort to improve the reliability in Mexico's water deliveries, the IBWC is developing a binational model for water management in the Rio Grande. Recent water deliveries in the two portions of the Rio Grande basin and related issues, including congressional and diplomatic efforts, are discussed in more detail below. Under the 1906 Convention, which guides U.S. deliveries to Mexico at Ciudad Juárez, the United States is to deliver annually to Mexico 60,000 AF (enough water to irrigate about 25,000 acres) for use in the Juárez Valley of Chihuahua. During conditions of extraordinary drought, these deliveries to Mexico are reduced proportionally to reductions in available supplies in the broader basin. U.S. deliveries to Mexico have been reduced in roughly 30% of the years since the convention came into force. The United States is not required to repay any reduced deliveries. Table 1 shows U.S. deliveries to Mexico in recent years falling below the 60,000 AF annual requirement established by the 1906 Convention for six of the seven years from 2012 to 2018. In some years, U.S. water deliveries to Mexico in the El Paso-Juárez Valley have drawn attention from U.S. water users. The portion of the Rio Grande that traverses New Mexico at times has experienced particularly low flow and reservoir storage due to drought. When water stored in project reservoirs is low, Rio Grande Project water users have seen significant curtailment in their water deliveries. The Rio Grande Project is a Bureau of Reclamation project that furnishes irrigation water for approximately 178,000 acres in New Mexico and Texas. Data from Table 1 and data provided to the Congressional Research Service by the Bureau of Reclamation show that the amount delivered to Mexico represented on average around 9% of the amount allocated to the principal U.S. irrigation districts for the Rio Grande Project from 2012 to 2018. Hydrologic changes in the Rio Grande in New Mexico and at the border, specifically climate conditions that can alter water availability and seasonal streamflow, could further complicate water delivery to U.S. water users and to Mexico and could exacerbate seasonal deficits for users and for riverine ecosystems and species. One assessment of conditions in the mountainous headwaters of the Rio Grande basin from 1958 to 2015 identified that winter and springtime temperatures have increased and peak snowpack has declined, contributing to the runoff from melting snowpack and post-snow rainfall occurring earlier in the spring and to diminished flows in late spring and summer months. A topic of disagreement between Texas stakeholders and the IBWC has been whether half or all of the water reaching Fort Quitman, TX, is allocated to the United States under the binational agreements. According to Article 4 of the 1944 Treaty, Mexico and the United States each have right to one-half of the Rio Grande main channel flow between Fort Quitman and the lowest major international storage dam unless otherwise allocated. Since 1958, the IBWC has allocated half of the water that reaches Fort Quitman to Mexico and half to the United States. IBWC uses the resulting water volumes when tabulating each country's allocation pursuant to the 1944 Water Treaty. Estimates place the cumulative total allocated to Mexico at Fort Quitman around 2.1 million AF from 1958 to 2016. The Texas Commission for Environmental Quality (TCEQ) and others argue against how IBWC allocates the water in the river segment that forms the U.S.-Mexico border between El Paso and Fort Quitman. Their argument is that Mexico in the 1906 Convention waived its rights to the Rio Grande waters arriving in Fort Quitman and that the division of the waters of the Rio Grande by the 1944 Water Treaty begins below Fort Quitman. Under the TCEQ's interpretation, the United States is entitled to 100% of the Rio Grande water in this segment of the river. In 2013, the USIBWC disputed this interpretation. It asserted that the 1944 Water Treaty intended to divide equally all Rio Grande waters beginning in Fort Quitman, including those waters arriving at Fort Quitman. In support of its position, the USIBWC cited historical IBWC practice, as reflected in the minutes to the 1944 Water Treaty, and statements made to the Senate Committee on Foreign Relations during consideration of the 1944 Water Treaty. The 1944 Water Treaty requires Mexico to deliver to the United States portions of the water in several tributaries that flow into the Rio Grande basin below Fort Quitman, TX. The treaty specifically states the following: To the United States ... (b) One-third of the flow reaching the channel of the Rio Grande (Rio Bravo) from the Conchos, San Diego, San Rodrigo, Escondido and Salado Rivers and the Las Vacas Arroyo, provided that this third shall not be less, as an average amount in cycles of five consecutive years, than 350,000 acre-feet (431,721,000 cubic meters) annually. The IBWC accounts for Mexico's deliveries to the United States pursuant to the 1944 Water Treaty largely by aggregating deliveries (i.e., 1.75 million AF) over a five-year cycle, with an annual average delivery target of 350,000 AF. The cycles are typically five years long but may be shortened if certain reservoirs are filled with waters belonging to the United States. Once implementation of the 1944 Water Treaty began, Mexico met its deliveries within the five-year cycles until the 1994-2003 drought. Mexico has not met its obligations at the conclusion of the following four five-year cycles: 1992-1997, 1997-2002, 2002-2007, and 2010-2015. Various factors may have contributed to Mexico not meeting delivery obligations under the 1944 Water Treaty, including the over-allocation of the water and the effect of extended drought conditions. Over-allocation persists in both the Mexican and the U.S. portions of the basin. A 2011 academic assessment of the treaty's performance found that under drought conditions, the water-sharing system established by the 1944 Water Treaty did not recover as fast as expected (i.e., Mexico's water deficits lasted longer than anticipated) and the deficits that occurred were larger in volume than estimated. A delivery cycle started October 25, 2010, and ended October 24, 2015. Final accounting for the 2010-2015 cycle indicated a shortfall of 15% (263,250 AF) in Mexico's water deliveries. The deficit largely resulted from low deliveries early in the cycle. By January 25, 2016, Mexico had paid off the debt from the previous cycle, while simultaneously making deliveries under the current cycle. Mexico paid off the remaining 263,250 AF through a combination of transferring water stored behind Amistad Dam and providing for a period 100% of the water from three of Mexico's treaty tributaries. The current cycle began in October 2015 and is anticipated to end in October 2020, unless the cycle ends early. During the current cycle, Mexico's deliveries were below 350,000 AF in the first year; that is, the first year of the 2015-2020 cycle ended with Mexico delivering 216,562 AF, which was 133,439 AF below the annual target delivery. During the second year of the cycle, Mexico's deliveries exceeded the cumulative two-year target of 700,000 AF. The combined amount delivered in the first and second years of the current cycle was almost 800,000 AF. Mexico accomplished this in part by using flexibility provided by Minute 234 to allow for 50% of the water from some of its Rio Grande tributaries to be counted toward its deliveries rather than 33%, as stipulated in the 1944 Water Treaty. The predictability and consistency of Mexico's deliveries within the five-year cycle is a point of tension among some basin interests. This tension was particularly acute during 2012, when Texas water-rights holders faced persistent dry conditions and Mexico delivered significantly less water than the annual delivery target. Two binational reservoirs on the Rio Grande at Amistad Dam and Falcon Dam store much of the water that Mexico delivers to the United States. The storage and releases from these reservoirs help to regulate the timing of when the water is available for U.S. interests. Some U.S. stakeholders have argued that the uncertainty regarding the timing of Mexico's deliveries reduces the effective use and management of the delivered water, its storage, and its release. Mexico, by contrast, has argued that its deliveries comply with the cycle provided for in the 1944 Water Treaty. Some U.S. interests, particularly agricultural water users in Texas, have contended that Mexico's pattern of water delivery treats U.S. deliveries as a secondary priority to meeting Mexico's own water uses. These stakeholders see Mexico's use of wet-weather flows (e.g., excess flows after large storms) as reducing the reliability of U.S. water supplies from Rio Grande. The flexible five-year cycle for Mexico's Rio Grande deliveries at times is a frustration for U.S. water users in part because of the contrast with the more prescriptive nature of the U.S. water-delivery requirement to Mexico in the Colorado River (i.e., specified quantities are required to be delivered annually). Some interests have raised the possibility of renegotiating the 1944 Water Treaty. Other basin stakeholders have argued that the 1944 Water Treaty purposefully provided flexibility in the timing of Mexico's deliveries to account for the annual variability of water conditions in the basin. Whereas some stakeholders view the flexibility in delivery schedule as generous to Mexico, some Mexican interests view the water delivery requirements in the 1944 Water Treaty as generous to the United States. Several Members of Congress noted the complaints of Texas farmers, local officials, and state officials about Mexico's water deliveries. Some Members of Congress expressed concerns about the adequacy of the efforts by the USIBWC and the U.S. Department of State to press Mexico to comply more consistently with its 1944 Water Treaty obligations. This attention has resulted in various congressional requirements for the U.S. Department of State to report on the Rio Grande; these requirements have appeared in law and been included in congressional reports accompanying enacted legislation. Since 2014, Congress has directed the Department of State to report to Congress on the Rio Grande. In the 2014 farm bill (Section 12310 of Agriculture Act of 2013; P.L. 113-79 ), Congress enacted a requirement for an annual report on efforts by Mexico to meet its Rio Grande treaty. Beginning with bill text for the FY2015 Department of State appropriations and subsequently in congressional reports accompanying appropriations bills, appropriators have regularly included direction for other reports on Mexico's Rio Grande water deliveries. For more on these reporting requirements, see Appendix A . The reporting requirements are for report delivery directly to Congress and congressional committees; only limited information about these reports and their contents has been publicly available. In addition to the U.S. and Mexican Sections of the IBWC discussing Mexico's water deliveries, other U.S. and Mexican political officials have engaged to address water-sharing concerns. Reported outcomes of diplomatic efforts since 2010 include the following: the Mexican government initiated some releases from a reservoir on the San Rodrigo River in spring 2013, and the two countries exchanged technical data to assist in developing options for future water management in the basin, including a July 2015 binational meeting on basin water modeling efforts and various means to improve the predictability and compliance of Mexico's water deliveries. IBWC continues to work toward a binational model for the Rio Grande. This modeling effort is assisted by investments made since 2016 in equipment for improved monitoring of the Rio Grande (e.g., acoustic measurements to calculate flow). Such modeling efforts may identify opportunities to shift from deliveries that at times are dominated by wet-weather flows to more proactive management in the basin to improve the predictability and reliability of water deliveries to the United States. IBWC has used binational working groups in its efforts to advance binational dealings on water and environmental management issues in the Colorado River, and it is now applying the approach in the Rio Grande. That is, IBWC has developed binational working groups related to policy and hydrology for the Rio Grande with the objective of using science to develop better operational policy that ensures compliance with the 1944 Water Treaty and improves predictability and reliability in water deliveries for both countries. The hydrology work group is to consider data, modeling, and operations to address treaty compliance; the policy group will address treaty compliance actions. The State of Texas and Mexico's CONAGUA (Mexico's national water commission) serve as technical advisers to the work groups. As the IBWC Rio Grande working groups and modeling efforts advance, they may identify opportunities for improving the predictability and reliability of Mexico's water deliveries to the United States. A next step may be to assess the extent of binational support for more proactive management of water deliveries. Some interests in the basin may want to tie advancements in water management to advancements in the river's water quality and ecological health. In addition to the persistent questions related to the definition of extraordinary drought and other terms of the 1944 Water Treaty, there are unresolved questions related to Minute 234. Minute 234, established in 1969, includes a procedure whereby Mexico may pay a water debt in the Rio Grande using three different sources of water. Minute 234 requires that deficit payments from these three sources be made concurrently with required deliveries in the following five-year cycle. The United States and Mexico differ in their interpretation and implementation of Minute 234. For example, Mexico claimed that in the event of extraordinary drought, only the deficit incurred during the 1992-1997 five-year water cycle needed to be repaid in the following five-year cycle (i.e., by 2002) and that any deficit incurred during the 1997-2002 cycle could be deferred until the next five-year cycle. The United States argued that Minute 234 required Mexico to make up the water debt incurred during the 1997-2002 cycle concurrently with the 1992-1997 water debt. The disagreement over the interpretation of Minute 234 remains unresolved. Differences of interpretation related to Minute 234, extraordinary drought, or other matters are particularly likely to arise during dry conditions and when Mexico's Rio Grande deliveries fall below annual targets and five-year cycle requirements. Unconventional oil and gas development in northeastern Mexico could represent an emerging water use in the Rio Grande basin that influences how Mexico uses and manages water in its portion of the basin. The use of water for hydraulic fracturing as well as the disposal of wastewaters from oil and gas development may draw attention to border water quality protections and monitoring. Congress has maintained significant interest in Mexico. To date, Congress has been involved in binational water-sharing issues primarily through oversight. The tone and nature of binational water relations between the United States and Mexico depend in part on the effectiveness of efforts to resolve water tensions and improve cooperative management of shared rivers. Binational water relations and the work of the IBWC also may be shaped by the broader U.S.-Mexico relationship. This broader relationship is determined by many issues such as trade, immigration, and efforts to enhance border security, including construction of a border wall or fencing. Some observers have raised questions about the IBWC's role in addressing flooding and floodplain concerns that may arise with some segments of a border wall or border fencing. Other factors that may shape future water sharing include basin hydrologic conditions, the population's water demand, and economic activity of the basins. Input on water sharing from and actions of the U.S. Department of State, Mexico's Ministry of Foreign Affairs, and executive branch leaders in both countries also may shape how the IBWC addresses tensions and seeks opportunities for cooperation and improved management. As this report discusses, various issues may shape binational water sharing and IBWC activities in the coming years. For the Colorado River basin, hydrologic conditions and the U.S. lower basin states' adoption of a drought contingency plan may shape what occurs pursuant to Minute 323. For Congress, binational Colorado River oversight topics may encompass Minute 323 implementation and operations and deliveries during shortage conditions. For the Rio Grande, Mexico has not met its 1944 Water Treaty deliver obligations at the conclusion of four recent five-year cycles. The IBWC is working to identify opportunities for improving the predictability and reliability of Mexico's water deliveries to the United States. Appendix A. Congressional Reporting Requirements Related to the Rio Grande Pursuant to the reporting requirements discussed below, the U.S Department of State has delivered reports to various committees of Congress, including as recently as March 2018. The reporting requirements are for report delivery directly to Congress and congressional committees; only limited information about these reports and their contents has been publicly available. Ongoing Reporting Requirements Since 2014, Congress has asked the U.S. Department of State to annually report to Congress on Mexico's Rio Grande water deliveries. The 2014 farm bill (Agriculture Act of 2013; P.L. 113-79 ) included the following requirement in Section 12310: Not later than 120 days after the date of the enactment of this Act and annually thereafter, the Secretary of State shall submit to Congress a report on efforts by Mexico to meet its treaty deliveries of water to the Rio Grande in accordance with the Treaty between the United States and Mexico Respecting Utilization of waters of the Colorado and Tijuana Rivers and of the Rio Grande (done at Washington, February 3, 1944). This reporting requirement has no explicit end date; that is, the 2014 farm bill reporting requirement remains in effect. Reporting Requirements in Annual Appropriations Bills and Accompanying Reports Water Delivery Reporting Requirements Beginning with statutory provisions for FY2015, appropriators have regularly included direction in congressional reports accompanying appropriations bills for the U.S. Department of State. The direction is for a report on Mexico's water deliveries to the United States in the Rio Grande. On December 16, 2014, Section 7045(g)(3) of Division J of P.L. 113-235 —the Consolidated and Further Continuing Appropriations Act of 2015—was enacted. It required that the Secretary of State report to the Committees on Appropriations on the following water delivery and accounting issues: Not later than 45 days after the enactment of this Act, the Secretary of State, in consultation with the Commissioner for the United States Section of the International Boundary and Water Commission (IBWC), shall report to the Committees on Appropriations on the efforts to work with the Mexico Section of the IBWC and the Government of Mexico to establish mechanisms to improve the transparency of data on, and predictability of, the water deliveries from Mexico to the United States to meet annual water apportionments to the Rio Grande, in accordance with the 1944 Treaty between the United States and Mexico Respecting Utilization of Waters of the Colorado and Tijuana Rivers and of the Rio Grande, and on actions taken to minimize or eliminate the water deficits owed to the United States in the current 5-year cycle by the end of such cycle: Provided, That such report shall include a projection of the balance of the water delivery deficit at the end of the current 5-year cycle, as well as the estimated impact to the United States of a negative delivery balance. The joint explanatory statement for the FY2016 Consolidated Appropriations Act (Division K, P.L. 114-113 ) carried forward reporting requirements from P.L. 113-235 related to Mexico's water deliveries. For FY2017 and FY2018, S.Rept. 114-290 and S.Rept. 115-152 continued similar reporting requirements. For FY2018, H.Rept. 115-253 also included the following direction from the House Appropriations Subcommittee on State, Foreign Operations, and Related Programs: The Committee notes the treaty obligations of Mexico to supply water deliveries to the Rio Grande and recognizes the importance of transparency concerning such matters. The Committee directs International Boundary and Water Commission (IBWC) to regularly publish water delivery data on its Web site, including projections for the balance of water deliveries. The Committee expects IBWC to hold quarterly meetings with interested stakeholders to inform them of IBWC activities and receive feedback. Some annual appropriations-related reporting requirements also may continue in FY2019. The 115 th Congress is considering various bills with accompanying reports that include references to reporting on Rio Grande water topics. For example, the Senate report for FY2019 Department of State appropriations— S.Rept. 115-282 accompanying S. 3108 —would continue the reporting requirement. The House report for FY2019 appropriations— H.Rept. 115-829 for H.R. 6538 —would continue report language requiring the publishing of data and the holding of stakeholder meetings, similar to H.Rept. 115-253 . Other Rio Grande Reporting H.Rept. 115-253 also includes the following language related to flood control rehabilitation: The Committee recommendation includes not less than the request for the Rio Grande Flood Control System Rehabilitation Project to continue and maintain levee projects along the Rio Grande, including environmental, hydrologic, hydraulic, and low water weir studies along the Rio Grande Valley that are consistent with the projects outlined within the Mexican Water Treaty of 1944, Treaty Series 994. H.Rept. 115-829 would continue the above language and add the following from the House Appropriations Subcommittee on State, Foreign Operations, and Related Programs: "The Committee also supports efforts to reduce the amount of sediment and other activities to maintain the health of the river." Appendix B. Drought Monitor Water sharing becomes more complicated during droughts, and both the Colorado River and the Rio Grande basins are prone to multiyear droughts. The North American Drought Monitor provides maps that synthesize various drought indexes and impacts. Experts from the United States, Mexico, and Canada create these maps. Figure B-1 shows the drought monitor in September 2016, September 2017, and September 2018. For September 2018, extreme and exceptional drought conditions existed in the headwaters of the Rio Grande, and drought conditions of varying degrees in most of the Colorado River basin. Figure B-2 shows the evolution of drought conditions from September 2011 through September 2015. For the Rio Grande, as shown in Figure B-2 , both 2011 and 2012 were marked by dry conditions, resulting from high heat, low precipitation, and low runoff throughout most of the basin. For the Colorado River, dry conditions in the basin developed in 2012, persisted in varying degrees through October 2016, and prominently returned in 2018. Appendix C. U.S.-Mexican Transboundary Aquifers Binational aquifers are transboundary water resources that can be particularly important for meeting needs during dry times. In some parts of the border, binational aquifers are significant sources of domestic water supply for overlying populations. For example, the Hueco Bolson aquifer provides water for the 1.5 million residents of Ciudad Juárez and for 40% of the 730,000 residents of El Paso, TX. Over the last century, many border aquifers have declined in volume and/or quality. No broad bilateral agreement exists on U.S.-Mexican border groundwater management and use. Declining water levels, deteriorating water quality, and increasing use of groundwater resources have raised concerns about the long-term availability of the border's groundwater. Knowledge about the extent, depletion rates, and quality of transboundary aquifers is limited, and in some areas extremely limited. A 2016 study entitled "Identifying and Characterizing Transboundary Aquifers Along the Mexico-U.S. Border: An Initial Assessment" identified 36 aquifers along the U.S.-Mexican border, as shown in Figure C-1 . As the level of water in an aquifer falls, surface water flows can decline. For example, historically, the Hueco Bolson aquifer was recharged primarily by precipitation and the aquifer contributed to the flow of the Rio Grande (i.e., the Rio Grande gained water from the aquifer). However, as the aquifer's level declined due to pumping levels exceeding recharge rates, the river-aquifer flows reversed. The Rio Grande began to recharge the aquifer, resulting in diminished surface water flows; that is, the river became a losing stream in the reach of the Hueco Bolson, as surface water entered the Hueco Bolson aquifer. A binational aquifer quantity and quality assessment program has been initiated, pursuant to the U.S.-Mexican Transboundary Aquifer Assessment Act ( P.L. 109-448 ; 42 U.S.C. §1962 note); the legislation identified four border aquifers as priorities for study. The act authorized the Secretary of the Interior, through the U.S. Geological Survey, to collaborate with the states of Arizona, New Mexico, and Texas through their Water Resources Research Institutes and with the International Boundary and Water Commission, stakeholders, and Mexican counterparts to provide information and a scientific foundation for state and local officials to address pressing challenges along the U.S.-Mexican border. According to the act's accompanying Senate report ( S.Rept. 109-17 ), Ground-water pumping has lowered the water table, depleted aquifers, and reduced the base flow of many streams thus decreasing the quantity of water available to support critical riparian habitats. Excessive groundwater pumping in some major urban centers, such as in the El Paso/Juárez metropolitan region, has caused land subsidence that has damaged homes and essential urban infrastructure. In addition to the effects of ground- and surface-water depletion, degradation of water quality has reduced habitat suitability for the region's diverse biota. Both U.S. and Mexican entities fund the aquifer assessment program. After multiple years of no U.S. federal funding, federal funds for the assessments resumed in FY2016, with $1 million provided; an additional $1 million in federal funding was provided in each of FY2017 and FY2018. Before the resumption of federal funding in FY2016, federal funding had totaled $2 million and had last been provided in FY2010. In November 2016, a binational study of the San Pedro aquifer, located along a portion of the Arizona-Sonora border, was released. The study identified available data and data gaps. It noted that discharges from the aquifer into the San Pedro River are in decline, with climate cycles and pumping likely contributing to the decline. Activities planned in 2018 include continued development of the report and database on the Santa Cruz aquifer (to the west of the San Pedro aquifer) and additional research on saline-water topics associated with the two freshwater aquifers near El Paso. | The United States and Mexico share the waters of the Colorado River and the Rio Grande. A bilateral water treaty from 1944 (the 1944 Water Treaty) and other binational agreements guide how the two governments share the flows of these rivers. The binational International Boundary and Water Commission (IBWC) administers these agreements. Since 1944, the IBWC has been the principal venue for addressing river-related disputes between the United States and Mexico. The 1944 Water Treaty authorizes the IBWC to develop rules and to issue proposed decisions, called minutes, regarding matters related to the treaty's execution and interpretation. Water Delivery Requirements Established in Binational Agreements. The United States' and Mexico's water-delivery obligations derive from multiple treaty sources and vary depending on the body of water. Under the 1944 Water Treaty, the United States is required to provide Mexico with 1.5 million acre-feet (AF) of Colorado River water annually. The 1944 Water Treaty also addresses the nations' respective rights to waters of the Rio Grande downstream of Fort Quitman, TX. It requires Mexico to deliver to the United States an annual minimum of 350,000 AF of water, measured in five-year cycles (i.e., 1.75 million AF over five years). For waters of the Rio Grande upstream of Fort Quitman, a 1906 bilateral convention requires the United States annually to deliver 60,000 AF of water to Mexico. Developments in the Colorado River Basin. The United States continues to meet its Colorado River annual delivery requirements to Mexico pursuant to the 1944 Water Treaty. At the forefront of recent IBWC actions on the Colorado River are efforts to cooperatively manage the Colorado River's water and infrastructure to improve water availability during drought and to restore and protect riverine ecosystems. Minute 323 is a set of binational measures in the Colorado River basin that provides for binational cooperative basin water management, including environmental flows to restore riverine habitat. Minute 323 also provides for Mexico to share in cutbacks during shortage conditions in the U.S. portion of the basin. Additionally, Minute 323 designates a "Mexican Water Reserve" through which Mexico can delay its water deliveries from the United States and store its delayed deliveries upstream at Lake Mead, thereby increasing the lake's elevation. Lake Mead elevation is the baseline used for determining shortage conditions and associated water delivery cutbacks for the lower Colorado River basin states of Arizona, California, and Nevada. Recent congressional attention to the Colorado River basin has related largely to oversight of Minute 323 implementation and water management during potential shortage conditions. Developments in the Rio Grande Basin. On multiple occasions since 1994, Mexico has not met its Rio Grande delivery obligations within the five-year cycle established by the 1944 Water Treaty. For example, Mexico fell 15% below its water-delivery obligations under the 1944 Water Treaty for the five-year cycle from 2010 to 2015. Mexico addressed its deficit by early 2016. The October 2015 to October 2020 cycle is under way. Mexico offset its below-target deliveries for the first year of this cycle with additional deliveries in the second year. IBWC indicates that Mexico delivered less than its 350,000 AF in the third year of the cycle; however, higher deliveries in the second year resulted in Mexico's deliveries being almost at 98% of the three-year cumulative delivery target of 1.05 million AF. Some U.S. stakeholders promote the adoption of mechanisms to achieve a water-delivery regime by Mexico that provides more reliability and benefit for U.S. interests in Texas. The IBWC is developing a binational model for water management in the Rio Grande, as part of its broader effort to improve reliability in Mexico's water deliveries. Congress has been involved in the recent Rio Grande water-sharing issues through oversight. Congress requires the U.S. Department of State to report annually on Mexico's deliveries and on efforts to improve Mexico's treaty compliance. |
Members of Congress receive numerous requests from grant seekers, including state and local governments, nonprofit social service and community action organizations, private research groups, small businesses, and individuals, for information and help in obtaining funds for projects. Both government and private foundation funding may be appropriate. Federal grants are not benefits or entitlements to individuals. Most federal grant funds goes to state and local governments, which in turn sub-award to local entities such as nonprofit organizations. Grants may be available for projects serving communities and needs. For example, government assistance may be available for nonprofit organizations (including faith-based groups) for initiatives such as establishing soup kitchens or after-school programs benefitting entire communities; and local governments seeking funds for community services, infrastructure, and economic revitalization may be most eligible for state and federal funds. Congressional offices may often need to direct constituents seeking government aid to funding options other than grants. Community fund-raising may be most suitable for school enrichment activities such as field trips or for band or sports uniforms. Local business or private foundation funding might be more appropriate for supporting projects such as construction of local memorials or commemorative programs. For others, such as for starting or expanding a small business or for students, loans may be available. Individuals looking for government benefits may find useful the website Benefits.gov at https://www.benefits.gov . Students seeking financial aid should search the Department of Education website at http://studentaid.ed.gov/sa . To start or expand a small business, the federal government provides assistance in the form of loans, advisory, or technical assistance. See the Small Business Administration website at http://www.sba.gov . To respond to constituents who have seen ads promising federal grants for personal expenses, refer them to the Federal Trade Commission Consumer Alert Government Grant Scams at http://www.consumer.ftc.gov/articles/0113-government-grant-scams . Given the competition for federal funds, the success rate in obtaining federal assistance is limited. A grants staff's effectiveness often depends both on an understanding of the grants process and on the relations it establishes with federal departments and agencies, state grants administering agencies (SAAs), private and local foundations, and other contacts. This report does not constitute a blueprint for every office involved in grants and projects activity, nor does it present in-depth information about all aspects of staff activity in this area. The discussion describes some basics about the grants process and some of the approaches and techniques used by congressional offices in dealing with this type of constituent service. Senate and House offices allocate staff and other resources to grants work to assist constituents with projects of potential benefit to their districts, cities, or states. Each congressional office handles grants requests in its own way, depending upon such factors as the Member's philosophy on federal support for local projects, the relation of certain proposals to his or her legislative activity, or the Member's particular interest in specific locations or types of projects. Other factors may include the degree of economic distress in any given locality and the current level of federal assistance it receives. Grants activities in any congressional office depend very much upon the overall organization, staff, and workload of the office. Most offices divide responsibility by function (i.e., legislation is assigned to legislative assistants and correspondents, media relations and newsletters are handled by a press secretary, and caseworkers help with problems of individuals). Offices organized in this way may have a full-time grants specialist or several staff members under the supervision of a grants coordinator working solely in the area of grants and projects. Some offices divide responsibilities by subject area; that is, a specialist in health issues is involved with legislation, correspondence, casework, grants, projects, speeches, and press releases in that subject area. In some offices, all grants requests are handled in the district or state office; in others, they are answered by the Washington, DC, staff; still others divide grants and projects activity between the district or state office and the Washington, DC, office. Regardless of how this responsibility is assigned, it is helpful to have at least one person in the district or state office and one person in the Washington, DC, office familiar with the whole process. District or state staff may be more readily able to communicate and develop relationships with federal state and federal regional offices, or state administering agencies, often the preferred contact office for federal programs. State delegation cooperation: since some constituents request the aid of the entire state delegation for a grant or project, cooperation among Members of the delegation can minimize duplication of effort and permit more effective use of staff time. To increase the chances of a project's funding, Members may solicit the support of other Members either from the same geographic region if the proposal would benefit a wide area, or from those who hold key positions in leadership or on committees which exercise funding and oversight of the federal program. Political considerations can limit the amount of such cooperation. One state's delegation has established a State Projects Office to help its constituents learn about the grants process and follow through on all applications until awards are made. The grants person in the congressional office can serve constituents not only as a source of information but also as a facilitator with agencies and foundations and, in some cases, even as an advocate. The congressional office is seen by constituents as a potential source of assistance, which includes providing facts about financial and nonfinancial assistance available through federal programs; clarifying the intricacies of proposal development, application, and follow-up procedures; writing letters of interest or support from the Member to the granting agency once a grant proposal is ready for submission; resolving problems that occur when an applicant is unsuccessful in obtaining funds or other assistance; and suggesting other sources for grant assistance in both the private and public sectors. The congressional office should first determine the priorities of its particular office: assess the volume of incoming grants requests; determine criteria for how much attention should be given to each grants request, for example, number of people who will be affected, visibility of projects, or political implications; decide the role of the congressional office: information source or active advocacy, or sometimes even earmarking appropriations for a project that mirrors the Member's legislative agenda. Congressional grants staff can help their constituents best when they thoroughly understand the entire grants process: defining the project; searching for likely funding sources, including federal grants administered and sub-awarded by states; developing and writing proposals; applying for grants; understanding review and award procedures; and knowing post-award requirements. To assure continuity, particularly in cases of staff turnover and shifting responsibilities, and to monitor the progress of the grants and projects operation, several resources can be developed. An internal grants manual is a valuable tool for grants staff to develop. It can outline office policies and procedures and ensure continuity when staff changes. Among the items that might be included in such a manual are a statement of the Member's policy on letters of endorsement and press announcements, along with samples; a checklist of procedures to facilitate the training of new staff; sample project worksheets, allowing space for agency contacts, status reports, and follow-up timetables; and a continually updated telephone and email listing of contacts in federal, state, and local agencies, and foundations that have proven especially helpful. Whether electronic or paper, a congressional office may maintain detailed, cross-referenced files such as agency files, constituent files by county, and tracking records. Agency Files Agency files, which could also be arranged under broad subjects, or use subject subdivisions: for example, Defense Department, district contracts; Education Department, curriculum development; Justice Department, Community Oriented Policing Services (COPS) program. Program files, which include detailed information on the most frequently used programs in communities in the state or district, with a fact sheet describing each program, plus agency brochures, and contacts. Project files, which may contain lists of applicants for each project. Some offices keep records on the steps taken in support of all grant applications as documentation. Constituent Files by County These can prove especially useful for the Member's visits to the state or district. Correspondence on each grant application, and local press coverage of awards can be added. These clippings, along with letters from grateful constituents, can serve as a source for favorable quotations. Tracking Requests Monitor grant applications as they move through an agency's review process—develop contacts in agency congressional liaison offices or state or regional administering agencies. Maintain a follow-up calendar or log. Track all grants awarded in the district or state—even those your office did not work on. For sources that track federal funds by state, by county, and by congressional district, see the CRS web page, Tracking Federal Funds , by [author name scrubbed], at http://www.crs.gov/resources/TRACKING-FEDERAL-FUNDS . Contact the CRS author for search strategies and best sources. A weekly grants and projects report or letter is one way to keep both the Member and other staff fully informed of significant developments. This is particularly important for offices organized by functional responsibility. The report prepares the Member for the types of questions that may be asked during visits to the state or district and provides topics to be addressed in speeches. The legislative staff may benefit from knowing about pending state or local government actions that would have an impact on grants and projects. Conversely, grants and projects staff should also be able to rely on the legislative staff for information about pending bills that would alter or create federal programs or change relevant funding levels. Sometimes, comments from constituents can supply data on whether programs are carrying out legislative intent and whether changes in agency regulations or legislation are needed. Such recommendations might then be the subject of congressional oversight hearings or might result in recommending changes in legislation. The press secretary should also be kept up to date on programs of interest in the district, so that current information can be presented in newsletters and press releases. If a proposal or serious inquiry is submitted to a congressional office, an assessment of the stated problem should be made. First, this benefits the grant seeker, since any application for assistance will require that the problem be clearly stated and that the proposed solution provide some remedy. Second, this initial assessment can provide staff with a sense of direction: Are there other projects currently under way that address the problem? Is there already an appropriate federal or state program that is designed for such a project, or is the issue better addressed through local, state, or private organizations, or through legislation? Will the sought-after aid produce other problems for the community? What are its chances for success? The initial review of the request should also involve an assessment of the applicant. A formal grant proposal will require an applicant to establish credibility. Individuals connected with a proposal might mention education, training, and professional credentials. Credibility for an organization may be established by giving its history, goals, activities, and primary accomplishments, as well as by letters of support, including by local governments. By reviewing such information, an office may avoid the hazard of offering support for a questionable applicant and may be in a better position to make decisions about support when several communities or organizations are applying for the same program—will all be treated equally or will support be given to selected applicants? A written request from a constituent should always be acknowledged. If the request is a fairly common one, the office may be able to respond with a prepared packet of materials on available programs. For large grants-in-aid projects, the congressional office may contact the federal or state agency congressional liaison and ask to speak to a grants specialist for a particular program or funding need. This procedure is generally more time consuming for a congressional staffer than a simple referral, but it is often more informative. The agency may provide facts about budget levels, authorizations and appropriations, the amount of money available for the program, the total amount requested in applications on file, the number of applications received, and the number likely to be approved, agency priorities, categories of competition or targets by region, key dates and deadlines, and information on who makes recommendations and decisions. If your constituent decides to submit a formal grant application for a particular program, the congressional office may recommend or arrange a meeting with agency offices in the district or state. Another way to get input from the agency early in the process is a pre-review of the application. Some agencies provide procedural review of proposals one or two months before the application deadline. Such a review, while not dealing with the substance of the proposal, allows an agency to inform the applicant of any technical problems or omissions to be corrected before the proposal is formally submitted. When a constituent notifies the congressional office that a proposal has been submitted, the office can send a letter to the agency expressing the Member's interest in being kept informed of developments relating to the application. In addition, the letter may also request a list of all applicants for the particular grant from the Member's state or district. This enables the office to consider initiating letters of support from the Member to those applicants in his or her state or district who did not approach the office prior to submission of their application. Whether the Member chooses to support an applicant or extends support to all applicants from the state or district, the office should maintain contact with all interested parties as it is notified of progress reports from agency contacts. Cutbacks in federal programs mean many projects are made possible only through a combination of funding sources—federal and state government grants as well as private or corporate foundation grants should be considered. Grant seekers should know that most federal funding goes to states in the form of formula or block grants. For many programs, application for federal funds must be made through state administering agencies (SAAs). Whatever the funding source, it is important to emphasize that once a project has been clearly defined, constituents can improve their likelihood of success by doing preliminary research to find potential funding sources whose goals are most nearly consistent with their own. Congressional offices can assist state, local, or private groups in identifying and obtaining available funding sources. Congressional grants staff can also serve as liaison between grant seekers and government executive offices, including their own state offices that administer federal grants. Some congressional offices may help grant seekers by forwarding to them descriptions and contact information on federal grants programs for particular projects. The site beta.SAM.gov offers keyword searching, searching by assistance type (grant, loan, etc.), and listings by department, agency, and program title. The assistance listing descriptions also link to related websites, such as federal department and agency home pages and Office of Management and Budget grants management circulars. Grant seekers themselves can then track notices of actual federal funding opportunities at websites such as Grants.gov at http://www.grants.gov and FedConnect at https://www.fedconnect.net . Congressional offices can also prepare their own information packets on federal grants programs, which are requested most frequently. Such packets could include program descriptions, brochures, the latest rules and regulations, changes in agency policy, application forms, and so on. For example, Members of rural states can become familiar with Department of Agriculture Rural Development programs; Members with urban constituencies and projects may want to consider Department of Housing and Urban Development programs. To assist Members in their representational duties, and to help congressional offices respond to grants questions, CRS has developed two Grants web pages: For congressional staff, the Grants and Federal Assistance web page, by [author name scrubbed] and [author name scrubbed], focuses on key CRS products, available at http://www.crs.gov/resources/GRANTS . It includes CRS publications on grants and programs that congressional offices can forward to their constituents and a separate web page of key sources (see next bullet) that Members may add to their home page for constituents. For grant seekers in districts and states, Members may add to their website the CRS Grants and Federal Domestic Assistance web page, by [author name scrubbed] (see sample at http://www.crs.gov/resources/MEMBER-GRANTS-PAGE ) to provide useful information directly to constituents. It gives guidance and links to key Internet sources covering information readily available to the public. CRS automatically updates the web page for Members on the House and Senate servers. CRS also has a number of publications to help both congressional staff and grant seekers. Sources described cover key Internet sources and publications about federal and private funding. Constituents may search Internet sites from home computers or in local libraries and can consult many of the published sources at public or university libraries or in government depository libraries in every state. Key useful CRS reports (in addition to the current report) to assist staff undertaking grants work include CRS Report RL34012, Resources for Grantseekers , by [author name scrubbed] and [author name scrubbed], and CRS Report RL32159, How to Develop and Write a Grant Proposal , by [author name scrubbed] and [author name scrubbed]. Newsletters (print or email) or Member web page news releases are a good way of reaching a large number of people. Some offices choose to either send out a special grants and projects newsletter or include a section on grants and projects in their regular newsletter. Subjects that could be developed include new programs, new appropriations, and descriptions of recently awarded grants. A congressional office may occasionally choose to communicate with selected audiences through targeted mailings to inform constituents of the possible impact of new legislative or executive actions that might revise existing programs, create new ones, or alter funding levels; important dates and deadlines; and the advantages and limitations of various programs. This is especially important as new programs are created and receive congressional appropriations: for example, a newly funded economic development program may be announced on Grants.gov with a short application deadline, of which constituents should be made aware. Another way to get information to interested constituents is for a congressional office to coordinate seminars on federal and private assistance at state and district locations. An office can sponsor programs bringing together federal, state, and local officials, as well as foundation, academic, and corporate specialists, experienced volunteers, and constituents who share common concerns. Many agencies, foundations, and corporations are willing to provide speakers for district seminars arranged by congressional offices and also to provide materials such as brochures, sample proposals, and lists of information contacts. For telephone numbers to contact speakers from federal departments and agencies, congressional staff can use the CRS Congressional Liaison Offices of Selected Federal Agencies , http://www.crs.gov/resources/LiaisonOffices , or use their own state contacts for government speakers. For constituent orientation and group seminars, Members may consider use of CRS products as handouts and presentation materials. Although well-planned, balanced programs tailored to a particular audience can create good will, coordinating and following through on such seminars takes a great deal of staff work and time. Such programs may also result in additional requests and demands on the sponsoring office. Although congressional staff do not write grant proposals, they are frequently approached by inexperienced constituents seeking guidance on what makes a good proposal. Offices aiding such constituents may find helpful CRS Report RL32159, How to Develop and Write a Grant Proposal , by [author name scrubbed] and [author name scrubbed], which discusses preliminary information gathering and preparation, developing ideas for the proposal, gathering community support, identifying funding resources, and seeking preliminary review of the proposal and support of relevant administrative officials. It also covers all aspects of writing the proposal, from outlining of project goals, stating the purpose and objectives of the proposal, explaining the program methods to solve the stated problem, and how the results of the project will be evaluated, to long-term project planning, and developing the proposal budget. The last section of the report lists free grants writing websites. The Foundation Center and other organizations also publish guides to writing proposals; the Foundation Center offers a "Proposal Writing Short Course" on its website at https://grantspace.org/training/introduction-to-proposal-writing/ and includes a version in Spanish. Constituents may also be advised that computer software templates can be found by searching the Internet under terms such as grant proposal AND template . Congressional offices may pass on the following suggestions: Allow sufficient time to prepare a thoroughly documented proposal, well before the application deadline. If possible, have someone outside the organization critique the proposal prior to submission. Follow the instructions given in the application form or in other material provided by the agency or foundation. Answer questions as asked. See that the proposal is clear and brief. Avoid jargon. Take pains to make the proposal interesting. Reviewing panels have limited time to devote to any single proposal. Whenever possible, fit the style of the proposal to the style of the agency or foundation being approached. When no form or instructions for submitting grant proposals are provided, the proposal should include the following: 1. a cover letter on the applicant's letterhead giving a brief description of the purpose and amount of the grant proposal, conveying the applicant's willingness to discuss the proposal in further detail; 2. a half-page summary that includes identification of the applicant, the reasons for the request, proposed objectives and means to accomplish them, along with the total cost of the project, an indication of funds already obtained, and the amount being requested for this grant; 3. an introduction in which the history, credentials, and accomplishments of the applicant are presented briefly (supporting documents can be included in an appendix); 4. a description of current conditions demonstrating the need for the proposed project; 5. a statement of the project's objectives in specific, measurable terms; 6. a description of the methods to be used to accomplish these objectives; 7. a description of the means by which the project will be monitored and evaluated; 8. a discussion of plans for continuing the project beyond the period covered by the grant; and 9. a detailed budget. Constituents seeking funds for projects frequently ask congressional offices to write letters to federal departments and agencies on their behalf. Some grants, such as funding for homeland security, are determined by formula to states and jurisdictions and letters may not be needed. Explain to constituents that the federal grants process is competitive and that your office can consider writing a letter to the department or agency once they submit a fully developed grant proposal. For most requests, use neutral language expressing the Member's "interest" in a proposal, rather than "support." Lending "support" to a proposal that might not be funded under the competitive process (and when there are competing applications from several constituents) might lead to disappointment and reflect negatively on the Member. For most constituent requests, write a letter only when the grantseeker is ready to submit the grant proposal to the department or agency. Check with the department or agency congressional liaison to learn where letters should be sent. Information needed from the grant seeker: name of applicant; contact person for the project if different grant program name and number agency contact address, grants officer's name if available deadline for proposal submission project name and summary The project summary should highlight: what the project/program does and how many people will benefit why this program is important to the community any unique features of the project, needs not already being met other support for the project such as local government specifically how the grant money will be used Write directly to the person in the department of agency; provide a copy of the letter to the constituent to submit with the proposal. The Member's letter could say why this is important to his or her district, what needs are being met, etc.—the summary supplied by the constituent should give the objectives of the proposal/project. Close by asking the grants officer to let the Member know when a decision will be made and to keep your office informed about the progress of the proposal. A sample letter of support, written on the Member's letterhead, might read as follows: Although there is some variation, the usual announcement procedure in cases of allocated federal funds is for the agency making the award to notify the Senate office first (a Senator of the President's party may be first notified), then the House office, and finally the recipient. This allows Members of Congress an opportunity to notify recipients of grants. Not all awards are announced publicly. In the case of block grants, the Office of Management and Budget notifies Senate offices of the allocations among the states. The state's decision on how to distribute funds among local communities is, however, not necessarily communicated to congressional offices. In these cases, a good state agency contact may be willing to provide the office with this information. Announcements of grants awarded are often posted on Member websites. Many congressional offices develop files or databases of grants awarded to track funding to their districts and states. Detailed information is difficult to obtain. P.L. 109-282 , the Federal Funding Accountability and Transparency Act of 2006, called for the Office of Management and Budget (OMB) to develop a database, which became USAspending.gov . For a summary of sources and limitations of currently available data, and the new law's requirements, see CRS web page, Tracking Federal Funds , by [author name scrubbed], at http://www.crs.gov/resources/TRACKING-FEDERAL-FUNDS . Contact the CRS author for search strategies and best sources. To avoid disappointment, congressional staff might consider cautioning grant seekers from making requests that are unlikely to be approved at the federal level. Suggest considering other funding sources early in the process. In cases where grant applications are made and turned down, the congressional office may notify constituents of their right to know why the award was not granted and what the appeals process is. Constituents may ask the agency for an analysis of the strengths and weaknesses of the proposal or may give the agency permission to provide the congressional office with this information. Alternative programs or other approaches may be suggested following an adverse decision. The constituent might also decide to improve the initial application and start the process again. Hundreds of grants or loans for various purposes are available from federal departments and agencies. Most federal funding (more than 80%) goes to state and local governments that determine state and local needs, and they themselves offer competitive grants and funding opportunities. New programs and federal funding to enhance homeland security or enhance emergency services are of particular interest to many local jurisdictions. Other federal funds not dispensed through grants, but highly sought after, are used for defense procurement, construction of federal installations, or infrastructure (e.g., military bases, federal office buildings, and federal projects such as flood control and highway construction). Congressional offices can assist state and local governments, nonprofit organizations, and other grant seekers in becoming aware of available funds and how to go about obtaining them. Staff members can contact federal agencies to find agency interest in certain projects; relay the findings to those interested and qualified for assistance in their states and districts; and notify home state governments, organizations, businesses, and people of what funds are available. Once a grant application is filed, offices frequently keep in touch with agencies. Contact can be maintained by email, phone, letter, or in person as the situation dictates. Concerted action on the part of the staff may result in more federal funds being spent in a state or district, thereby providing greater benefit to the constituency. Federal program and contact information for each program is given at beta.SAM.gov. Current notices of competitive project grant opportunities for grant seekers themselves appear on the websites Grants.gov at http://www.grants.gov and FedConnect at https://www.fedconnect.net . See sections below for more information about these key sources. Congress may also designate or "earmark" federal funds for projects in districts and states in annual appropriations legislation, though appropriations committees in recent years have chosen to limit the practice. Because much of the annual U.S. budget consists of expenditures for entitlement programs such as Social Security, mandatory spending through authorizing legislation and interest payments, or allocations in the form of formula and block grants to states and local governments, discretionary funding for new grant awards is limited. The appropriations measure that a congressional office chooses to submit often reflects the Member's legislative agenda as well as the needs of the state or district. Grant seekers who ask support of their Senator or Representative for project funding should consider the congressional budget process calendar. Appropriations measures for the next fiscal year (October 1-September 30) are usually submitted as early as February. If congressionally directed spending seems appropriate, applicants may be asked by the Member to make a formal request accompanied by supporting materials, including project description; research and documentation of the need for the project (such as a feasibility study and history of community support); letters of support from elected officials and local community leaders; and amount requested, anticipated total project cost, sources of other funding (state, private, local match), and any history of past funding. Grant seekers may contact both Representatives and Senators about their project. Although an "earmark" may appear in either a House or Senate committee report, a conference committee (composed of an equal number of House and Senate Members) makes the final decisions on funding. Having support of both Representatives and Senators for a project may enhance a grant seeker's success for an "earmark." The congressional appropriations process follows an annual time line, beginning in February of each year. Grant seekers such as state and local governments or nonprofit organizations can submit requests for project support and funding to Representatives and Senators before the beginning of the budget cycle. February: The President submits to Congress the proposed Budget of the United States. Members submit requests for discretionary funding on behalf of projects in their districts or states prior to the start of appropriations hearings in early March. Early March: The House Appropriations Committee's 12 subcommittees begin hearings on proposed spending bills. May-August: The House votes on appropriations bills beginning in May and tries to finish before the end of the fiscal year, September 30. The Senate generally follows the House in considering appropriations measures. In recent years, voting has continued into the fall, and continuing resolutions are passed to ensure that federal offices and programs do not close down. After each chamber votes on its version of an appropriations bill, a conference committee, consisting of equal numbers of House and Senate Members, meets to reconcile any differences and makes final decisions on spending. Funding for district and state projects included in both House and Senate appropriations bills will generally be approved by the conferees, and submitted for floor vote by the full House and Senate. After approval, appropriations bills are forwarded to the President for signature. Members notify grant seekers of projects successfully funded. Currently, programs in beta.SAM.gov, the key source to federal program information (see " Assistance Listings at beta.SAM.gov," below), are classified into several types of financial and nonfinancial assistance. Grants are generally considered desirable by applicants because they are an outright award of funds. Formula Grants : allocations of money to states or their subdivisions for activities of a continuing nature not confined to a specific project. Includes block grants to states and local governments. Project Grants : funding, for fixed or known periods, of specific projects or the delivery of specific services or products, including fellowships, scholarships, research grants, training grants, traineeships, experimental and demonstration grants, evaluation grants, planning grants, technical assistance grants, survey grants, construction grants, and unsolicited contractual agreements. Can also be referred to as discretionary or categorical grants or funding. Direct Payments for Specified Use : federal financial assistance provided directly to individuals, private firms, and other private institutions to encourage or subsidize a particular activity. Direct Payments with Unrestricted Use: federal financial assistance provided directly to beneficiaries who satisfy federal eligibility requirements with no restrictions as to how the money is spent. Because loans must be repaid, they are often viewed by applicants as less desirable than grants. However, with the reduction of federal funds available for grants and the increasing level of competition for such funds, loans are often the only form of assistance available. Direct Loans : lending of federal funds for a specific period of time, with a reasonable expectation of repayment; may or may not require the payment of interest. Guaranteed/Insured Loans : programs in which the federal government makes an arrangement to indemnify a lender against part or all of any defaults by those responsible for repayment of loans. Some federal programs provide financial assistance to assure reimbursement for losses sustained under specified conditions. Coverage may be provided directly by the federal government or through private carriers and may or may not require the payment of premiums. The federal government has programs both for the sale, exchange, or donation of property and for temporary use or loan of goods and property. Sale, Exchange, or Donation of Property and Goods : programs that provide for the sale, exchange, or donation of federal real property, personal property, commodities, and other goods including land, buildings, equipment, food, and drugs. Use of Property, Facilities, and Equipment : programs that provide for the loan of, use of, or access to federal facilities or property wherein the federally owned facilities or property do not remain in the possession of the recipient of the assistance. The federal government offers a variety of programs to assist communities and citizens. Provision of Specialized Services : programs that provide federal personnel to directly perform certain tasks for the benefit of communities or individuals. Advisory Services and Counseling : programs that provide federal specialists to consult, advise, or counsel communities or individuals, to include conferences, workshops, or personal contacts. Dissemination of Technical Information : programs that provide for the publication and distribution of information or data of a specialized technical nature frequently through clearinghouses or libraries. Training : programs that provide instructional activities conducted directly by a federal agency for individuals not employed by the federal government. Investigation of Complaints : federal administrative agency activities that are initiated in response to requests, either formal or informal, to examine or investigate claims of violations of federal statutes, policy, or procedure. Federal Employment : programs that reflect the government-wide responsibilities of the Office of Personnel Management in the recruitment and hiring of federal civilian agency personnel. Official descriptions of more than 2,200 federal assistance programs (including grants, loans, and other financial and nonfinancial assistance) can be found on beta.SAM.gov. The website, produced by the General Services Administration (GSA), is currently in beta, and it houses federal assistance listings previously found on the now-retired Catalog of Federal Domestic Assistance (CFDA). Each federal assistance program has a corresponding CFDA program number; these CFDA numbers are still used as numerical program identifiers. Programs are searchable at the "Assistance Listings" domain at beta.SAM.gov; descriptions are updated by departments and agencies, and they cover authorizing legislation, objectives, and eligibility and compliance requirements. The site will eventually be renamed SAM.gov. About 1,800 assistance programs are classified as grants. Assistance listing descriptions include the following: federal agency administering a program legislation authorizing the program objectives and goals of program types of financial or nonfinancial assistance provided uses and restrictions eligibility requirements application and award process criteria for selecting proposals amount of obligations for some past and current fiscal years range and average of financial assistance regulations, guidelines, and literature relevant to a program information contacts and headquarters, regional, and local offices related programs examples of funded projects formula and matching requirements, where applicable requirements for post-assistance reports Updated information on federal programs also appears in the daily Federal Register , http://www.gpo.gov/fdsys/browse/collection.action?collectionCode=FR . Federal departments and agencies may also provide information and guidelines for specific programs on their websites. These websites may also provide a list of grantees from the previous fiscal year and indicate the amount of money still available for the coming year. Congressional staff may suggest that constituents seeking federal funding search beta.SAM.gov themselves by keyword, beneficiary, and other options for identifying appropriate program information. Some congressional offices may forward to constituents a preliminary beta.SAM.gov search of potential federal funding. Descriptions of programs identified will have to be carefully analyzed by grant seekers themselves to see whether they may be appropriate. Early in the process, the grant seeker should contact the department or agency indicated in the beta.SAM.gov program description(s) for latest information on funding availability, program requirements, and deadlines. Often a referral to a local or state office will be given. Many may be project or formula (block) grants to states that in turn accept grants applications and determine award recipients. More than 80% of federal grant funding is allocated to states to administer, or directly to local governments, and funding opportunities may be posted at the state level. However, for competitive project grants, as part of the federal government's e-grants initiative, federal departments and agencies are required to post grants opportunities notices on websites, such as Grants.gov at http://www.grants.gov and FedConnect at https://www.fedconnect.net . These websites post federal funding notices, give guidelines and registration information, and provide a uniform application procedure. Except for familiarizing themselves with information provided on the Grants.gov site, and sometimes posting Grants.gov funding notices on Member websites if they wish, congressional staff generally need not search this website for funding opportunities for constituents. CRS grants websites and reports include Grants.gov, which is free to the public, as a key source for grant seekers themselves to access and search. Registration by the grant seeker who will be making the application is required at Grants.gov and FedConnect. Before applying, grant seekers must also obtain a Data Universal Number System (DUNS) number and register with the System for Awards Management (SAM). Grants.gov includes inst ructions and links at http://www.grants.gov/web/grants/applicants/organization-registration/step-1-obtain-duns-number.html and http://www.grants.gov/web/grants/applicants/organization-registration/step-2-register-with-sam.html . For grant seekers who have identified appropriate federal funding programs (through beta.SAM.gov or department and agency websites), Grants.gov enables them to search for current funding opportunity notices (including by CFDA program number); sign up for email notification of future grant opportunities; download grants application packages and instructions or go to another website to apply; submit applications electronically through a uniform process for all federal grant-making agencies; and track the progress of their applications using unique IDs and passwords. Many federal agencies have a number of offices: a central office in Washington, DC; a series of regional and state offices; and, in some cases, local or area offices. Each assistance listing at beta.SAM.gov includes information contacts, either providing the name, address, and telephone number of the main program officer, or referring applicants to the regional, state, or local office of the agency. Congressional offices can channel their requests for program funding information and get help identifying appropriate grants officers through federal department and agency congressional liaison offices (see CRS Report 98-446, Congressional Liaison Offices of Selected Federal Agencies , by [author name scrubbed], for emails and phone numbers). Establishing a good relationship with program grants officers is usually beneficial—they are normally well informed and willing to share information with congressional grants and projects staff. The liaison office may also be willing to brief congressional staff so that they may become more familiar with the way the agency is organized and where responsibilities are assigned, as well as with published materials that may be available on various programs. State and district grants and projects staff usually work closely with federal agency representatives in their areas, with their state Members of Congress, with state and local elected officials, and with state councils of government. Many federal programs are administered directly by state agencies or other entities within the state, and many states have programs funded out of their own appropriations that supplement or complement federal programs. Local councils of government, where they exist, have access to federal funds for providing technical assistance, guidance, and counseling in the grants process. Constituents are, as a rule, best served by being put in touch with program officers closest to them as early as possible. Some congressional grants and projects staff report that a congressional office that encourages cooperation among local organizations, foundations, units of government, and councils of government can serve as a catalyst for applicants by improving communications, which may in turn enhance the chances for proposal approval. When congressional staff take the time to express appreciation for assistance provided by federal personnel, foundation officials, and others involved in the grants process, they may possibly improve their chances for future assistance. Many federal grants such as formula and block grants are awarded directly to state governments, which then set priorities and allocate funds within that state. To help constituents, congressional grants staff need to identify their State Administering Agencies (SAAs), the state counterpart offices accepting grants applications and disbursing federal formula and other grants. For more information on how a state intends to distribute formula grant funds, grant seekers need to contact the state administering agency. Many federal department and agency websites provide state contacts. Often the site will have an interactive U.S. map where grant seekers can click on their state and obtain program and funding contact information. State government agencies provide coordination of local efforts to obtain federal funds through grant programs that are already allocated to the state; and state government agencies are familiar with federal program requirements, can assist with proposals, and can provide other guidance. In fact, many federal grant programs require that an applicant complete a pre-application screening at the state level before submitting requests. Federal congressional liaison offices can help congressional staff identify SAAs for their programs, see CRS Congressional Liaison Offices of Selected Federal Agencies at http://www.crs.gov/resources/LiaisonOffices . Many states require federal grants applicant to submit a copy of their application for state government-level review and comment, and have designated a "Single Point of Contact" under Executive Order 12372, listed by Office of Management and Budget (OMB) at https://obamawhitehouse.archives.gov/omb/grants_spoc . The state offices listed here coordinate government (both federal and state) grants development and may provide guidance to grant seekers. Other state government agency websites may be identified at the federal government site USA.gov, State Government, https://www.usa.gov/states-and-territories . Many federal department and agency websites include SAAs and often the site will have an interactive U.S. map. Grant seekers can click on their state and obtain program and state contact information. A selection of some executive department websites includes the following: Agriculture Rural Development State Contacts http://www.rd.usda.gov/contact-us/state-offices National Endowment for the Arts (NEA) Partners https://www.arts.gov/partners/state-regional Commerce Offices and Services https://www.commerce.gov/locations#2/40.5/-13.0 Education (ED) State Contacts http://www2.ed.gov/about/contacts/state/index.html Environmental Protection Agency (EPA) Grant Regional Office https://www.epa.gov/grants/regional-grants-information Federal Emergency Management Agency (FEMA) State Offices and Agencies https://www.fema.gov/emergency-management-agencies Health and Human Services (HHS), Social Services Block Grants State Officials & Program Contacts https://www.acf.hhs.gov/programs/ocs/resource/ssbg-state-officials-program-contacts Homeland Security (DHS) State Homeland Security Contacts https://www.dhs.gov/state-homeland-security-and-emergency-services Housing and Urban Development (HUD) State/Local Offices http://portal.hud.gov/hudportal/HUD?src=/program_offices/field_policy_mgt/localoffices National Endowment for the Humanities (NEH) State Councils http://www.neh.gov/about/state-humanities-councils Office of Justice Programs (OJP) State Administering Agencies http://ojp.gov/saa/ Labor (DOL) Education and Training Administration, State and Local Contacts https://www.doleta.gov/regions/ Small Business Administration https://www.sba.gov/tools/local-assistance/districtoffices Transportation, Federal Transit Administration (FTA) Regional Offices http://www.fta.dot.gov/12926.html Veterans Affairs State/Territory Offices http://www.va.gov/statedva.htm With reductions in federal programs, congressional grants specialists may suggest other funding possibilities to their constituents as alternatives or supplements to federal grants. Private foundation funding can also be used for federal grants that have matching requirements. Small local projects should begin their search for help at the community level from local businesses or institutions. Support may be available in the form of cash contributions or in-kind contributions of property, buildings, equipment, or professional expertise. Evidence of such community-based support may strengthen a federal grant proposal. Grant making foundations are established for the express purpose of providing funds for projects in their areas of interest, and all must comply with specific Internal Revenue Service regulations to maintain their tax-exempt status. Every year, each is required to give away money equal to at least 5% of the market value of its assets, and each must make its tax records public. Although there are all kinds of foundation and corporate grants available, competition for these funds is great, and, just as is the case in searching for federal support, grant seekers enhance their chances for success by doing preliminary research to find grant makers whose priorities and goals match their own. By searching foundation websites, grant seekers can find guidelines, copies of annual reports, and tax returns to learn whether their proposals match a foundation's areas of interest and geographic guidelines; whether the proposal is within its budgetary constraints; and whether it normally funds the type of project being considered. There are many different kinds of foundations, with widely varying resources and purposes. Some are national in scope; others are set up purely for the purpose of local giving. Some are endowed by an individual or family to provide funds for specific social, educational, or religious purposes; others are company-sponsored; still others are publicly supported community foundations. Grant seekers might begin by identifying state or local foundations. These may have a greater interest in local projects than larger foundations mainly concerned with programs of national significance. Direct corporate giving should also be explored: many corporations support local projects in areas where they have their headquarters or plants, or sponsor projects which somehow enhance their corporate image. Because of this variety, different strategies may be needed for dealing with different foundations. A few foundations publicize their funding policies, and even initiate projects, but generally they do not. Usually, the grant seeker must take the first step and approach the foundation about his or her proposal. Although it is hard to generalize about foundations, they tend to be more flexible than federal funding agencies and to have fewer bureaucratic requirements. Many foundations see their purpose as providing short-term, startup funding for demonstration projects. Frequently, such foundations are the best source to turn to for funding emergency situations or small, high-risk, innovative programs. In some cases, foundation officials will work closely with inexperienced grant seekers to help them develop realistic proposals. The Foundation Center serves as a clearinghouse of information on private philanthropic giving and is a good starting point for identifying likely funding sources. The center's office in Washington, DC, can advise staff on other sources of private funding. The Foundation Center can be contacted via phone at [phone number scrubbed]. The center's website, http://www.foundationcenter.org , includes extensive information about private funders; posts requests for proposals (RFPs) for funding opportunities from foundations in all subject fields; offers web and in-person training, many of them free, including a "Proposal Writing Short Course"; and produces a number of directories and guides to private and corporate funding sources, in print, CD-ROM, web, and other electronic formats. The Foundation Center also posts IRS Form 990 for nonprofit organizations at http://foundationcenter.org/findfunders/990finder/ . In addition to its major reference collections in New York, Washington, DC, Cleveland, and San Francisco, the Foundation Center maintains a national network of cooperating library collections in each state, with print and electronic resources available free to the public. Addresses of these library collections are provided on the Foundation Center website at http://foundationcenter.org/fin . At these libraries, grant seekers may search the Foundation Directory Online by field of interest, by foundation location, and other categories to produce lists of likely funding sources for projects. For congressional staff, the Library of Congress maintains a subscription to the Foundation Directory Online . Other websites that provide free listings of foundations include the Council on Foundations web page, Community Foundation Locator by state, at http://www.cof.org/community-foundation-locator ; and the Grantsmanship Center's Funding Sources, which for each state lists "top," corporate, and community foundations, at http://tgci.com/funding-sources . Congressional offices may send constituents state listings from these websites. Grants and Federal Assistance web page, by [author name scrubbed] and [author name scrubbed] http://www.crs.gov/resources/GRANTS Focuses on CRS grants web products and publications. CRS reports provide guidance to congressional staff on federal programs and funding, and may be forwarded to constituents in response to grants requests. Grants and Federal Domestic Assistance web page, by [author name scrubbed] http://www.crs.gov/resources/MEMBER-GRANTS-PAGE Provides Internet links to free key federal and private grants and funding information, including beta.SAM.gov, Grants.gov, and other federal websites; and the Foundation Center, and other private funding resources. Members may add this CRS web page to their home page so grant seekers in districts and states can access web information directly using the Member's home page as portal to key grants sources. For beta.SAM.gov and Grants.gov, see sections of this report and the CRS websites described above. A-Z Index of U.S. Government Departments and Agencies (General Services Administration) https://www.usa.gov/federal-agencies/a To better develop a grant proposal, search a department or agency's home page to learn more about its programs and objectives. The site also includes the following: Government Benefits, Grants and Loans https://www.usa.gov/benefits-grants-loans Starting a Nonprofit Organization https://www.usa.gov/start-nonprofit Links to federal department and agency information on several types of nonprofit organizations and outlines the process of incorporating and applying for tax-exempt status. Grants Management Circulars (Office of Management and Budget) https://obamawhitehouse.archives.gov/omb/circulars_default/ OMB establishes government-wide grants management policies and guidelines through circulars and common rules. OMB Circulars are cited in beta.SAM.gov program descriptions. Circulars target grants recipients and audit requirements for educational institutions, state and local governments, and nonprofit organizations. Grants and Related Resources (Michigan State University Libraries) http://staff.lib.msu.edu/harris23/grants/index.htm The site provides government and private grants resources, primarily Internet, by subject or group categories, and is updated frequently. Subpages include the following: Funding for Business and Economic Development http://staff.lib.msu.edu/harris23/grants/2biz.htm Grants for Nonprofit s http://staff.lib.msu.edu/harris23/grants/2sgalpha.htm Grants for Individuals (primarily financial aid and scholarships) http://staff.lib.msu.edu/harris23/grants/3subject.htm | Members of Congress receive frequent requests from grant seekers needing funds for projects in districts and states. The congressional office should first determine its priorities regarding the appropriate assistance to give constituents, from providing information on grants programs to active advocacy of projects. Congressional grants staff can best help grant seekers by first themselves gaining some understanding of the grants process. Each office handles grants requests in its own way, depending upon the Member's legislative agenda and overall organization and workload. There may be a full-time grants specialist or several staff members under the supervision of a grants coordinator working solely in the area of grants and projects. In some offices, all grants requests are handled in the district or state office; in others, they are answered by the Washington, DC, staff. To assist grant seekers applying for federal funds, congressional offices can develop working relationships with grants officers in federal and state departments and agencies. Because more than 80% of federal funds go to state and local governments that, in turn, manage federal grants and sub-award to applicants in their state, congressional staff need to identify their own state administering offices. To educate constituents, a congressional office may provide selected grant seekers information on funding programs or may sometimes sponsor workshops on federal and private assistance. Because most funding resources are on the Internet, Member home pages can also link to grants sources such as Assistance Listings at beta.SAM.gov and Grants.gov so that constituents themselves can search for grants programs and funding opportunities. The Congressional Research Service (CRS) web page, Grants and Federal Domestic Assistance, by [author name scrubbed] (see sample at http://www.crs.gov/resources/MEMBER-GRANTS-PAGE), can be added to a Member's home page upon request and is updated automatically on House and Senate servers. Another CRS web page, Grants and Federal Assistance, by [author name scrubbed] and [author name scrubbed], at http://www.crs.gov/resources/GRANTS, covers key CRS products. Congressional staff can use CRS reports to learn about grants work and to provide information on government and private funding. In addition to the current report, these include CRS Report RL34012, Resources for Grantseekers, by [author name scrubbed] and [author name scrubbed] ; and CRS Report RL32159, How to Develop and Write a Grant Proposal, by [author name scrubbed] and [author name scrubbed]. CRS also offers reports on block grants and the appropriations process; federal assistance for homeland security and terrorism preparedness; and federal programs on specific subjects and for specific groups, such as state and local governments, police and fire departments, libraries and museums, nonprofit organizations, small business, and other topics. An internal grants manual outlining office policies and procedures, including perhaps templates for letters of support, might be developed to help grants staff. With reductions in federal programs, and with most government grants requiring matching funds, grants staff should also become familiar with other funding, such as private or corporate foundations, as alternatives or supplements to federal grants. This report will be updated at the beginning of each Congress and as needed. |
The federal government first relinquished its monopoly on atomic energy in 1954 by permitting the private development of nuclear power production for peaceful purposes. After an initial surge in the development of commercial nuclear power, the nuclear industry suffered a long period of dormancy due, at least in part, to political barriers, an unfavorable economic climate, prohibitive construction costs, and reactor accidents accompanied by a corresponding decline in the public's perception of nuclear energy's overall safety. However, after a 30-year lull in development following the Three Mile Island and Chernobyl accidents, the last half decade has generated what many have considered to be a "nuclear renaissance." This resurgence in enthusiasm for commercial nuclear power has been triggered by a number of factors, including a streamlined regulatory environment, the availability of economic incentives for construction and research development, and the absence of a major nuclear accident in the United States. In addition, increasing energy demand and national concerns about climate change and energy security have prompted considerable presidential and congressional support for the expansion of nuclear power, including the establishment of significant loan guarantee authority for the construction of new nuclear power plants. Moreover, as evidence of the "renaissance," license applications for more than two dozen new commercial reactors have been submitted to the Nuclear Regulatory Commission (NRC) since 2007—the first U.S. reactor applications since the 1970s. Recent events, however, have the potential to slow the current growth period. Most importantly, the earthquake and tsunami that caused significant damage to the Fukushima Dai-ichi nuclear power plant in Japan have heightened nuclear safety concerns in the United States. In addition, congressional and media focus on the federal government's failure to develop a disposal solution for the nation's growing stockpile of nuclear waste; reports of radioactive tritium leaks from nuclear reactors in various states; and a threat to a federal nuclear facility in New Mexico due to wildfires have all reinforced the health and safety concerns associated with nuclear power. Also, significant controversy has surrounded the NRC, the independent regulatory commission charged with ensuring the safety of nuclear power in the United States, relating to the Commission's role in determining whether to license the proposed Yucca Mountain nuclear waste facility. These various forces have culminated in increased concern over the safety of nuclear power generally—all during a period in which operating licenses for 18 reactors will expire by 2020 if not renewed. Given these recent events, a number of states have sought to take action to assure that power plants within their borders are operating safely. Most visibly, the State of Vermont has suggested that it will not approve the continued operation of the Vermont Yankee nuclear power plant, despite the NRC's approval of an extension to the plant's operating license. The dispute may have profound effects on establishing the scope of state control over nuclear power—including whether states have the authority to shut down a federally licensed and long-operating nuclear power plant. However, while safety concerns may prompt states to assert influence over nuclear power plants, federal law severely limits the extent to which states can regulate nuclear power. Indeed, the Supreme Court has expressly held that, while states retain authority over "questions of need, reliability, cost, and other related State concerns," federal preemption under the Atomic Energy Act (AEA) prevents states from regulating nuclear power for the purposes of radiological safety. However, the exact scope of the AEA's preemptive effects, and therefore the extent to which states can regulate nuclear facilities, has long been litigated and remains disputed. This report will look at general constitutional principles of preemption, analyze the Supreme Court's interpretation of the scope of federal preemption under the AEA, and apply established preemption principles to the Vermont Yankee licensing dispute. The legal doctrine of preemption is grounded in the established constitutional principle that federal law takes precedence over inconsistent state law. Under Article VI, cl. 2: "[t]he Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land." The Supremacy Clause, therefore, "elevates" the U.S. Constitution, federal statutes, federal regulations, and ratified treaties above the laws of the states. Thus, where a state law is in conflict with a federal law, the federal law must prevail. A state law, however, need not be utterly incompatible with federal law in order to be preempted. Where Congress has expressed an intent to displace state authority within a given subject matter by establishing exclusive federal authority, state action in the field will be deemed preempted and therefore invalid. Often, the mere decision by Congress to legislate (or by an agency to regulate) comprehensively in an area is enough to supplant state authority in a particular field. Additionally, in evaluating whether a state law has been preempted by federal law, a court often seeks to prevent "conflicting regulation of conduct by various official bodies which might have some authority over the subject matter." The doctrine of preemption, therefore, serves two purposes: first, to enforce federal supremacy over state law; and second, to reduce the burden of compliance with multiple, at times inconsistent, regulatory regimes. Although there is "no one crystal clear distinctly marked formula" for determining whether a state law is preempted by federal law, the Supreme Court has established three general classes of preemption: express preemption, conflict preemption, and field preemption. In each instance, however, "the question of preemption is one of determining congressional intent." Express preemption exists where the language of a federal statute explicitly states the degree to which related state laws are superseded by the federal statute. In including such language, Congress has expressed its clear intent that the federal statute preempt state attempts to legislate on the subject matter. For example, the Employment Retirement Income Security Act of 1974 contained an unusually broad express preemption provision, stating that the act "supersede[d] any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." Congress, however, does not always articulate its view as to a statute's intended impact on state laws. Nonetheless, a court may imply preemption if there is evidence that Congress intended to supplant state authority. Even absent specific preemptive language, preemption is generally implied in two situations. First, under conflict preemption, a state law is preempted "where compliance with both federal law and state regulations is a physical impossibility ... or where state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." Thus, where one cannot simultaneously comply with both state and federal law, or where the state law directly frustrates the purpose of a federal law, the state law is preempted. Second, under field preemption, a state law is preempted where a "scheme of federal regulation is so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it...." Where Congress has established a substantial regulatory framework, any state law falling within the occupied field—even if consistent with federal law—may be preempted. Congress can sufficiently occupy the field so as to displace state law either through statute or pursuant to a delegation to an agency to regulate extensively in the field. Much of the debate surrounding federal preemption of state regulation of nuclear power has centered on field preemption. Of the various forms of preemption, field preemption can be the most difficult to apply. Although the notion that Congress has exclusively "occupied" a field may be simple in theory, identifying the boundaries of the field that has been occupied by federal law, and whether a given state statute or regulation falls into that field, can be incredibly complex in application. In considering whether Congress intended to exclusively occupy a given field, courts will typically consider additional factors, such as whether Congress is regulating in an area of traditional federal responsibility; whether Congress intended to eliminate dual federal and state regulations; whether allowing state regulation in the area would interfere with the goals of the federal regulatory scheme; and, whether the state can assert an important and traditional state interest. Prior to 1954, the federal government maintained a complete monopoly on the use, control, and ownership of nuclear technology. However, the Atomic Energy Act of 1954 (AEA) marked a clear shift away from public ownership towards the private development of nuclear energy for peaceful purposes. In effectuating this transfer, the AEA encouraged private development of nuclear power pursuant to a strict federal licensing and regulatory regime. Accordingly, while private entities were granted the authority to own, construct, and operate commercial nuclear power reactors, they would do so under the extensive supervision of the Atomic Energy Commission (AEC or Commission). With a focus on ensuring national security and maintaining the public health and safety, the AEA provided the Commission with exclusive jurisdiction over the license, transfer, delivery, receipt, acquisition, possession, and use of all nuclear materials. Although states retained their traditional and established role over the "generation, sale, or transmission of electric power," given the Commission's exclusive and comprehensive regulatory authority over nuclear materials, "no significant role was contemplated for the states." In 1959, however, Congress amended the AEA to provide the states with greater authority in regulating nuclear materials and nuclear power. The amendments, which contained three key preemption-related provisions, were passed for the express purpose of "clarify[ing] the respective responsibilities ... of the States and the [Federal Government] with respect to ... nuclear materials." First, the amendments authorized the AEC to enter into agreements with states for the "discontinuance" of AEC authority over byproduct materials, source materials, and special nuclear materials in quantities not sufficient to form a critical mass (enough material to create a nuclear chain reaction). The provision provided the states with an explicit avenue for asserting increased regulatory authority, but only in limited circumstances and only with the consent of the AEC. Second, the amendments made clear that notwithstanding the limited jurisdiction available to states through approved agreements, the AEC "shall retain authority and responsibility" over the "construction and operation" of nuclear power plants as well as the "disposal of such other byproduct, source, or special nuclear material as the Commission determines by regulation or order should, because of the hazards or potential hazards thereof, not be so disposed of without a license from the Commission." Finally, the amendments attempted to reaffirm states' traditional role in the regulation of power generation while simultaneously asserting the AEC's exclusive authority over radiological safety, providing that "nothing in this section shall be construed to affect the authority of any state or local agency to regulate activities for purposes other than protection against radiation hazards ." The legislative history suggests that the decision to invest the AEC with exclusive authority over radiological safety was "premised on [Congress's] belief that the [AEC] was more qualified [than the states] to determine what type of safety standards should be enacted in this complex area." Pursuant to the authority delegated under the AEA, the Commission—along with its successor agency the Nuclear Regulatory Commission —has promulgated detailed and comprehensive regulations with respect to the operation of nuclear facilities and the storage of nuclear waste. The intent of the 1959 amendments was to clearly delineate the roles of state and federal government in the regulation of nuclear power. However, in practice, the actual impact of the amendments was only to muddy the waters dividing state and federal authority. Although Congress had intended a clear division in regulatory authority that granted the AEC exclusive jurisdiction over safety concerns related to radiation hazards, and the states authority over other non-radiological aspects of the generation and transmission of nuclear power, the federal courts have not interpreted the preemptive effects of the statute in such a straightforward manner. Indeed, the intricacies of the ostensibly simple division of authority have challenged courts for decades. The Supreme Court first directly addressed the AEA's preemptive scope in 1983. In Pacific Gas & Electric v. State Energy Resources Conservation and Development Commission , the Court heard a challenge to a California law that prohibited the construction of any new nuclear power plant until the California Energy Commission "finds that there had been developed and that the United States through its authorized agency has approved and there exists a demonstrated technology or means for the disposal of high-level nuclear waste." The law, which remains in force, has amounted to an effective moratorium on the construction of any new nuclear power plant in the state. Importantly, California argued that the law was necessary to avoid the economic consequences of a critical nuclear waste build-up, which could result in "unpredictably high costs to contain the problem or, worse, shutdowns in reactors." The law was not, the state argued, motivated by radiological safety concerns. In upholding the California law, the Court accepted the state's economic purpose and held that the law was outside the preemptive scope of the AEA. In discussing the division of authority between federal and state government under the AEA, the Court asserted that Congress had intended for the continued "dual regulation of nuclear-powered electricity generation." Pursuant to this regime, state and federal government would exercise concurrent, yet distinct, regulatory authority over the nuclear power industry. In enacting the AEA, Congress intended "that the federal government should regulate the radiological safety aspects involved in the construction and operation of a nuclear plant, but that the states retain their traditional responsibility in the field of regulating electrical utilities for determining questions of need, reliability, cost, and other related state concerns." For example, states retain the authority to make the initial determination regarding the need for nuclear power. The Court then employed Congress's intended division of authority to determine the preemptive scope of the AEA. In doing so the Court established two instances in which state law was preempted. First, almost in passing, the Court noted that any state statute which sought to regulate the "construction and operation" of a nuclear power plant, even if enacted out of nonsafety concerns," would "directly conflict with the NRC's exclusive authority over plant construction and operation." Thus, any state law seeking to regulate the "construction or operation" of a nuclear power plant would be preempted, either as in "conflict" with federal law, or as within a field exclusively occupied by the NRC. Without elaborating, the Court concluded that the California statute did not attempt to regulate the "construction or operation" of a nuclear reactor. Second, the Court established that state regulations motivated by radiological safety concerns are broadly preempted by the AEA, as the "Federal Government has occupied the entire field of nuclear safety concerns...." Thus, under field preemption, state attempts to regulate nuclear power that are grounded in safety concerns are invalid, as Congress has delegated comprehensive authority over nuclear safety to the NRC. However, the Court determined that where a non-safety rationale can be established, the state law may be able to avoid preemption. Because the California statute was based on the potential economic consequences of a buildup of nuclear waste, rather than safety issues associated with that buildup, the law did not fall within the prohibited field. Although the petitioners pointed to other "indicia" suggesting that the California legislature was actually motivated by safety concerns rather than the proffered economic concerns, the Court rejected any further investigation into the state's intent and accepted California's "avowed economic purpose as the rationale for enacting" the restrictive provision. The Court refused to "become embroiled in attempting to ascertain California's true motive," as any "inquiry into legislative motive is often an unsatisfactory venture." Third, the Court held that the California statute was not in conflict with NRC's regulation of nuclear waste disposal. Although the NRC had concluded that "progress toward the development of disposal facilities" was sufficient to allow for the continued licensing of nuclear reactors, the Court made clear that the NRC's determination "indicates only that it is safe to proceed with such plants, not that it is economically wise to do so." Accordingly, a state is free to prevent the construction of new nuclear power plants until the state is satisfied that the ultimate disposal of nuclear waste does not pose an economic obstacle to the reactor's ability to provide power to the state. Importantly, the California law also did not "impose its own standards on nuclear waste disposal," as the regulation of nuclear waste disposal was a field "occupied by the federal government." Rather, the Court interpreted the statute as acknowledging exclusive federal responsibility in regulating how nuclear waste is stored. Finally, the Court rejected the petitioners' argument that the California statute should be preempted as "an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." Although the Court determined that the "primary purpose" of the AEA was to promote the development of nuclear power for peaceful purposes, that goal was not to be accomplished "at all costs." While the California law may have undercut the continued development of nuclear power, the Court noted that "the legal reality remains that Congress has left sufficient authority in the States to allow the development of nuclear power to be slowed or even stopped for economic reasons." Significantly, the Court determined that the objective of the AEA was to encourage, but not mandate, the development of nuclear power. Pacific Gas remains the authoritative case in assessing the preemptive scope of the AEA. The legacy of the case can be reduced to a number of key principles. First, the AEA established a division of authority between federal and state government such that states retain substantial authority over the threshold decision of the need for nuclear power. Second, the AEA's goal of encouraging the development of nuclear power does not supersede a state's economic decision to restrict that development. Finally, and perhaps most importantly, a state or local statute or regulation that either seeks to regulate the processes for the construction and operation of a nuclear power plant, or that is otherwise motivated by radiological safety concerns, falls within the preempted field exclusively occupied by the NRC. In its next term, the Supreme Court subsequently narrowed the field, albeit in a limited way, occupied by the federal government under the AEA. In Silkwood v. Kerr-McGee , the Court held that a state's award of punitive damages as a consequence of a radiological leak from a nuclear facility was not preempted by the AEA. The Court determined that Congress, in enacting both the AEA and the Price-Anderson Act—a statute which provided a scheme for liability in the case of a nuclear disaster—did not intend to prohibit the states from awarding otherwise available remedies to individuals injured by radiological elements. The Court, therefore, concluded that state-awarded damages for radiation injuries do not fall within the radiological safety field occupied by the federal government as defined in Pacific Gas . Nor did the Court find that a state award for damages for radiation injuries created an "irreconcilable conflict between the federal and state standards" or frustrated the "objectives" of federal law. In its most recent consideration of the scope of preemption under the AEA, the Supreme Court held that a state claim by an employee of a nuclear power plant for intentional infliction of emotional distress also did not lie within the preempted field of the AEA. In English v. General Electric Co. , the employee had claimed that the defendant nuclear power company had engaged in "extreme and outrageous conduct" after she had made repeated nuclear safety complaints. The actual holding in English was predictable given its similarity to Silkwood , as it "would be odd, if not irrational, to conclude" that Congress intended to preempt "tort actions stemming from retaliation against whistleblowers, but not tort actions arising from radiation damage." However, the Court's interpretation of the then seven-year-old decision in Pacific Gas was significant. English can most reasonably be characterized as an expansion of the Court's existing field preemption standards. The Court held that although Pacific Gas had determined that a state law "grounded in safety concerns" was sufficient to trigger field preemption, the opinion "[D]id not suggest that a finding of safety motivation was necessary to place a state law within the preempted field.... Thus, even as the Court suggested that part of the pre-empted field is defined by reference to the purpose of the state law in question, it made clear that another part of the field is defined by the state law's actual effect on nuclear safety." English, therefore, established that an analysis of whether a state law was preempted under the AEA required a consideration of both the purpose and effect of the state law in question. Thus, any state law motivated by radiological safety concerns or that has a "direct and substantial" effect on the safety of nuclear plant "construction and operation" falls within the field exclusively occupied by the NRC and is preempted. The Court determined that the tort law in question was neither motivated by safety concerns, nor was the effect of the law on radiological safety concerns "direct nor substantial enough to place petitioner's claim in the preempted field." The Supreme Court has not addressed preemption under the AEA since its 1990 decision in English . Two more recent U.S. courts of appeals opinions also warrant discussion, and may assist in clarifying the federal courts' current view of preemption under the AEA. In Skull Valley Band of Goshute Indians v. Nielson , the United States Court of Appeals for the Tenth Circuit (Tenth Circuit) held that a series of Utah statutes regulating the storage and transportation of spent nuclear fuel were preempted by the AEA. Principally, the Utah statutes established state licensing requirements for the storage of nuclear waste and required counties to address nuclear waste storage and transportation concerns in their land use planning provisions. The Tenth Circuit struck down the statutes as "grounded in safety concerns" and therefore preempted under Pacific Gas. The court looked to the language included within the statute that expressed the state's concerns over the "effects of nuclear waste on the health and welfare of Utah citizens." Additionally, the court noted that "unlike the state officials in Pacific Gas , the Utah officials here have failed to offer evidence" that the statutes were "supported by a non-safety rationale." Thus, under Tenth Circuit case law, the burden is on the state to present evidence of its non-safety rationale, rather than on the opposing party to prove that the statute was motivated by safety concerns. Finally, in the 2008 decision of U.S. v. Manning , the U.S. Court of Appeals for the Ninth Circuit (Ninth Circuit) struck down the Washington State Cleanup Priority Act (CPA) that required the mitigation of "mixed waste" contamination before additional waste could be stored within the state. The State of Washington is home to the Department of Energy's Hanford Nuclear Reservation, which houses over 53 million gallons of mixed radioactive and nonradioactive waste—at least one million gallons of which has leaked into the surrounding groundwater. In considering the state law, the Ninth Circuit directed that field preemption under the AEA is triggered where "(1) the purpose of the CPA is to regulate against radiation hazards, or (2) if the CPA directly affects decisions concerning radiological safety." The court determined that the CPA was preempted on both grounds, as the purpose of the law was to "regulate the treatment, storage, and disposal of radioactive materials, among other materials, in order to protect the health and safety of Washington residents and the environment." In reaching that determination, the court gave great weight to language of the CPA—including the general "policy" section of the statute and the structure of the law—which included state permit conditions on the disposal of nuclear waste. The court also found that the CPA would "directly and substantially impact[] the DOE's decisions on the nationwide management of nuclear waste." Although the Supreme Court has restricted a state's ability to regulate nuclear reactors within its borders for the purposes of safety, the preemptive scope of the AEA has not entirely closed off state regulation of nuclear power. States retain authority in traditional areas of state control, such as "the need for additional generating capacity, the type of generating facilities to be licensed, land use, rate making, and the like." Additionally, it is clear that states retain longstanding authority over the sale and transmission of electric power generated by nuclear power plants. Accordingly, states that have sought to assert authority over nuclear power production have done so by avoiding laws related to radiological safety and laws regulating how nuclear plants are operated and constructed—focusing instead on the initial determination of whether a need for nuclear power exists, and whether nuclear power is economically feasible. These longstanding state statutes are wide ranging. For example, Minnesota has enacted an outright prohibition on new nuclear power plants. Many states, like California, have enacted laws that condition the construction of new nuclear power plants upon certain findings of a state regulatory body. The required finding is often associated with the existence of a viable means for the disposal of nuclear waste. Other states require that the construction of a new plant be economical. Still others require ratification—either by the state legislature or through statewide referendum—before establishing a new nuclear power plant. These types of state laws, however, act to prevent the establishment of new nuclear power plants. They do not attempt to assert ultimate control over existing plants. Significant controversy has surrounded Vermont's attempt to prevent the continued operation of the state's only nuclear power plant—Vermont Yankee, located in Vernon. Under Vermont law, a power generator must obtain a certificate of public good (CPG) from the state Public Service Board (PSB) before constructing any new power plant. As to nuclear power plants specifically, before a CPG for new construction may be granted, the PSB must first obtain the approval of the Vermont General Assembly. Recently, however, Vermont has enacted a series of statutes that provide the General Assembly with the authority to decide whether Vermont Yankee, which has been operating for almost 40 years, operates beyond March 21, 2012. Vermont has suggested that it may attempt to stop the operation of Vermont Yankee nuclear power plant by preventing the PSB from providing the power plant with the necessary CPG to both operate and to store new nuclear waste. The factual background to the licensing of the Vermont Yankee plant is long and complicated. Entergy Nuclear purchased the plant in 2002. At the time, the plant was authorized by the NRC to operate until March 21, 2012. The purchase, however, had to be approved by the Vermont Public Service Board before it could be finalized. In support of gaining this approval, Entergy entered into a Memorandum of Understanding with the Vermont Department of Public Service. In exchange for the Department's support of the sale, Entergy agreed to acknowledge the PSB's authority to determine whether the plant would be allowed to operate beyond March 21, 2012, and also agreed not to challenge the PSB's authority to make that operation decision on the grounds that it is preempted under the AEA. At the time, Vermont law prohibited the construction of any facility for the storage of nuclear waste without first obtaining the approval of the Vermont General Assembly. Aware that the plant would exceed its existing storage capacity by 2008, Entergy sought permission from the General Assembly to construct additional waste storage, which authorized the Public Service Board to approve additional storage through the passage of Act 74 in 2005, but only up to March 21, 2012. Act 74 expressly stated that the "storage of spent fuel derived from the operation of Vermont Yankee after March 21, 2012 shall require the approval of the general assembly." Thus, the act required that Entergy return to the General Assembly for approval to store waste created after the March 21, 2012, deadline. In 2006, the General Assembly passed Act 160 which prohibited the PSB from issuing a CPG for the continued operation of the Vermont Yankee plant beyond March 21, 2012, without the approval of the General Assembly. The statute provided that the General Assembly "shall consider concurrently the issue of storage of spent nuclear fuel derived ... after March 21, 2012 ... and the operation of Vermont Yankee after March 21, 2012...." Accordingly, Entergy would be required to obtain legislative approval to both operate beyond 2012 and to store nuclear waste created after 2012. In a third statute passed in 2008, Act 189 called for a "comprehensive vertical audit and reliability assessment" of the Vermont Yankee plant "in order to determine if it should be authorized to operate in this state beyond the expiration of its current operating license on March 21, 2012." On March 21, 2011, after an extensive environmental and safety review, the NRC renewed the Vermont Yankee operating license, authorizing plant operation through March 21, 2032. The Governor of Vermont, however, has suggested that the state will not grant the approval for the plant's continued operation beyond 2012, and the Vermont Senate has rejected legislative proposals that would authorize the PSB to provide Entergy with the CPG necessary for continued operation. Entergy has challenged the state's authority to prevent the Vermont Yankee plant from operating—arguing that Acts 74, 160, and 189 are preempted by the AEA. In filing its claims before the U.S. District Court for the District of Vermont, Entergy also asked the court to grant a preliminary injunction that would immediately, but temporarily, prohibit Vermont from forcing Entergy to cease operations. Entergy asserted that it needed confirmation of whether the state could shut down the plant's operation before Entergy purchased $60 million in nuclear fuel needed for the continued operation of the plant. The district court recently denied the request for an injunction, holding that Entergy had failed to show that the company would suffer "irreparable harm" between now and the merits trial, currently scheduled for September 12, 2011. Whether Vermont, or any other state, may act to prevent a nuclear power plant from operating, despite the fact that the plant has been authorized by the NRC, will depend principally on whether the state law or regulation in question is preempted by the AEA. Although federal courts have previously considered state laws that have the effect of preventing new nuclear power plants from being constructed, until now, a federal court has not considered an attempt by a state to shut down a currently licensed and operating nuclear power plant. Thus, the Vermont controversy raises a novel legal issue which could have a substantial impact on states' abilities to determine the fate of existing nuclear plants within their borders. Although predicting the outcome of the Vermont Yankee case at such an early stage is difficult, it is important to understand the legal analysis the district court, and other courts facing challenges to state attempts to regulate nuclear power, will likely apply. In asserting that Vermont has intruded on the NRC's exclusive authority under the AEA, Entergy has focused on two principal arguments: that the Vermont statutes are inappropriately grounded in radiological safety concerns; and that Vermont is preempted from shutting down a federally licensed and currently operating nuclear power plant. The court's primary determination will be whether the Vermont statutes, which provide the General Assembly with the authority to prevent Vermont Yankee from operating, "address matters of radiological safety." Pursuant to Pacific Gas , "a state moratorium grounded in safety concerns ..., a state judgment that nuclear power is not safe enough to be further developed ... [or] a state prohibition on nuclear construction for safety reasons" all fall within the field occupied by the federal government. Accordingly, if the court determines that safety was indeed the purpose behind the statutes, then the law in question will be deemed preempted. In determining the purpose of the laws, the court will likely consider the statutory language included within the "findings" or "legislative purpose" sections, as well as the substantive provisions of the enacted statutes. Additionally, the court may look to the legislative history to determine legislative intent, although the Supreme Court has warned that courts "should not become embroiled in attempting to ascertain [a state's] true motive." The district court's determination of whether the Vermont statutes are grounded in safety concerns may raise three key questions. First, to what extent does the language and purpose of Act 189 taint the language and purpose of Acts 75 and 160? Courts have repeatedly struck down state laws relating to the operation of nuclear power plants or the storage of nuclear waste where there is evidence that the law was motivated by safety concerns. However, very little in the text of either Act 74 or 160 explicitly suggests that the statutes were passed for the purpose of radiological safety. The findings section of Act 74 suggests that the General Assembly's purpose was a desire to ensure that the state's future power supply is "diverse, reliable, economically sound, and environmentally sustainable," and the state's need to invest in "clean energy resources in order to permit adequate power supply diversity." Additionally, prior to granting a CPG for nuclear waste storage, Act 74 mandated that the Public Service Board determine that "adequate financial assurance exists for the management of spent fuel at Vermont Yankee for a time period reasonably expected to be necessary...." The state was also concerned with the eventual removal of the stored waste "consistent with applicable federal standards." Likewise, the "legislative policy and purpose" section of Act 160 specifically states that the General Assembly should consider "the state's need for power, the economics and environmental impacts of long-term storage of nuclear waste, and choice of power sources among various alternatives," as well as assess "the potential need for the operation of the facility and its economic benefits, risks, and costs," and "alternatives that may be more cost-effective or that otherwise may better promote the general welfare." However, Act 160 does direct that the Department of Public Service arrange for studies that "in general, shall…identify, collect information on, and provide analysis of long-term environmental, economic, and public health issues…." In acting on a petition for the continued operation of a nuclear power plant, the PSB "shall consider…the general and specific issues that the studies are required to address." Thus, long-term public health, which may or may not implicate radiological safety, was a factor to be considered by the PSB in determining whether Vermont Yankee may continue to operate. Nevertheless, both Act 74 and 160, on their face, seem to be primarily grounded in permissible state concerns such as ensuring diverse power generation, financial costs associated with waste storage, the need for additional power, and general economic concerns. Vermont's most recently enacted statute, however, could be interpreted as suggesting that the General Assembly may base its ultimate decision on whether to approve the continued operation of Vermont Yankee on safety concerns. Act 189 called for an "independent comprehensive reliability assessment" of the Vermont Yankee power plant. The assessment, which has been completed, included various investigations, many of which touch on the reliability of radiological safety systems. For example, the audit was to include an assessment of the plant's core cooling system, primary containment system, heat removal system, and the "separation of safety systems." Act 189 also called for a "physical examination" of the entire plant—an action the U.S. Court of Appeals for the Second Circuit has previously said "obviously invade[s] the NRC's exclusive regulatory province ... whether it be for safety or non-safety purposes." A "public oversight panel" was also created and given access to "records and documents consulted and generated in developing and conducting the comprehensive reliability assessment." Importantly, the panel was directed to report its findings, which presumably are based on the "comprehensive reliability assessment" to the General Assembly "for the purpose of informing the legislature in making its determination whether Entergy Nuclear Vermont Yankee plant should be authorized to operate in the state beyond the expiration of its current license...." Thus, Act 189 could be interpreted as principally concerned with the continued operational safety of Vermont Yankee. If the general assembly exercises its authority to prohibit the continued operation of Vermont Yankee based on a "reliability assessment" that includes a judgment of the adequacy of the plant's safety systems, such an action would likely be preempted under the AEA. Vermont, however, could argue that any decision to prohibit the continued operation of Vermont Yankee would be based on the reliability of the plant rather than the safety of the plant. Pacific Gas expressly held that states "retain their traditional responsibility in the field of regulating electrical utilities for determining questions of ... reliability...." California, for instance, was concerned about the reliability of nuclear power as an energy source in the sense that a nuclear waste buildup could lead to "shutdowns in reactors" with significant economic consequences once a plant's storage capacity was reached. California's primary concern was not that reactors would shut down because the buildup of waste was unsafe, but rather that the buildup would have significant economic consequences. Vermont's reliability concerns, however, seem to be focused on safety-related shutdowns and the adequacy of certain safety-related equipment. This type of reliability concern rooted in safety flaws could still be interpreted as falling within the preemptive field established in Pacific Gas . Thus, in determining whether a safety purpose exists, the district court will likely consider how the three statutes interrelate, the role of the "reliability assessment," and whether Vermont's reliability concerns can be distinguished from safety concerns. The second key question the court may look at in determining whether the Vermont statutes are grounded in safety concerns is to what degree the court will entertain evidence of legislative intent arising from sources outside the text of the enacted statutes. While there is limited evidence in the plain text of the Vermont statutes of safety concerns, Entergy has asserted that the legislative history behind the statutes and public comments associated with the laws suggest otherwise. Indeed, in denying Entergy's motion for a preliminary injunction, the district court noted that "the legislative history of the challenged enactments contains numerous references to 'safety'...." However, given the Supreme Court's warning in Pacific Gas to "not become embroiled in attempting to ascertain [a state's] true motive," it is unclear whether the district court will be swayed by, or even consider, non-textual sources of legislative intent. Lower courts have, however, been willing to engage in a deeper investigation of legislative intent. A third key question the court may look at in deciding whether the Vermont statutes are grounded in radiological safety concerns is which party has the burden of proving legislative intent. Is the burden on the state to prove the existence of a non-safety rationale, or is the burden on Entergy to prove that the state purpose in enacting the statutes was to regulate radiological safety? The Tenth Circuit, for instance, has suggested that the burden is on the state to prove its non-safety rationale. However, Pacific Gas seems to suggest that the state need only "avow" a non-safety purpose. If the burden is on Vermont to prove the basis of their non-safety rationale, then the state will likely have to combat the distinct differences between the state regulated market that existed in California during Pacific Gas , and the deregulated "merchant" or "wholesale" status of Vermont Yankee. Under the California regulatory regime, a new nuclear power plant would have been owned by a state regulated utility—with the economic consequences of a reactor shutdown being directly felt by the state or statewide customers in the form of rate increases. As a "merchant" generator selling electricity into the interstate market, Vermont and Vermont customers are not liable for the economic failures or increased costs of Vermont Yankee's operation. However, the spectrum of "economic consequences" that may justify a state's decision to shut down an operating reactor goes beyond rule increases. Thus, a state like Vermont may still be able to cite alternative economic concerns sufficient to warrant a shutdown even absent a direct regulatory interest. If the court finds that any of the Vermont statutes are grounded in radiological safety concerns, then those statutes fall into the field exclusively occupied by the NRC and are therefore preempted. Given that the different statutes may have different purposes, it is entirely possible that the court will find that the state assertion of authority over the operation of Vermont Yankee was grounded in economic interests, while the state assertion of authority over nuclear waste disposal was grounded in safety concerns. Nonetheless, in discerning the purpose behind these statutes, the court will undoubtedly look first to the text of the Vermont statutes. If further investigation into legislative intent is required, the court may have to consider questions of how the statutes interrelate, the applicability of legislative history, and where to place the burden of proving the General Assembly's legislative intent. A finding that the Vermont laws were not grounded in safety concerns does not, however, mean that the laws definitively avoid the field exclusively occupied by the NRC and preempted under the AEA. A finding that a state law is grounded in nuclear safety concerns is not "necessary to place the state law within the pre-empted field." As the Supreme Court determined in Pacific Gas, state attempts "to regulate the construction or operation of a nuclear power plant ... even if enacted out of non-safety concerns, would nevertheless directly conflict with the NRC's exclusive authority over plant construction and operation." The Court later clarified this standard in English —determining that state laws grounded in a permissible non-safety rationale would still fall into the AEA's preempted field only if the law were found to have "direct and substantial" effect on the safety of nuclear plant construction and operation. In Pacific Gas , however, the Court clearly held that the complete California moratorium on the construction of new nuclear power plants did "not seek to regulate the construction or operation of a nuclear power plant." Pursuant to the division of authority established under the AEA, states retain the authority to make the threshold determination, based on reasons unrelated to radiological safety, of whether there exists a need for a new plant. As suggested in Justice Blackmun's concurring opinion, the AEA does not preempt state laws that regulate whether a plant is constructed, but only those that regulate how a plant is constructed. However, the moratorium at issue in Pacific Gas pertained only to the construction of new plants; therefore, the Court did not consider the effect of a prohibition on the operation of an existing plant. Like the California law at issue in Pacific Gas , the Vermont statutes do not seem to regulate how Vermont Yankee is to operate, but rather whether the plant operates at all. Entergy, however, asserts that the Vermont laws may be distinguished from the California law in that the Vermont General Assembly claims the authority to prohibit the operation of an existing, federally licensed power plant, as opposed to the California law, which simply prohibited the construction of new plants. Entergy asserts that the courts have maintained a distinction between new and existing nuclear power plants—limiting the states' authority to only the threshold decision of whether a plant shall be built, not whether an existing plant may continue to operate. Vermont, on the other hand, contends that the NRC has recognized that the states retain the final authority on whether a plant may operate. Under the Court's existing jurisprudence, it is clear that a state may, based on a non-safety rationale, prohibit the construction of a new nuclear power plant pursuant to an "initial decision regarding the need for power." Indeed, the Court has made clear that "Congress has left sufficient authority in the States to allow the development of nuclear power to be slowed or even stopped for economic reasons." Additionally, the Court has cited a NRC Atomic Safety and Licensing Board holding that "even in the face of the issuance of a NRC construction permit" states "retain the right" to preclude construction. Thus, it seems likely that a decision by the NRC to approve the construction of a specific plant does not necessarily mean that the plant will be built if the state determines that it is not economically prudent to do so. It is an open question as to whether these established principles also apply in the "operation" context, in addition to the "construction" context. However, it could be argued that given the Court's repeated union of "construction and operation," if a state may preclude construction of a plant in the face of a NRC approved construction license, the state may also preclude the operation of the plant in the face of a NRC approved operating license. Additionally, the Court has established that the AEA reserves to the states the authority to regulate nuclear plants on the basis of a "need" for power. In practice, this principle has been applied with respect to a state threshold determination as to whether more nuclear electrical generation is needed. However, it seems logical to suggest that if a state has the authority to determine whether more power is needed, it would also have the authority to determine whether less electrical generation is needed. Such an interpretation would require that states have the authority to shut down existing power plants where the state determines that current power generation is excessive. Moreover, if courts were to adopt the Entergy position, once a state permitted the construction of a nuclear power plant, it would be unable to reassess that determination in the face of changing power needs. Thus, the state would be potentially bound by its initial decision to permit the construction and operation of a nuclear power plant. For example, if a state had a valid nonsafety rationale for seeking to terminate the operation of a plant, Entergy's interpretation of the AEA's preemptive effects may prevent that state from ceasing operation of the nuclear plant as long as the NRC renews the plant's license. Vermont argues that the NRC has recognized that the states have the final word in determining whether a federally licensed plant continues to operate. For example, in discussing its newly adopted regulations governing license renewal, the NRC noted that "[a]fter the NRC makes its decision based on the safety and environmental considerations, the final decision on whether or not to continue operating the nuclear plant will be made by the utility, State, and Federal (non-NRC) decisionmakers." While the identified sources may suggest this position, it does not seem that any statute, regulation, or other binding authority exists to confirm the NRC's understanding that the states retain the ultimate decision as to whether a licensed nuclear power plant continues to operate. Additionally, it is congressional intent, rather than the position of the NRC, that is essential in determining the division of authority under the AEA. The outcome of the Vermont Yankee case will likely have a lasting impact on state authority to regulate and terminate the operation of existing nuclear power plants. Prior case law suggests that the question of whether the Vermont General Assembly enacted Acts 74, 160, and 189 for the purposes of regulating radiological safety will likely be critical to the court's holding. If the court determines that the laws were not grounded in safety concerns and are not otherwise preempted, the case could stand as an expansion of state regulatory authority over nuclear power. To the contrary, if the court finds that the Vermont laws intrude on federal authority and are preempted, the case would highlight states' limited authority over licensed and operating nuclear power plants. Although preemption is a constitutional principle arising from the Supremacy Clause, the extent to which state laws are preempted is a matter of congressional intent. Therefore, Congress retains the authority to define the preemptive scope of a statute. If Congress is unhappy with a court's interpretation of a given statute, Congress is free to amend the statute to make the statute's preemptive effects clear. Likewise, if Congress disagrees with the degree to which a state is regulating in an area, Congress is free to either restrict or enlarge that freedom. It is "up to Congress to determine whether a state has misused the authority left in its hands." Courts have struggled to define the precise borders of the preemptive field emanating from the NRC's exclusive authority over radiological safety aspects of the construction and operation of nuclear power plants. Given the uncertainties associated with field preemption generally, it is not surprising that the AEA has been subject to a number of conflicting interpretations, which have, in turn, given rise to conflicting case law. Congress, however, is free to adjust or clarify those preemptive boundaries by amending the AEA. The Supreme Court expressly invited Congress to adjust the separation of authority between the states and the federal government if it felt state laws like the California moratorium infringed on federal authority to encourage the development of nuclear power. In Pacific Gas , the Court noted that "it is for Congress to rethink the division of regulatory authority in light of its possible exercise by the States to undercut a federal objective. The courts should not assume the role which our system assigns to Congress." If Congress believes that courts have interpreted the AEA in a way that provides states with too much freedom in slowing or preventing the development of nuclear power; or, conversely, that courts have interpreted the AEA in a way that excessively restricts a state's ability to regulate nuclear power within its borders; or if Congress simply seeks to mitigate the uncertainty associated with defining the scope of field preemption under the AEA, then Congress is free to expressly adjust the preemptive field of the AEA accordingly. Preemption is, at its core, controlled by Congress. | A number of states have recently sought to take action to assure that nuclear power plants within their borders are operating safely. Most visibly, the State of Vermont has suggested that it will not approve the continued operation of the Vermont Yankee nuclear power plant, despite the Nuclear Regulatory Commission's (NRC's) approval of an extension to the plant's operating license. The dispute may have profound effects on establishing the scope of state control over nuclear power—including whether states have the authority to shut down a federally licensed and long operating nuclear power plant. However, while safety concerns may prompt states to assert influence over nuclear power plants, federal law severely limits the extent to which states can regulate nuclear power. Indeed, the Supreme Court has expressly held that, while states retain authority over "questions of need, reliability, cost, and other related State concerns," federal preemption prevents states from regulating radiological safety aspects of nuclear power production. Whether Vermont, or any other state, can act to prevent a nuclear power plant from operating, despite the fact that the plant has been authorized by the NRC, will depend principally on whether the state law or regulation in question is preempted by the Atomic Energy Act (AEA). Although there is "no one crystal clear distinctly marked formula" for determining whether a state law is preempted by federal law, the Supreme Court has established three general classes of preemption: express preemption, conflict preemption, and field preemption. In each instance however, "the question of preemption is one of determining Congressional intent." Much of the debate surrounding federal preemption of state regulation of nuclear power has centered on field preemption. Under existing Supreme Court precedent, an analysis of whether a state law is preempted under the AEA requires a consideration of both the purpose and effect of the state law in question. Thus, any state law grounded in radiological safety concerns or that has a "direct and substantial" effect on the safety of nuclear plant "construction and operation," falls within the field exclusively occupied by the NRC and is therefore preempted. This report will look at general constitutional principles of preemption, analyze the Supreme Court's interpretation of the scope of federal preemption under the AEA, and apply established preemption principles to the Vermont Yankee licensing dispute. |
Federal mandatory minimum sentencing statutes (mandatory minimums) demand that execution or incarceration follow criminal conviction. Among other things, they cover drug dealing, murdering federal officials, and using a gun to commit a federal crime. They have been a feature of federal sentencing since the dawn of the republic. They circumscribe judicial sentencing discretion, although they impose few limitations upon prosecutorial discretion, or upon the President's power to pardon. They have been criticized as unthinkingly harsh and incompatible with a rational sentencing guideline system; yet they have also been embraced as hallmarks of truth in sentencing and a certain means of incapacitating the criminally dangerous. This is a brief overview of federal statutes in the area and a discussion of some of the constitutional challenges they have faced. Mandatory minimums come in many stripes, including some whose status might be disputed. The most widely recognized are those that demand that offenders be sentenced to imprisonment for "not less than" a designated term of imprisonment. Some are triggered by the nature of the offense, others by the criminal record of the offender. A few members of this "not less than" category are less "mandatory" than others, because Congress has provided a partial escape hatch or safety valve. For example, several of the drug-related mandatory minimums are subject to a "safety valve" for small time, first time, non-violent offenders that may render their minimum penalties less than mandatory, or at least less severe. Still others can be avoided at the behest of prosecution for a defendant's substantial assistance against his cohorts. Some of the other "not-less-than" mandatory minimums purport to permit the court to sentence an offender to a fine rather than to a mandatory term of imprisonment. A second generally recognized category of mandatory minimums consists of the flat or single sentence statutes, the vast majority of which call for life imprisonment. Closely related are the capital punishment statutes that require imposition of either the death penalty or imprisonment for life, or death or imprisonment either for life or for some term of years. The "piggyback" statutes make up a third class. The piggyback statutes are not themselves mandatory minimums but sentence offenders by reference to underlying statutes including those that impose mandatory minimums. Substantial Assistance : "Upon motion of the Government, the court shall have the authority to impose a sentence below a level established by statute as a minimum sentence so as to reflect a defendant's substantial assistance in the investigation or prosecution of another person who has committed an offense. Such sentence shall be imposed in accordance with the guidelines and policy statements issued by the Sentencing Commission pursuant to section 994 of title 28, United States Code," 18 U.S.C. 3553(e). As a general rule, a defendant is entitled to a sentence below an otherwise applicable statutory minimum under the provisions of Section 3553(e) only if the government agrees. The courts have acknowledged that due process or equal protection or other constitutional guarantees may provide a narrow exception. "Thus, a defendant would be entitled to relief if a prosecutor refused to file a substantial-assistance motion, say, because of the defendant's race or religion." A defendant is entitled to relief if the Government's refusal constitutes a breach of its plea agreement. A defendant is also "entitled to relief if the prosecutor's refusal to move was not rationally related to any legitimate Government end." Some courts have suggested that a defendant is entitled to relief if the prosecution refuses to move under circumstances that "shock the conscience of the court," or that demonstrate bad faith, or for reasons unrelated to substantial assistance. A majority of the judges who answered the Sentencing Commission's survey agreed that relief under Section 3553(e) should be available even in the absence of motion from the prosecutor. The substantial assistance exception makes possible convictions that might otherwise be unattainable. Yet, it may also lead to "inverted sentencing," that is, a situation in which "the more serious the defendant's crimes, the lower the sentence – because the greater his wrongs, the more information and assistance he had to offer to a prosecutor"; while in contrast the exception is of no avail to the peripheral offender who can provide no substantial assistance. Perhaps for this reason, most of the judges who responded to the Sentencing Commission survey agreed that a sentencing court should not be limited to assistance-related factors and should be allowed use of the generally permissible sentencing factors when calculating a sentence under Section 3553(e). Sentencing Commission Report : Early in its history, the Sentencing Commission gave Congress a report to Congress on the challenges it believed mandatory minimum sentencing statutes presented. The Sentencing Commission's second mandatory minimum report contains extensive statistical analysis, makes recommendations, and summarizes views of those who favor mandatory minimums and those who oppose them. Proponents contend that mandatory minimum sentences: (1) promote sentencing uniformity and prevent sentencing disparity; (2) afford greater public protection through certain punishment, deterrence and incapacitation; (3) inflict just desserts; (4) induce plea bargains and offender cooperation and thus contribute to law enforcement efficiency; and (5) assist state and local law enforcement efforts. Opponents, on the other hand, contend that mandatory minimum sentences: (1) contribute to both excessive uniformity and unwarranted disparity; (2) result in disproportionate and excessively severe sentences; (3) fail to account for individualized circumstances; (4) transfer sentencing discretion from judges to prosecutors; (5) constitute neither a deterrent nor an effective law enforcement tool; (6) interfere with state law enforcement efforts; and (7) adversely impact various demographic groups. It omits at least one argument for mandatory minimums. During the Commission's first decade and a half, the Commission created its own system of mandatory minimum penalties. The Guidelines denied judges sentencing discretion. Imprisonment was mandatory by operation of the Guidelines in the vast majority of cases. True, it occurred by operation of the exercise of a delegation of Congress's legislative authority rather than by direct exercise. Yet the result was the same, a mandatory minimum term of imprisonment. The Guideline system was more nuanced, but that is a difference of degree not of kind. Defendants sentenced to mandatory minimum terms of imprisonment have challenged them on a number of constitutional grounds beginning with Congress's legislative authority and ranging from cruel and unusual punishment through ex post facto and double jeopardy to equal protection and due process. Each constitutional provision defines outer boundaries that a mandatory minimum must be crafted to honor; none confine legislative prerogatives in any substantial way. The federal government is a creature of the Constitution. It enjoys only such powers as can be traced to the Constitution. All other powers are reserved to the states or to the people. Among the powers which the Constitution bestows upon Congress are the powers to define and punish felonies committed upon the high seas, to exercise exclusive legislative authority over certain federal territories and facilities, to make rules governing the Armed Forces, to regulate interstate and foreign commerce, and to enact legislation necessary and proper for the execution of those and other constitutionally granted powers. It also grants Congress authority to enact legislation "necessary and proper" to the execution of those powers which it vests in Congress or in any officer or department of the federal government. Many of the federal laws with mandatory minimum sentencing requirements were enacted pursuant to Congress's legislative authority over crimes occurring on the high seas or within federal enclaves, or to its power to regulate commerce. When a statute falls for want of legislative authority, the penalties it would impose fall with it. This has yet to occur in the area of mandatory minimum sentences. The Commerce Clause vests Congress with authority to regulate three broad categories of interstate commerce. In the words of United States v. Lopez , "[f]irst, Congress may regulate the use of the channels of interstate commerce.... Second, Congress is empowered to regulate and protect the instrumentalities of interstate commerce, or persons or things in interstate commerce, even though the threat may come only from intrastate activities.... Finally, Congress' commerce authority includes the power to regulate those activities having a substantial relation to interstate commerce." A few years later, the Court reiterated "that Congress may [not] regulate noneconomic, violent criminal conduct based solely on that conduct's aggregate effect on interstate commerce. The Constitution requires a distinction between what is truly national and what is truly local." Yet, purely intrastate activities may have a sufficient impact on interstate commerce to bring them within the reach of Congress's Commerce Clause power. So it is in the case of the Controlled Substances Act where several mandatory minimums are found. The Court in Comstock provided a hint of the scope of Necessary and Proper Clause. The statute there authorized the Attorney General to continue to hold a federal inmate, pending a civil commitment determination, after his scheduled date of release. The Court analyzed the breadth of the power without any explicit reference to any other constitutional power, deciding that "[T]he statute is a 'necessary and proper' means of exercising the federal authority that permits Congress to create federal criminal laws, to punish their violation, to imprison violators, to provide appropriately for those imprisoned, and to maintain the security of those who are not imprisoned but who may be affected by the imprisonment of others." The Constitution grants the President authority to negotiate treaties and the Senate the authority to approve them in the exercise of its advice and consent prerogatives. Almost a century ago, the Court observed that "[i]f the treaty is valid there can be no dispute about the validity of the statute under Article I, §8, as a necessary and proper means to execute the powers of the Government." The Controlled Substances Act, the home of several mandatory minimums, might be considered implementation of various treaties of the United States relating to controlled substances. Congress enjoys legislative authority over felonies on the high seas, over matters occurring within the territorial jurisdiction of the United States, and incident to the maritime jurisdiction of the federal courts. It has exercised the authority frequently to enact criminal laws applicable within the territorial and special maritime jurisdiction of the United States. Some of these provisions include mandatory minimums. Mandatory minimums implicate considerations under the Eighth Amendment's cruel and unusual punishments clause. The clause bars mandatory capital punishment statutes. Although the case law is somewhat uncertain, it seems to condemn punishment that is "grossly disproportionate" to the misconduct for which it is imposed. Only in extremely rare circumstances, however, is a sentence of imprisonment likely to be thought so severe as to be disproportionate to the gravity of the offense. The clause does bar imposition of a mandatory life term of imprisonment upon a juvenile. "Under the Due Process Clause of the Fifth Amendment and the notice and jury trial guarantees of the Sixth Amendment, any fact (other than prior conviction) that increases the maximum penalty for a crime must be charged in an indictment, submitted to a jury, and proven beyond a reasonable doubt," Apprendi v. New Jersey. Initially unwilling to extend Apprendi to mandatory minimums in Harris , the Court did so in Alleyne v. United States . Neither the Sixth Amendment, Apprendi , nor Alleyne limits Congress's authority to establish mandatory minimum sentences, nor limits the authority of the courts to impose them. They simply dictate the procedural safeguards that must accompany the exercise of that authority. While "it remains a basic principle of our constitutional scheme that one branch of the Government may not intrude upon the central prerogatives of another," the Supreme Court has observed that "Congress has the power to define criminal punishments without giving the courts any sentencing discretion." Thus, the lower federal courts have regularly upheld mandatory minimum statutes when challenged on separation of powers grounds, and the Supreme Court has denied any separation of powers infirmity in the federal sentencing guideline system which at the time might have been thought to produce its own form of mandatory minimums. Federal law regulates the cultivation, manufacture, distribution, export, import, and possession of certain plants, drugs, and chemicals, which it designates as controlled substances and classifies according to medicinal value and potential for abuse under the Controlled Substances Act and the Controlled Substances Import and Export Act. The acts contain a number of mandatory minimum penalty provisions. Most involve possession with the intent to distribute (traffic) substantial amounts of eight controlled substances which are considered highly susceptible to abuse. The mandatory minimums are structured so that more severe sentences attend cases involving very substantial quantities, death or serious bodily injury, or repeat offenders. The penalties of the underlying offense apply to anyone who attempts or conspires to commit any controlled substance offense that carries a mandatory minimum. The eight trigger substances are heroin, powder cocaine, cocaine base (crack), PCP, LSD, propanamide, methamphetamine, and marijuana. Each comes with one set of mandatory minimums for trafficking a substantial amount and a second, high set of mandatory minimums for ten times that amount. The first set (841(b)(1)(B) levels) has the following thresholds: (1) heroin: 100 grams; (2) powder cocaine: 500 grams; (3) crack: 28 grams; (4) PCP: 100 grams; (5) LSD: 1 gram; (6) propanamide: 40 grams; (7) methamphetamine: 5 grams; and (8) marijuana: 100 kilograms. The second set (841(b)(1)(A) levels): (1) heroin: 1 kilogram; (2) powder cocaine: 5 kilograms; (3) crack: 280 grams; (4) PCP: 100 grams; (5) LSD: 10 grams; (6) propanamide: 400 grams; (7) methamphetamine: 50 grams; and (8)marijuana: 1,000 kilograms. Severe mandatory minimum penalties also follow conviction under the continuing criminal enterprise ("drug kingpin") section. Section 848(c) defines a continuing criminal enterprise as one in which an individual derives substantial income from directing five or more others in the commission of various controlled substance felonies. The offense itself carries a term of imprisonment of not less than 20 years and may be increased to not more than 30 years for repeat offenders. Furthermore, anyone who kills in furtherance of the enterprise is punishable by imprisonment for not less than 20 years and may be put to death. Large scale drug kingpins who traffic in vast amounts of any of the eight 841(b)(1) substances or who realize vast fortunes from such trafficking receive a mandatory life term of imprisonment upon conviction. Possession with Intent : Conviction of possession with intent to distribute various controlled substances forms the basis for imposition of a mandatory minimum sentence under Section 841(b). To support a conviction, "the government must show that the defendant had (1) knowing (2) possession of the drugs and (3) an intent to distribute them." The government need not prove that the defendant knew the particular type or quantity of the controlled substance he intended to distribute. Culpable possession may be either actual or constructive. "Constructive possession exists where the defendant has the power to exercise control or dominion over the item. In drug cases, constructive possession is an appreciable ability to guide the destiny of the contraband." As for the intent to distribute, it "can be proven circumstantially from, among other things, the quantity of cocaine and the existence of implements such as scales commonly used in connection with the distribution of cocaine." Moreover, although proof of sale or gift will suffice, intent to distribute demands no more than an intent to transfer. The escalating mandatory minimums that apply to offenders with "a prior conviction for a felony drug offense" extend to those classified as misdemeanors under state law but punishable by imprisonment for more than a year. They also apply even though the underlying state felony conviction has been expunged. On the other hand, there is apparently at least a division among the circuits over whether the government's failure to comply with the procedure for establishing a prior conviction, and therefore to alert the defendant of the prospect of an enhanced mandatory minimum, is jurisdictional. The Sentencing Commission second report made several recommendations relating to repeat offender mandatory minimums. It suggested that the escalator approach in some instances might be unduly severe. It also expressed the view that exclusion of simple possession offenses and greater compatibility with state sentence provisions might be advisable. The mandatory minimums apply with equal force to those who attempt to possess with intent to distribute, or who conspire to do so, or who aids and abets another to do so. "To prove the crime of attempted knowing or intentional possession, with intent to distribute, of a controlled substance, the government must show: (1) the defendant acted with the intent to possess a controlled substance with the intent to distribute; and (2) the defendant engaged in conduct which constitutes a substantial step toward commission of the offense." "To establish a conspiracy, the government must prove: (1) the existence of an agreement among two or more people to achieve an illegal purpose; (2) the defendant's knowledge of the agreement; and (3) that the defendant knowingly joined and participated in the agreement." The agreement may be inferred circumstantially. Conspirators need to know the scheme's general outline, but every conspirator need not be informed of the plot's every detail. "To convict under a theory of aiding and abetting, the Government must prove: (1) the substantive offense was committed; (2) the defendant contributed to and furthered the offense; and (3) the defendant intended to aid in its commission." Conviction of a Continuing Criminal Enterprise (CCE or Drug Kingpin) offense is punishable by imposition of a mandatory minimum. The courts have held that to secure a conviction, the government must establish "(1) a felony violation of the federal narcotics laws; (2) as part of a continuing series of three or more related felony violations of federal narcotics laws; (3) in concert with five or more other persons; (4) for whom [the defendant] is an organizer, manager or supervision; [and] (5) from which [the defendant] derives substantial income or resources." The homicide mandatory minimum found in the drug kingpin statute sets a 20-year minimum term of imprisonment for killings associated with a kingpin offense or for killings of law enforcement officers associated with certain other controlled substance offenses. Safety Valve : Low level drug offenders can escape some of the mandatory minimum sentences if they qualify for the safety valve found in 18 U.S.C. 3553(f). It is available to qualified offenders convicted of violations of the possession with intent, the simple possession, attempt, or conspiracy provisions of the Controlled Substances or Controlled Substances Import and Export Acts. For the convictions to which the safety valve does apply, the defendant must convince the sentencing court by a preponderance of the evidence that he satisfies each of the safety valve's five requirements. He may not have more than one criminal history point. He may not have used violence or a dangerous weapon in connection with the offense. He may not have been an organizer or leader of the drug enterprise. He must have provided the government with all the information and evidence at his disposal. Finally, the offense may not have resulted in serious injury or death. Two-thirds of the judges who responded to the Commission's survey favored expanding the safety valve criminal history criterion to encompass those with 2 or 3 criminal history points, although fewer than one quarter favored expansion of the criterion further. Some of the Commission's hearing witnesses concurred. The Commission's second report, in fact, recommends that Congress "consider expanding the safety valve ... to include certain offenders who receive two, or perhaps three, criminal history points under the guidelines." Section 924(c) : Mandatory minimums are found in two federal firearms statutes. One, the Armed Career Criminal Act, deals exclusively with recidivists. The other, Section 924(c), attaches one of several mandatory minimum terms of imprisonment whenever a firearm is used or possessed during and in relation to a federal crime of violence or drug trafficking. Section 924(c) has been the subject of repeated Supreme Court litigation and regular congressional amendment since its inception in 1968. Section 924(c), in its current form, imposes one of several different minimum sentences when a firearm is used or possessed in furtherance of another federal crime of violence or of drug trafficking. The mandatory minimums, imposed in addition to the sentence imposed for the underlying crime of violence or drug trafficking, vary depending upon the circumstances: (1) imprisonment for not less than 5 years, unless one of higher mandatory minimums below applies; (2) imprisonment for not less than 7 years, if a firearm is brandished; (3) imprisonment for not less than 10 years, if a firearm is discharged; (4) imprisonment for not less than 10 years, if a firearm is a short-barreled rifle or shotgun or is a semi-automatic weapon; (5) imprisonment for not less than 15 years, if the offense involves the armor piercing ammunition; (6) imprisonment for not less than 25 years, if the offender has a prior conviction for violation of Section 924(c); (7) imprisonment for not less than 30 years, if the firearm is a machine gun or destructive device or is equipped with a silencer; and (8) imprisonment for life, if the offender has a prior conviction for violation of Section 924(c) and if the firearm is a machine gun or destructive device or is equipped with a silencer. As a general rule, conspirators are liable for any foreseeable crimes committed by any of their co-conspirators in furtherance of the conspiracy. The rule applies when a defendant's co-conspirator has committed a violation of Section 924(c). Under federal law, moreover, anyone who commands, counsels, aids, or abets the commission of a federal offense by another is punishable as though he had committed the crime himself, 18 U.S.C. 2. Here too, the general proposition applies to Section 924(c). "[A] defendant is liable of aiding and abetting the use of a firearm during a crime of violence if he (1) knows his cohort used a firearm in the underlying crime, and (2) knowingly and actively participates in that underlying crime." The Second Amendment states that "A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed." The Supreme Court has explained that the Second Amendment confers an individual right to possess and carry weapons for the defense of his or her person, family, and home. The Court has been quick to point out, however, that the right is not absolute. Without providing a full panoply of exceptions, it observed that the Amendment permits such things as "longstanding prohibitions on the possession of firearms by felons and the mentally ill, [and] laws forbidding the carrying of firearms in sensitive places such as schools and government buildings, [and] laws imposing conditions and qualifications on the commercial sale of arms." Consistent with this theme, the circuit courts have held that the Second Amendment cast no constitutional doubt upon Section 924(c). The Fifth Amendment declares that "No person shall be ... subject for the same offence to be twice put in jeopardy of life or limb.... " The double jeopardy clause protects against both successive prosecutions and successive punishments for the same offense. The initial test for whether a defendant has been twice tried or punished for the same offense or two different offenses is whether each of the two purported offenses requires proof that the other does not. Thus, without violating the double jeopardy clause, an individual may be convicted and sentenced for two violations of Section 924(c), if each has a different predicate offense. On the other hand, there is no consensus over whether a single predicate offense may support conviction and sentencing for two or more violations of Section 924(c). Moreover, the conviction for a serious offense will ordinarily preclude prosecution or punishment for a lesser included offense, since the lesser offense consists of only elements found in the more serious offense. For example, a defendant may not be convicted and punished for both a violation of Section 924(c)(use of a firearm in furtherance of a robbery) and of Section 924(j)(use of the same firearm in the same robbery resulting in death). More than 60% of the judges who responded to the Commission's survey felt that the mandatory minimum sentencing provisions of Section 924(c) were appropriate. Nevertheless, the Commission recommended that Congress consider several modifications: (1) "Congress should consider amending the mandatory minimum penalties established at section 924(c), particularly the penalties for 'second or subsequent' violations of the statute, to lesser terms." (2) "Congress should consider amending section 924(c) so that the increased mandatory minimum penalties for a "second or subsequent" offense apply only to prior convictions." (3) "Congress should consider amending section 924(c) to give the sentencing court limited discretion to impose sentences for multiple violations of section 924(c) concurrently." (4) "Congress should consider clarifying the statutory definitions of the underlying and predicate offenses that trigger mandatory minimum penalties under section 924(c) and the Armed Career Criminal Act to reduce the risk of inconsistent application and the litigation that those definitions have fostered." Armed Career Criminal Act (18 U.S.C. 924(e)) : The Armed Career Criminal Act (ACCA) establishes a 15-year mandatory minimum term of imprisonment for defendants convicted of unlawful possession of a firearm under Section 18 U.S.C. 922(g) who have three prior convictions for violent felonies or serious drug offenses. Congress's constitutional authority to regulate interstate and foreign commerce is among its most sweeping prerogatives, but the power is not boundless. It permits regulation of the use of the channels of commerce, of the instrumentalities of commerce, of the things that move there, and of those activities which substantially impact commerce. Absent such a nexus, it does not permit Congress to enact legislation proscribing possession of a firearm on school grounds, as the Supreme Court observed in Lopez . Section 922(g) outlaws receipt by a felon of a firearm "which has been shipped or transported in interstate or foreign commerce." This, in the view of the circuit courts to address the issue, is sufficient to bring within Congress's commerce clause power the prohibitions of Section 922(g), that Section 924(e) makes punishable. In Section 924(e) cases, the courts ordinarily proceed no further in their Second Amendment analysis than to the threshold possession offense, e.g ., 18 U.S.C. 922(g)(1)(prohibiting firearm possession by convicted felons). Pointing to the statement in Heller , they conclude that the possession offense does not offend the Second Amendment. From which it seems to follow that Section 924(e), at least when it imposes a mandatory minimum sanction upon felons who violate Section 922(g)(1), is similarly inoffensive. The Supreme Court in Almendarez-Torres identified the fact of a prior conviction as a sentencing factor. The Court has yet to revisit Almendarez-Torre s, and the lower federal courts continue to adhere to it in Section 924(e) cases: the fact of a prior qualifying conviction need not be charged in the indictment nor proved to the jury beyond a reasonable doubt. Defendants sentenced under Section 924(e) have suggested two Eighth Amendment issues. First, they argue that their sentences are disproportionate to their offenses. Second, they contend that crimes committed when they were juveniles may not be used as predicates. The lower federal courts have consistently rejected general claims that sentences under 924(e) were grossly disproportionate to the crimes involved. In cases decided before Graham , the lower federal courts had also rejected claims that the Eighth Amendment precluded use of a juvenile predicate offense to trigger sentencing of an adult under Section 924(e). To date, there have been no subsequent federal appellate court decisions directly on point. Two circuits, however, have found no Eighth Amendment impediment to mandatory life imprisonment sentences imposed under provisions other than Section 924(e) upon adults convicted of drug trafficking and based in part on predicate juvenile offenses. The Fifth Amendment ensures that no "person be subject for the same offence to be twice put in jeopardy of life or limb." The double jeopardy clause protects against both successive prosecutions and successive punishments for the same offense. The test for whether a defendant has been twice tried or punished for the same offense or tried or punished for two different offenses is whether each of the two purported offenses requires proof that the other does not. Defendants have argued to no avail that the double jeopardy clause bars reliance on the predicate offenses or on Section 922(g) to trigger Section 924(e). Almost 60% of those responding to a Sentencing Commission survey indicated that they considered the Section 924(e) mandatory minimum sentences appropriate. Congress increased the number of federal sex offenses and their attendant mandatory minimum sentences beginning in 1978 with the enactment of the first federal child pornography statutes. It filled out the complement of federal sex offenses with mandatory minimum sentences of imprisonment at fairly regular intervals thereafter. The current array includes the following: A majority of the judges responding to a Sentencing Commission survey thought that the mandatory minimum sentences for production and distribution of child pornography and other child exploitation offenses were generally appropriate. Well over two-thirds, however, considered those for receipt of child pornography too high. The Commission's report on mandatory minimum sentencing statutes noted that its "review of available sentencing data [relating to sex offenses] indicates that further study of these penalties is needed before it can offer specific recommendations in this area." It concluded preliminarily, however, that "the mandatory minimum penalties for certain non-contact child pornography offenses may be excessively severe and as a result are being applied inconsistently." Aggravated identity theft is punishable by imprisonment for two years, and by imprisonment for five years if the offense involves a federal crime of terrorism. Aggravated identity theft only occurs when the identity theft happens "during and in relation" to one of several other federal crimes. It has the effect of establishing a mandatory minimum for each of those predicate offenses that would not otherwise exist. More than half of the judges who responded to a United States Sentencing Commission survey felt that the two-year mandatory minimum was a generally appropriate sentence. The Sentencing Commission's report on mandatory minimum penalties makes little if any mention of the five-year terrorism penalty and instead directs its attention to the two-year identity theft mandatory minimum. The Commission further confines itself to comparatively complimentary observations rather than recommendations, due to the provision's relatively recent emergence and its somewhat unique characteristics. Section 1028A only punishes aggravated identity theft by individuals. Most federal crimes outlaw misconduct by both individuals and organizations, such as corporations, firms, and other legal entities. The Dictionary Act explains that "[i]n determining the meaning of any Act of Congress, unless the context indicates otherwise … the words 'person' and 'whoever' include corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals." Section 1028A is one of those situations when "the context indicates otherwise." Entities other than individuals can be fined, but they cannot be imprisoned. Section 1028A punishes violations with a flat term of imprisonment, but no fine. Thus, only individuals may be punished for violating the section. For the same reason, persons other than individuals may not incur criminal liability indirectly as principals under 18 U.S.C. 2. Principals are subject to the same penalties, in this case only imprisonment. Persons other than individuals may, however, incur criminal liability as conspirators. The federal conspiracy statute outlaws conspiracy to commit any federal crime, including aggravated identity theft. It makes conspiracy punishable by both a fine and a term imprisonment. Thus, it seems possible for a person other than an individual to incur criminal liability for conspiracy to commit aggravated identity theft. The phrase "during and in relation to" describes the connection, necessary for a violation under the section, between the predicate offense and the other identity theft elements. The phrase also appears in the mandatory minimums of 18 U.S.C. 924(c) that apply when a firearm is used "during and in relation to" certain crimes of violence or drug trafficking. There, the Supreme Court has said the "in relation to" portion of the phrase requires that the firearm "must facilitate or have the potential of facilitating" the predicate offense. This suggests that the "phrase 'in relation to' in §1028A … means that the 'in relation to' element is met if the identity theft 'facilitates or has the potential of facilitating' that predicate felony." Whether the identity theft occurs "during" the predicate offense depends on the duration of the predicate offense. Section 1028A recognizes two classes of predicate offenses—one of which involves terrorist offenses and carries a five-year term of imprisonment; the other of which does not and carries a two-year term. Proof of the commission of one of the qualifying predicate offenses is an element of aggravated identity theft. The defendant, however, need not otherwise be charged or convicted of the predicate offense. Moreover, the Constitution's double jeopardy clause, which prohibits multiple punishments for the same offense, bars prosecution for both aggravated identity theft and the parallel identity theft provision. Attached is the list of more than 60 federal theft, fraud, immigration, and related felonies for which the two-year mandatory minimum sentencing provision provides a sentencing floor when identity theft is involved. The terrorist predicate offenses are the federal crimes of terrorism, listed in 18 U.S.C. 2332b(g)(5)(B), regardless of whether the predicate offense was committed for a terrorist purpose. A list of the close to 50 terrorist predicate offenses also appears below as an attachment. The five-year aggravated identity theft offense seems to have been infrequently prosecuted thus far. The Supreme Court in Flores-Figueroa made clear that the knowledge element colors each of the other elements. The government must prove that the defendant was aware that he transferred, possessed, or used something. It must prove that the defendant was aware that he was doing so without lawful authority. Finally, it must prove that the defendant was aware that the something he unlawfully possessed, transferred, or used was that of another person. What constitutes a proscribed transfer, possession, or use appears to have been a matter of dispute only rarely, perhaps because of the limitations posed by the other elements. For example, the requirement that possession be knowing and in relation to a predicate offense cabins the otherwise natural scope of the term "possession." The "lawful authority" element addresses whether the law permits the defendant to use the identification of another, not whether the defendant has the permission of another to borrow the means of identification. Thus, "the use of another person's social security number to commit a qualifying felony, even with that person's permission, serve[s] as use 'without lawful authority' in violation of §1028A." Moreover, a defendant may be guilty of using the means of identity of another without lawful authority for certain purposes, even though he has lawful authority to use the identification for other purposes. The term "means of identification" in the aggravated identify theft provision draws its meaning from the definition of that term in the generic identity theft provision. "The 'overriding requirement' of [that] definition is that the means of identification 'must be sufficient to identify a specific individual.'" The statute does not extend to the use of a "fake ID" that does not identify with a real person. On the other hand, the "other person" element reaches both the living and dead. Moreover, although only an individual may engage in aggravated identity theft, the victim of such a theft might well include persons who are legal entities rather than individuals. The Sentencing Commission's assessment of sentencing under the provision is guardedly laudatory: "The problems associated with certain mandatory minimum penalties are not observed, or are not as pronounced, in identity theft offenses. The Commission believes this is due, in part, to 18 U.S.C. §1028A requiring a relatively short mandatory penalty and not requiring stacking of penalties for multiple counts. The statute is relatively new and is used in only a handful of districts, however, so specific findings are difficult to make at this time." A defendant convicted of a federal "serious violent felony" must be sentenced to life imprisonment under the so-called three strikes law, 18 U.S.C. 3559(c), if he has two prior state or federal violent felony convictions or one such conviction and a serious drug offense conviction. Over 60% of the federal district court judges responding to a subsequent commission survey indicated they considered federal mandatory minimum sentences too high. Although the survey asked specifically about sentences under other mandatory minimum statutes, it provided no opportunity for a response focused on Section 3559(c). Section 3559(c) requires prosecutors to follow the notice provisions of 21 U.S.C. 851(a), if they elect to ask the court to sentence a defendant under the three strikes provision. Section 851(a), in turn, requires prosecutors to notify the court and the defendant of the government's intention to seek the application of Section 3559(c) and the description of the prior convictions upon which the government will rely. Without such notice, the court may not impose an enhanced sentence. The purpose of the requirement "is to ensure the defendant is aware before trial that he faces possible sentence enhancement as he assesses his legal options and to afford him a chance to contest allegations of prior convictions." As long as that dual purpose is served, however, a want of meticulous compliance or complete accuracy will not preclude enhanced sentencing. The objections most often raised are constitutional challenges and those that question the qualifications of prior convictions as predicate offenses. Serious drug offenses for purposes of Section 3559(c) consist of (a) federal drug kingpin offenses; (b) the most severely punished of the federal drug trafficking offenses; (c) the smuggling counterpart of the such trafficking offenses; and (d) state equivalents of any of these three. When the prosecution relies upon a state drug trafficking conviction, for example, it must show that the amount of drugs involved warranted treating it as an equivalent. The federal three strikes provision recognizes convictions for two categories of serious violent felonies—one enumerated, the other general. The inventory of enumerated serious violent felonies consists of the federal or state crimes of (1) murder; (2) manslaughter other than involuntary manslaughter; (3) assault with intent to commit murder; (4) assault with intent to commit rape; aggravated sexual abuse and sexual abuse; (5) abusive sexual contact; (6) kidnapping; (7) aircraft piracy; (8) robbery; (9) carjacking; (10) extortion; (11) arson; (12) firearms use; (13) firearms possession; and (14) attempt, conspiracy, or solicitation to commit any of the above offenses. The more general, unenumerated category consists of "any other [state or federal] offense punishable by a maximum term of imprisonment of 10 years or more that has as an element the use, attempted use, or threatened use of physical force against the person of another or that, by its nature, involves a substantial risk that physical force against the person of another may be used in the course of committing the offense." Defendants sentenced under Section 3559(c) have raised many of the same constitutional arguments asserted by defendants subject to other mandatory minimum sentences. Here too, their arguments have been largely unavailing. Almendarez-Torres blocks the contention that prior convictions must be noted in the indictment and proven to the jury beyond a reasonable doubt. Defendants who claimed that Section 3559(c) has a disparate racial impact and therefore offends equal protection have been unable to show, as they must, that it was crafted for that purpose. Generally the Eighth Amendment's "grossly disproportionate" standard (severity of the sentence in light of gravity of the offense) has proven too formidable for defendants sentenced under the section to overcome. The courts remain to be convinced that the mandatory minimum features of the section pose any separation of powers impediments. Defendants who invoke double jeopardy have been reminded that "the Supreme Court has long since determined that recidivist statutes do not violate double jeopardy because 'the enhanced punishment imposed for the later offense is not to be viewed as either a new jeopardy or additional penalty for the earlier crimes, but instead as a stiffened penalty for the latest crime, which is considered to be an aggravated offense because a repetitive one.'" Much the same response has awaited those in Section 3559(c) cases who seek refuge in ex post facto, "the use of predicate felonies to enhance a defendant's sentence does not violate the Ex Post Facto Clause because such enhancements do not represent additional penalties for earlier crimes, but rather stiffen the penalty for the latest crime committed by the defendant." | Federal mandatory minimum sentencing statutes limit the discretion of a sentencing court to impose a sentence that does not include a term of imprisonment or the death penalty. They have a long history and come in several varieties: the not-less-than, the flat sentence, and piggyback versions. Federal courts may refrain from imposing an otherwise required statutory mandatory minimum sentence when requested by the prosecution on the basis of substantial assistance toward the prosecution of others. First-time, low-level, non-violent offenders may be able to avoid the mandatory minimums under the Controlled Substances Acts, if they are completely forthcoming. The most common imposed federal mandatory minimum sentences arise under the Controlled Substance and Controlled Substance Import and Export Acts, the provisions punishing the presence of a firearm in connection with a crime of violence or drug trafficking offense, the Armed Career Criminal Act, various sex crimes including child pornography, and aggravated identity theft. Critics argue that mandatory minimums undermine the rationale and operation of the federal sentencing guidelines which are designed to eliminate unwarranted sentencing disparity. Counter arguments suggest that the guidelines themselves operate to undermine individual sentencing discretion and that the ills attributed to other mandatory minimums are more appropriately assigned to prosecutorial discretion or other sources. State and federal mandatory minimums have come under constitutional attack on several grounds over the years, and have generally survived. The Eighth Amendment's cruel and unusual punishments clause does bar mandatory capital punishment, and apparently bans any term of imprisonment that is grossly disproportionate to the seriousness of the crime for which it is imposed. The Supreme Court, however, has declined to overturn sentences imposed under the California three strikes law and challenged as cruel and unusual. Double jeopardy, ex post facto, due process, separation of powers, and equal protection challenges have been generally unavailing. The United States Sentencing Commission's Mandatory Minimum Penalties in the Federal Criminal Justice System (2011) recommends consideration of amendments to several of the statutes under which federal mandatory minimum sentences are most often imposed. This is an abbreviated version of CRS Report RL32040, Federal Mandatory Minimum Sentencing Statutes, stripped of its citations, footnotes, and appendixes. |
The North Atlantic Treaty Organization's (NATO's) 2014 summit was held in Newport, Wales, United Kingdom (UK), on September 4-5. This was the first meeting of NATO's 28 heads of state or government since Russia's annexation of Crimea and subsequent military support of separatist fighters in eastern and southern Ukraine—actions that some allies view as having fundamentally altered the European security environment. Accordingly, summit deliberations centered largely on the appropriate NATO response to Russian aggression and the extent to which the alliance should alter its longer-term strategic approach and defense posture toward Russia. The summit was the last presided over by outgoing NATO Secretary General Anders Fogh Rasmussen, who will be succeeded in October by former Norwegian Prime Minister Jens Stoltenberg. The formal summit agenda focused on three main areas: Enhancing allied readiness and strengthening collective defense and military capabilities, including through increased troop rotations and military exercises in Central and Eastern Europe; Marking the conclusion of NATO's decade-long mission in Afghanistan at the end of 2014 and launching a planned follow-on training mission; and Enhancing NATO's support of partner countries outside the alliance, including through a new "Defense Capacity Building Initiative." At the behest of several allied governments, including the United States and the UK, the allies also discussed the security implications for NATO of ongoing instability in the Middle East and North Africa, and particularly the emergence of the Islamic State of Iraq and the Levant (ISIL). However, although NATO condemned ISIL and noted significant security concerns in the region, the alliance as a whole did not commit to a substantive response beyond saying that it would consider any future request from the Iraqi government for assistance in training Iraqi security forces. Ongoing disagreement within the alliance over the extent to which Russia poses a sustained threat to European security exposes longer-standing tensions regarding NATO's strategic focus. Since the end of the Cold War, NATO has evolved from maintaining an exclusive focus on territorial defense in Europe to overseeing a range of military and crisis management operations across the globe. This transformation was predicated largely on the perception that Russia no longer posed a security threat to NATO, and on a conviction that the primary security challenges facing the allies emanated from beyond the Euro-Atlantic region. However, some allies, including many former members of the communist bloc, have consistently expressed concern that NATO's transformation could come at the expense of its capacity to uphold its commitment to collective defense, enshrined in Article 5 of the North Atlantic Treaty. After more than a decade of war in Afghanistan and against the backdrop of a resurgent Russia, allies such as Poland and the Baltic states have called for a renewed NATO focus on collective defense and deterring Russia. Among other things, they have advocated a permanent eastward shift in NATO's defense posture. Others, including Germany and Italy, have cautioned that permanently basing NATO forces in Eastern Europe could unnecessarily provoke Russia and impede efforts to restore more cooperative relations with Moscow. Debates about NATO's mission come against the backdrop of continued economic stagnation in Europe and long-standing U.S. concerns about a downward trend in European defense spending, shortfalls in European defense capabilities, and burden sharing within the alliance. NATO officials have argued that Russian aggression should spur allied governments to boost defense spending and cooperation, or at least to allocate projected savings from the end of military operations in Afghanistan to defense modernization initiatives. However, since the annexation of Crimea in March, only a handful of allies have announced defense spending increases. In Wales, the allies committed to halting any further cuts in national defense spending and agreed to aim to meet NATO's target of spending 2% of GDP on defense within a decade. Nonetheless, some analysts caution that NATO's latest effort to boost defense spending and enhance military capabilities could face the same challenges as the long line of similar post-Cold War capabilities initiatives that have had mixed success, at best. They contend that the limited outcomes may reflect a general lack of public support for military engagement, as well as divergent threat perceptions both across the Atlantic and within Europe. No substantive progress on NATO enlargement was announced at the Wales summit. The allies did, however, reaffirm their commitment to NATO's "open door" policy and said that they would make a decision by the end of 2015 on whether to invite Montenegro to join the alliance. They also agreed to boost NATO's partnership with aspiring member Georgia. This fell short of the U.S. Administration's stated goal of granting Georgia a Membership Action Plan (MAP) at the summit. Many Western European governments oppose granting a MAP to Georgia, largely due to a perception that NATO has enlarged too quickly and that the alliance should first agree on resolving a host of other issues, including relations with Russia. Obama Administration officials outlined several key objectives for the Wales summit, including securing additional European contributions to reassurance and military readiness initiatives in Central and Eastern Europe and pledges to increase defense spending and enhance military capabilities. The Administration also underscored its commitment to the transatlantic security relationship and to defending NATO allies, particularly in response to Russia's action in Ukraine. Among other things, President Obama highlighted the proposed $925 million European Reassurance Initiative (ERI), for which the Administration has requested congressional approval in the Department of Defense's FY2015 Overseas Contingency Operation (OCO) budget request. The formal agenda for the Wales summit focused on three main issues: adoption of collective defense and military capabilities initiatives aimed at reassuring allies and deterring Russia; marking NATO's transition in Afghanistan; and enhancing support of partner countries outside the alliance. In Wales, NATO adopted a slate of defense initiatives largely intended to demonstrate allied resolve in the face of potential threats from Russia. NATO's "Readiness Action Plan" outlines reinforcement measures in Central and Eastern Europe such as enhanced infrastructure, pre-positioning of equipment and supplies, and designation of bases for troop deployments. This includes the planned expansion of an existing NATO facility in Szeczin, Poland, to enable rapid deployment of a large number of NATO forces to respond to a security threat. Bases in the Baltic States and Romania reportedly could also be expanded and designated as reception facilities for NATO forces. However, given the aforementioned reluctance of some allies to permanently station forces in Central and Eastern Europe, such base expansions are likely to host only rotating troop units and military exercises. NATO's Readiness Action Plan also includes new early warning procedures, updated threat assessments, new defense and crisis response plans, and enhanced intelligence sharing arrangements among allies. NATO leaders also committed to holding more frequent military exercises intended to respond to the changed security environment in Eastern Europe. The allies also agreed to establish a new Very High Readiness Joint Task Force (VJTF), capable of deploying within "a few days" to respond to any threat against an ally, particularly on NATO's periphery. As envisioned, the VJTF will be a land force of about 4,000 soldiers that includes appropriate air, maritime, and special operations support. The VJTF will be a smaller, more specialized arm of the NATO Response Force (NRF), a multinational rapid reaction force of about 13,000, comprised of land, air, maritime, and special operations components. Since its creation in 2003, the NRF has never been fully deployed. In recent years, however, NATO members have sought to reinvigorate the force, designating it as the primary mechanism for NATO training and interoperability exercises, particularly with respect to territorial defense. Some observers point out that both the NRF and the VJTF could be hard pressed to respond to the kind of "hybrid" or "ambiguous" warfare that has been a hallmark of Russia's intervention in Ukraine. A defining tactic is the deployment of non-traditional tools intended to disrupt, subvert, and create chaos, including sophisticated public information campaigns, cyber attacks, and deployment of commando-style irregular forces to support pro-Russia separatist militias. Analysts agree that most NATO members, including those closest to Russia's borders, do not possess the kind of wide-ranging capabilities necessary to counter such a threat. In Wales, the allies acknowledged the threat posed by hybrid warfare, noting in particular that NATO should enhance its strategic communications, develop the appropriate exercise scenarios, and strengthen coordination with other organizations to respond to the threat. Although they did not commit to a specific plan to build joint capabilities in these areas, the allies did take some initial steps in the area of cyber security that some analysts believe could help overcome long-standing reluctance to empower NATO to engage in that domain. For the first time, NATO heads of state and government jointly declared that "cyber defence is part of NATO's core task of collective defence," adding that "A decision as to when a cyber attack would lead to the invocation of Article 5 [NATO's collective defense clause] would be taken by the North Atlantic Council on a case-by-case basis." Despite this qualification, some analysts view the clear declaration that a cyber attack could be considered on the same level as a traditional military attack as an important and necessary step if NATO is to improve its collective cyber defense capabilities. A key question underlying summit deliberations on collective defense was whether the allies are willing to devote the resources necessary to meet their stated commitments. As such, a primary objective of NATO leaders and U.S. and UK officials, among others, was to secure allied pledges to reverse the ongoing downward trend in allied defense spending. In 2013, total defense spending by NATO European allies as a percentage of GDP was about 1.6%; just four NATO allies (Estonia, Greece, the UK, and the United States) met the alliance's goal of spending 2% of GDP on defense (see Appendix for more allied defense spending figures). Since 2001, the U.S. share of total allied defense spending has grown from 63% to 72%. NATO officials have argued that the threat posed by Russia in Ukraine should spur European allies to make the defense spending commitments long called for by NATO leaders. In this vein, they welcomed pledges made before the summit by five allies—Latvia, Lithuania, Poland, Romania, and Turkey—to increase defense spending to meet at least 2% of GDP within the next few years. However, they also stress that, while Russia has increased its defense spending by about 50% since 2008, on average, the allies have decreased theirs by about 20%. In Wales, allied leaders pledged to "halt any decline in defence expenditure" and to "aim to move towards the 2% guideline within a decade." They also said they would aim to meet an existing NATO target to devote 20% of defense expenditures to purchasing new equipment and related research and development within the next 10 years. These pledges were widely viewed as falling well short of the shorter-term, binding commitments thought to be sought by NATO officials and the U.S. Administration. Following the summit, outgoing NATO Secretary General Rasmussen asserted that the pledges on defense spending were "as strong as [they could] be in a political world," and underscored that it was the first time in the history of the alliance that NATO heads of state and government had issued such clear commitments on defense spending. Many analysts and U.S. officials have long asserted that defense spending in many European countries is not only too low; it is also inefficient, with disproportionately high personnel costs coming at the expense of much-needed research, development, and procurement. In 2013, only four allies (France, Turkey, the United Kingdom, and the United States) met the aforementioned NATO guideline to devote 20% of defense expenditures to the purchase of major equipment, considered a key indicator of the pace of military modernization. These trends correlate with significant, long-standing shortfalls in key military capabilities, including strategic air- and sealift; air-to-air refueling; and intelligence, surveillance, and reconnaissance (ISR). Some allied officials and observers argue that despite the criticism and shortcomings, the forces of key European allies still rank among the most capable militaries in the world; this assessment remains particularly true for the UK and France, which rank fourth and fifth, respectively, in global defense expenditure. Critics counter that far-reaching defense spending cuts in precisely these two countries—by far Europe's most militarily capable—should lead to heightened concern about diminished European military capability. Despite uniform allied condemnation of Russian actions in Ukraine and support for NATO's new Readiness Action Plan, most analysts do not expect European allies to substantially increase defense spending over the short to medium term. A number of factors drive this reluctance, including significant fiscal challenges facing many governments and broad public skepticism of military action, particularly in Western Europe. In light of these realities, NATO and U.S. leaders have also called for more progress on existing allied defense cooperation initiatives, including the joint acquisition of shared capabilities, aimed at stretching existing defense resources farther. Analysts argue that the European defense industry remains fractured and compartmentalized along national lines; many believe that European defense efforts would benefit from a more cooperative consolidation of defense-industrial production and procurement. Progress on this front has been limited, however, with critics charging that national governments often remain more committed to protecting domestic constituencies than making substantive progress in joint capabilities development. At the summit, the allies announced several joint capabilities and force development initiatives. These include a six-nation program, led by Denmark, to boost the availability and sharing of air-to-ground precision guided munitions (PGMs). The program is largely a response to munitions shortages that arose during NATO's 2011 air campaign in Libya. In addition, three groups of allies announced programs to jointly develop capabilities under a new "Framework Nations Concept" that encourages subsets of allies to cooperate on shared priorities. The announced initiatives include a UK-led joint expeditionary force, an Italy-led group of allies focused on stabilization and reconstruction capabilities, and a group led by Germany to develop capabilities in the areas of logistics support; chemical, biological, radiological, and nuclear protection; land, air, and sea firepower; and deployable headquarters. The Wales summit was NATO's last before the planned transfer at the end of 2014 of full responsibility for security in Afghanistan to Afghan forces—marking the end of the longest and most extensive combat mission in NATO's history. Over the course of the 11-year NATO mission, European allies, Canada, and partner countries maintained a significant collective military presence alongside U.S. forces in Afghanistan, in recent years exceeding 40,000 troops. The military operation faced relatively consistent public opposition in many NATO member states, however. Along with the decidedly mixed perceptions about the mission's success, this has led many analysts to doubt whether NATO will embark on a mission of similar size and scope in the foreseeable future. At the summit, NATO leaders hoped to finalize plans for a continued NATO presence in Afghanistan starting in early 2015 of up to 4,000 military trainers to advise and assist the Afghan National Security Forces (ANSF). The allies have adopted an operational plan for the training mission, dubbed Operation Resolute Support, but its deployment remains contingent on NATO and the United States finalizing Bilateral Security Agreements (BSA) with the Afghan government. Although both candidates in Afghanistan's 2014 presidential election have said they would sign the BSAs, an ongoing dispute over the election's outcome has prevented this. According to Secretary General Rasmussen, NATO would need to begin to plan for a complete withdrawal from the country soon after the summit if the bilateral agreements are not in place. As of early September, 41,124 NATO forces remained in Afghanistan, including 29,000 from the United States, just under 4,000 from the UK, 1,600 from Germany, and 1,400 from Italy. A third summit objective was to strengthen relations with and assistance to non-NATO members interested in working with the alliance. In particular, allies such as the United States and UK have called on NATO to be more effective in providing security assistance and training to countries in Central and Eastern Europe such as Ukraine as well as fragile states in North Africa and the Middle East such as Libya. Such security and defense capacity building programs could be viewed as an attempt to enhance regional and global stability with a lighter NATO footprint—or, in the words of outgoing Secretary General Rasmussen, "To help [partners] help themselves. To project stability without always projecting significant forces of our own." In Wales, the allies launched a "Defense Capacity Building Initiative" aimed at better coordinating member state expertise and support for defense reform and military training both in partner states and in non-partner countries that express an interest in working with NATO. Programs could range from deploying small specialist advisory teams to larger-scale training missions. The first recipients of NATO assistance under the new capacity building program will be Georgia, Jordan, and Moldova. In pursuing the initiative, NATO members hope to capitalize on the alliance's extensive experience assisting with defense sector reform, including in Central and Eastern Europe in the 1990s, in Iraq, in Afghanistan, and in the Balkans. At the summit, the allies emphasized advances in relations with Ukraine and Georgia. However, in both cases, announced measures fell short of the level of assistance called for by advocates for the countries. With respect to Ukraine, NATO reiterated its commitment to assist the government through several trust funds focused on improving command, control, and communications capabilities; logistics capabilities; cyber defense; and strategic communications. The allies also said they would increase the number of NATO military advisors in Kiev. They continued to disagree on whether to provide more substantive military support, such as intelligence capabilities or weapons systems. With respect to Georgia, the allies agreed to boost capacity building and military training programs, but did not announce a specific timetable to advance Georgia's long-standing membership aspirations. Some analysts believe that many Western European member states oppose Georgian membership due to concerns about Russia's possible reaction. Recent developments in NATO's relations with Libya and Ukraine may demonstrate some of the challenges facing the Defense Capacity Building Initiative. In 2013, two years after a NATO-led air campaign helped oust Muammar Qadhafi, the then-Libyan government requested military training assistance from NATO. However, the persistently unstable security environment has prevented NATO from undertaking such a mission, even if the allies had been inclined to do so. In Ukraine, as noted above, NATO has established trust funds and sent some military trainers to assist with defense planning and reform efforts. Nevertheless, the allies have been unable to reach agreement on providing more substantive assistance, largely due to differing views on the shape and extent of NATO's relations with Ukraine. Such political and security considerations could ultimately be a key factor in the success or failure of NATO's defense capacity building efforts. Perhaps the key summit priority for the U.S. Administration was to secure increased allied commitments to collective defense in Europe. After the summit, President Obama pointed to the new Readiness Action Plan as a clear demonstration of a renewed NATO commitment in this regard. However, allied pledges to aim to increase defense spending over the next decade reportedly fell short of what U.S. officials had hoped for. In the view of many analysts, European allies could be hard-pressed to maintain commitments to the Readiness Action Plan if they are unable or unwilling to boost defense spending. A second Administration priority at the summit was to reassure European allies, particularly in Central and Eastern Europe, that the United States remains fully prepared, capable, and willing to honor its collective defense commitments in Europe. As discussed below, U.S. officials view the proposed European Reassurance Initiative (ERI) as a key component of these efforts. Against the backdrop of escalating violence in Iraq and Syria, President Obama also sought to secure commitments from fellow allies to join U.S.-led efforts to fight ISIL. On the sidelines of the summit, nine allies—Canada, Denmark, France, Germany, Italy, Poland, Turkey, the UK, and the United States—did agree to coordinate their efforts to fight ISIL, but ruled out deploying "boots on the ground." The alliance as a whole did not make any new commitments in the Middle East. However, the allies did agree to consider any Iraqi requests for NATO assistance in training its security forces. Given the heightened concerns regarding Russia's aggression in Ukraine, some allies, particularly in Central and Eastern Europe, may be reluctant to endorse a more proactive NATO role in the Middle East and North Africa. The crisis in Ukraine has renewed focus on the U.S. commitment to European security and on overall U.S. force posture in Europe. Since the end of the Cold War, as NATO and the European Union have enlarged eastward and as both organizations have pursued partnership with Russia, the perceived need for a robust U.S. military presence to defend the continent receded. Today, about 67,000 U.S. military personnel are stationed in Europe, primarily in Germany, Italy, and the UK; this is down from a Cold War high of about 400,000. Some allies in Central and Eastern Europe have consistently expressed concerns about the reduced U.S. force posture, and especially the withdrawal over the past two years of two of the Army's four Brigade Combat Teams. Other allies and U.S. policy makers supported the shift, particularly given other security challenges facing the United States and NATO. The adjusted U.S. force posture has coincided with U.S. calls for European allies to enhance their own military capabilities in order to boost NATO's effectiveness and reduce Europe's dependence on the U.S. security guarantee. As discussed above, such efforts have had mixed results, at best. The Administration has moved to adjust its force posture in Europe in response to Russian actions in Ukraine. This includes rotational military deployments to Central and Eastern Europe, including 600 troops and additional fighter jets to carry out air policing activities in Poland and the Baltic states. In addition, the Administration is seeking congressional approval for $925 million to fund a European Reassurance Initiative, intended to reassure allies in Central and Eastern Europe and bolster the security and defense capabilities of allies and partner countries in the region (see text box below). Administration officials have also asserted that later this year the Department of Defense would launch a comprehensive review of the U.S. military footprint in Europe, adding that the U.S. response thus far may be a temporary solution to what could be a longer-term crisis in Europe. Although specific details of the proposed ERI have not been made public, some analysts posit that the program would essentially enable the Administration to prolong some of the measures already taken in response to Russia's annexation of Crimea and allow for additional U.S. contributions to NATO training exercises. While the ERI has been welcomed in the region, it falls short of the permanent basing of U.S. and NATO forces called for by some European leaders. Critics caution that contributions to the ERI from other NATO members could be essential, both to enable a sustained response and to demonstrate allied unity. On the other hand, other European governments, including Italy and Germany, have repeatedly cautioned against further militarization in the region. Members of Congress have expressed deep concern over Russian aggression in Ukraine, with many calling for a robust NATO and U.S. military response, and others advocating stronger European contributions to collective defense measures in Europe. Congressional consideration of the European Reassurance Initiative and other proposed Administration responses to the crisis in Ukraine could enable further examination of U.S. force posture in Europe and the U.S. capacity and willingness to uphold its collective defense commitments. Deliberations could also highlight longer-standing concerns about European contributions to NATO security and defense measures. Congress could also take an increasingly active role in determining U.S. policy toward NATO and in guiding discussions about NATO's future more broadly. This could include holding hearings and/or drafting legislation on issues such as development of allied military capabilities and military burdensharing within the alliance, the allied commitment to NATO enlargement and its relations with partner countries such as Ukraine and Georgia, NATO relations with Russia, and NATO involvement in areas such as cybersecurity and energy security. The prospects for further NATO enlargement, especially to the east, have been of particular interest to many Members of Congress, who argue that continued enlargement would send an important signal to aspiring members that NATO's "open door" policy will not be scaled back in the face of Russian opposition. They add that Russia would be less willing and less able to take the aggressive actions it has in Ukraine, Georgia, and elsewhere in its near-abroad if these countries were members of the alliance. In February 2014, a bipartisan group of 40 Members of the House sent a letter to Secretary of State Kerry urging the Administration to support granting NATO membership to Montenegro and Macedonia and a Membership Action Plan (MAP) to Georgia at NATO's September summit in Wales. The lawmakers also called for intensified progress on advancing Bosnia-Herzogovina's MAP. The proposed Forging Peace through Strength in Ukraine and the Transatlantic Alliance Act ( H.R. 4433 ) also calls for immediate NATO membership for Montenegro and the granting of a NATO Membership Action Plan (MAP) to Georgia. Despite these calls, most analysts consider NATO unlikley to make significant progress toward expanding over the next several years. They point to a perception in some Western European countries that NATO has enlarged too quickly and that the alliance should agree on how to resolve a complex range of issues, including managing relations with Russia, before taking in new members. For some allied governments, ongoing territorial disputes with Russia in countries such as Georgia and Ukraine could be a strong deterrent to extending membership invitations to these countries. For their part, NATO officials emphasize that the allies have reaffirmed their commitment to NATO's "open door" enlargement policy. Among other things, they point to the announcement in Wales that the allies would make a decision on Montenegro's application for membership by the end of 2015. Before Russia's annexation of Crimea in March, NATO's Wales summit was expected to be defined largely by leaders' efforts to outline a new, and perhaps more modest, set of priorities for an alliance moving on from a taxing decade of war in Afghanistan. To many analysts, the end of the Afghanistan mission represents the next step in NATO's post-Cold War evolution from a regional defense organization focused exclusively on deterring the Soviet Union to an alliance confronting an array of complex security challenges across the globe. However, Russia's ongoing intervention in Ukraine has caused some allies to question one of the key premises on which NATO's transformation has been based—that Russia no longer poses a significant security threat to the alliance. Accordingly, these allies have advocated a renewed NATO focus on territorial defense in Europe and deterring Russia. In Wales, NATO leaders reaffirmed their condemnation of Russia's intervention in Ukraine and announced a slate of collective defense measures intended to deter further Russian aggression. However, they did not come to agreement on managing NATO's relations with Russia over the medium to long term. Furthermore, the summit exposed possibly growing tension within NATO on the appropriate allied response to growing instability in the Middle East and North Africa. The lack of consensus on these questions could have significant implications for NATO's future. Key areas of concern include member state decisions on the kinds of military capabilities to develop, the direction of NATO defense planning and overall force posture, and NATO's willingness and capacity to address other security threats. Evolving allied perceptions of the longer-term threat posed by Russia are also likely to be a key factor in U.S. decisions on future force posture in Europe. In light of these considerations, Members of Congress could focus on several key questions regarding NATO's future in the aftermath of the summit. These might include: Addressing whether the alliance should adopt a new strategic concept that better reflects views of the security threat posed by Russia (NATO's current strategic concept was adopted in 2010); Examining NATO's capacity and willingness to address other security threats to the Euro-Atlantic region, including from the Middle East and North Africa; More seriously addressing the possible consequences of member states' failure to meet agreed defense spending targets; Assessing U.S. force posture in Europe and the willingness of European allies to contribute to U.S. defense initiatives in Europe such as the ballistic missile defense program and the proposed European Reassurance Initiative; and Revisiting the allies' commitment to NATO's stated "open door" policy on enlargement. | On September 4-5, the leaders of the North Atlantic Treaty Organization's (NATO's) 28 member states met in Wales for the alliance's 2014 summit. This was their first meeting since Russia began providing large-scale military support to separatist forces fighting in Ukraine, and their last before the planned completion by the end of 2014 of NATO's mission in Afghanistan, the longest and most ambitious operation in NATO history. As such, some analysts portrayed the summit as an opportunity to consider a possible strategic shift for NATO, away from the broad, "out of area" focus embodied by the Afghanistan mission, toward a more narrow focus on territorial defense and deterrence, largely in response to a resurgent Russia. Although the allies did not make such decisive declarations, summit deliberations did center largely on responding to Russian aggression in Ukraine and elsewhere in the region. Summit outcomes centered on three main areas: (1) enhancing allied readiness and collective defense in response to Russian aggression; (2) increasing defense spending and boosting military capabilities; and (3) boosting NATO support for partner countries outside the alliance, including through a new "Defense Capacity Building Initiative." The allies also marked the planned withdrawal at the end of 2014 of NATO's International Security Assistance Force (ISAF) in Afghanistan and discussed a non-combat security sector training mission in the country expected to begin in 2015. The cornerstone of NATO's new collective defense initiative is a "Readiness Action Plan" intended to enable a continuous NATO military presence on the alliance's periphery, including in its easternmost member states. This includes enhanced troop rotations and military exercises in Central and Eastern Europe and establishment of a high readiness force able to deploy within a few days. Although NATO leaders have characterized the envisioned rotational troop deployments in Central and Eastern Europe as continuous, they say the deployments will not amount to a permanent NATO military presence. Some allied governments in the region, including Poland and the Baltic states, have called for larger, permanent NATO deployments. These are opposed by member states concerned about the possible negative consequences of longer-lasting militarization in the region. In Wales, the allies also sought to address widespread concerns regarding a long and ongoing decline in European defense spending—in 2013, only four allies met the alliance's target to spend 2% of GDP on defense. NATO leaders committed to halting any further decline in defense spending and pledged to aim to reach the 2% target within a decade. These declarations fell short of the shorter-term, binding commitments reportedly sought by the United States and the NATO Secretary General. A top U.S. Administration priority for the summit was to secure allied commitments to increase defense spending, enhance military capabilities, and boost contributions to NATO defense initiatives in Europe. In addition, President Obama sought to reassure European allies, particularly in Central and Eastern Europe, that the United States remains prepared, capable, and willing to honor its collective defense commitments in Europe. The Administration also used the summit to gain commitments from other governments to join ongoing efforts to fight the Islamic State of Iraq and the Levant (ISIL). Although a group of allies agreed to join these efforts, all ruled out deploying ground forces, and NATO as a whole did not commit to any new, substantive engagement in the region. Congress can continue to play an important role in guiding the U.S. and NATO response to Russian aggression in Ukraine and in addressing broader concerns regarding NATO's future. This includes consideration of the Administration's request for $925 million to fund a proposed European Reassurance Initiative. Many Members of Congress have consistently called on NATO's European allies to enhance their contributions to NATO collective defense efforts. They have also advocated a more proactive NATO enlargement policy, which they argue would send an important signal to aspiring members that NATO's "open door" policy will not be scaled back in the face of Russian opposition. The proposed Forging Peace through Strength in Ukraine and the Transatlantic Alliance Act (H.R. 4433), for example, calls for additional NATO and U.S. military assistance to Ukraine and calls for immediate NATO membership for Montenegro and the granting of a NATO Membership Action Plan (MAP) to Georgia. This report provides an overview of the summit's main agenda items and outcomes, highlighting key challenges, U.S. policy priorities, and potential issues for Congress. For more on the situation in Ukraine and NATO's response, see CRS Report R43478, NATO: Response to the Crisis in Ukraine and Security Concerns in Central and Eastern Europe, coordinated by [author name scrubbed]; and CRS Report RL33460, Ukraine: Current Issues and U.S. Policy, by [author name scrubbed]. |
Funding for the U.S. Department of Energy (DOE), including the Office of Energy Efficiency and Renewable Energy (EERE), is provided in the annual Energy and Water Development (E&W) Appropriations bill. EERE supports renewable energy and end-use energy efficiency technology research, development, and implementation. The funding level Congress decides to provide for FY2018 could impact goals set by EERE and priorities identified in the Administration's FY2018 budget request. President Trump submitted his FY2018 budget request to Congress on May 23, 2017. The budget requests $28.2 billion for DOE, a decrease of nearly $3 billion, or 9.5%, from the FY2017 enacted level. Nearly half of the reduction ($1.5 billion) in the DOE budget request would come from EERE programs. The request specifies two EERE program eliminations: the Weatherization Assistance Program and the State Energy Program. The funding level Congress provides could affect continued support for these programs and other efforts within EERE including sustainable transportation, renewable energy, and energy efficiency. This report discusses the FY2018 EERE budget request and the proposed EERE funding levels and priorities in the related E&W appropriations bills. It does not discuss the opportunities, challenges, economic value, or commercial status of the various renewable energy technologies and energy efficiency initiatives selected by EERE, nor does it delve into the goals of the individual EERE programs or congressional oversight of certain EERE issues. EERE leads the DOE's effort to support research, accelerate development, and facilitate deployment of energy efficiency and renewable energy technologies. EERE is led by the Assistant Secretary for Energy Efficiency and Renewable Energy, and it is organized into four offices: Office of Transportation, Office of Renewable Power, Office of Energy Efficiency, and Office of Operations. EERE contends that it invests in what it considers to be the highest-impact activities. The office collaborates with industry, academia, national laboratories, and others to develop technology-specific road maps and then focuses funding on early stage research and development (R&D), technology validation and risk-reduction activities, and the reduction of barriers to the adoption of market-ready new technologies. EERE also manages a portfolio of research and development programs that support state and local governments, tribes, and schools. In addition, EERE oversees the National Renewable Energy Laboratory (NREL)—the only national laboratory solely dedicated to researching and developing renewable energy and energy efficiency technologies. EERE funding is provided from the annual E&W appropriations bill. During the last several years of the Obama Administration, the budget request sought to increase funding to support EERE programs and objectives. Congress provided funding at levels lower than the request. Appropriations for EERE have averaged $2.0 billion annually for the last three years in current dollars (see Table 1 ). DOE categorizes EERE funding into four major categories: sustainable transportation, energy efficiency, renewable energy, and corporate support (e.g., program administration). From FY2015 to FY2017, approximately 30% of EERE appropriations supported sustainable transportation, 35% went to energy efficiency, 23% went to renewable energy, and 12% went to corporate support. President Trump submitted his FY2018 budget request to Congress on May 23, 2017. The budget requests $28.2 billion for DOE, a decrease of nearly $3 billion, or 9.5%, from the FY2017 enacted level. Nearly half of the reduction ($1.45 billion) in the DOE budget request comes from EERE programs. The EERE request of $636 million is a nearly 70% decrease from FY2017. According to the budget request, funding for EERE would focus on "early-stage R&D, where the Federal role is critically important, and reflects an increased reliance on the private sector to fund later-stage research, development, and commercialization of energy technologies." For FY2018, the bulk of the EERE request would be split among three areas: about 29% for sustainable transportation programs, 25% for energy efficiency programs, and 21% for renewable energy programs. Under the request, funding for both the Office of Sustainable Transportation and Office of Renewable Power would decrease by 70% from FY2017 enacted levels. The Office of Energy Efficiency would see funding decrease by 79% from FY2017 enacted levels, and funding for corporate support would decrease by 18%. The budget request specifies two EERE program eliminations: the Weatherization Assistance Program and the State Energy Program, which received FY2017 appropriations of $225 million and $50.0 million, respectively. The request would reduce EERE funded full-time equivalents (FTE) by approximately 30%. Some of the goals, highlights, and major changes presented in the EERE FY2018 request, as reported by DOE, are discussed below. The Administration's request for the Office of Sustainable Transportation is $184 million for FY2018, $429 million (70.0%) less than the FY2017 enacted level of $613 million. Sustainable transportation includes vehicle technologies, bioenergy technologies, and hydrogen and fuel cell technologies. Research priorities for FY2018 in vehicle technologies include the following: Explore new battery chemistry and cell technologies to reduce the cost of electric vehicle batteries by more than 50% (the ultimate goal is $80/kWh with a near-term goal of $125/kWh by 2022), to increase range to 300 miles, and to decrease charge time to 15 minutes or less. [$36.3 million] Improve understanding of combustion processes to support industry development of next generation engines and fuels to improve passenger vehicle fuel economy by 50% from a 2009 baseline. [$22.0 million] Create modeling, simulations, and high-performance computing-enabled data analytics to contribute to the energy efficiency of automobiles, trucks, and other vehicles building upon the prior-year Transportation as a System initiative. [$12.2 million] Continue to support advanced materials research to enable lightweight, multi-material structures that could reduce light-duty vehicle weight by 25% as compared to a 2012 baseline. [$7.5 million] According to the request, activities identified as later-stage development or a lower priority would be terminated. These include but are not limited to electric drive technologies R&D, advanced electrode processing research for lithium ion batteries, SuperTruck II, advanced vehicle testing and evaluation (AVTE), work to optimize vehicle powertrains, engine enabling technologies, particulate emissions control/after-treatment, lubricant R&D, reactivity controlled compression ignition, advanced high-strength steel, safety statistics, vehicle technologies deployment (including Clean Cities coalitions and Alternative Community Partner projects), and advanced vehicle competitions. Research priorities for bioenergy technologies in the FY2018 request include the following: Develop a fundamental understanding of feedstock preprocessing and the deconstruction of polymers within biomass to improve downstream conversion efficiency and throughput. [$6 million] Develop new advanced algal strains, approaches to culture management, and methods of crop protection. [$5 million] Support R&D in synthetic biology through the Agile BioFoundry and in new catalysts through the Chemical Catalysis for Bioenergy (ChemCatBio) consortium. [$34.6 million] Collaborate with the Vehicle Technologies Program on the co-optimization of fuels and engines to develop bio-based fuels/additives to enable 15-20% fuel economy gain beyond projected results of existing R&D efforts. [$6 million] Analyze pathways and strategies to achieve $2 per gallon gasoline-equivalent (gge) and conduct sustainability research. [$5 million] The proposed reduction in funding would include the termination of later-stage bioenergy R&D activities including, but not limited to, pilot-scale and demonstration-scale projects. Priorities for FY2018 hydrogen and fuel cell technologies research include the following: Support fuel cell R&D in catalysts, membranes, performance, and durability. Conduct proof-of-concept testing and technical analysis coupled with high-performance modeling to enable development of platinum group metal-free (PGM-free) catalysts and electrodes. [$15 million] Focus on applied materials research and early-stage component and process development for hydrogen production, delivery, and storage. [$29 million] Identify key areas for prioritization by assessing R&D gaps, planning, budgeting, and identifying synergies with other energy sectors such as natural gas and nuclear. [$1 million] The FY2018 request for hydrogen and fuel cell technologies would discontinue or reduce later-stage and lower-priority research in several areas including but not limited to low-PGM catalysts, balance of plant, low-cost 700 bar composite tanks, storage balance of plant components, cryo-compressed on-board hydrogen storage R&D, measurement of program impacts and return on investment, infrastructure financing analysis, and codes and standards support. The Administration's request for the Office of Renewable Energy is $134.3 million for FY2018, $317 million (70.2%) less than the FY2017 enacted level of $451 million. Renewable energy includes solar energy, wind energy, water power, and geothermal technologies. Research priorities in the FY2018 request for solar energy include the following: Address the challenges of higher levels of grid integration and focus on tools and technologies to measure, analyze, predict, protect, and manage the impacts of solar generation on the grid. [$18 million] Support research to better understand high temperature component design for higher efficiencies. Investigate advanced diffusion-bonded heat exchangers and new concepts for collecting and harvesting light. [$8 million] Support 2030 SunShot target through research on emerging photovoltaic technologies and physics and materials science to improve microelectronics reliability, performance, and durability. [$43.7 million] The FY2018 request for solar energy would discontinue funding for the Balance of Systems Soft Cost Reduction subprogram and Innovations in Manufacturing Competitiveness subprogram. Priorities for FY2018 wind energy research include the following: Continue to support the Atmosphere to Electrons (A2e) initiative to develop modeling and simulation capabilities that enable performance optimization of wind plants. Address R&D challenges to the design and manufacture of low-specific power rotors. [$26.7 million] Continue research to improve wind energy grid integration and develop and evaluate technology solutions to inform processes to address deployment issues such as radar interference. [$3.8 million] Refocus modeling and analysis on evaluation of early-stage, transformative science and technology opportunities. [$1.2 million] The FY2018 request for wind energy would discontinue funding for later-stage R&D including the technology validation and market transformation subprogram and wind plant performance benchmarking. Research priorities for water power in FY2018 include the following: Support early-stage research in modular hydropower systems, hydropower grid reliability services, and novel hydropower turbines. [$11.7 million] Develop tools to model and evaluate control strategies for marine hydrokinetic (MHK) and test full sensor-based control algorithms in a wave tank setting. Develop instrumentation for environmental monitoring instruments for harsh marine environments. [$8.8 million] The FY2018 request for water power would discontinue funding for later-stage development and testing of MHK systems and components and research on the environmental impacts of MHK technologies. Priorities in the FY2018 request for geothermal technologies include the following: Support research in the enhanced geothermal system (EGS) in the fundamental relationships between seismicity, stress state, and permeability, and the validation and verification of thermal hydro mechanical chemical models. These concepts would be directly applied at the Frontier Observatory for Research in Geothermal Energy (FORGE) EGS field laboratory. [$5.4 million] Conclude final year of three-year hydrothermal effort at three national laboratories targeting research on microhole drilling applications, self-healing cements, and subsurface imaging. Support R&D in waterless stimulation to reduce impact of geothermal development in water-limited areas. [$6 million] Continue to support data collection and dissemination including input into the Geothermal Electricity Technology Evaluation Model (GETEM), deployment of a node on the National Geothermal Data System (NGDS) for researchers, and deployment of integrated hydrothermal datasets into the NGDS to reduce time and cost of determining geothermal potential. [$1 million] The FY2018 request for geothermal technologies would discontinue funding for later-stage R&D in the EGS topics of advanced stimulation, zonal isolation, and fracture propping tools; the hydrothermal topics of wellbore integrity, subsurface stress and induced seismicity, and new subsurface signals; and all low-temperature and co-produced resource topics. The Administration's request for the Office of Energy Efficiency is $159.5 million for FY2018, $602 million (79%) less than the FY2017 enacted level of $762 million). Energy Efficiency includes advanced manufacturing, the federal energy management program, building technologies, and the weatherization and intergovernmental programs. Priorities for FY2018 for advanced manufacturing include the following: Support advanced manufacturing R&D for energy applications in high-impact foundational technology areas. Prioritize high-performance computing for manufacturing. [$41 million] Support the manufacturing demonstration facility (MDF) and the Carbon Fiber Test Facility (CFTF). Additional support would focus on early stage applied research to address challenges in key technical areas for semiconductors and manufacturing cybersecurity. [$27.5 million] Continue to engage with the private sector to ensure that technical knowledge and results from R&D are effectively transferred to the private sector for further development or commercialization. [$13.5 million] The request does not include funds for the Critical Materials Hub, Clean Water Hub, the five Clean Energy Manufacturing Innovation Institutes in the National Network for Manufacturing Innovation (NNMI) program, or the Industrial Assessment Centers (IACs). The request notes that these hubs and institutes previously supported later-stage demonstration and deployment activities. Prior year balances would be used to wind down and terminate existing institutes. The federal energy management program would focus on the following: Continue to support federal agencies in meeting statutory energy and water management related goals and requirements and focus on reducing government operating costs. [$10 million] The request would not support the Federal Energy Efficiency Fund/AFFECT subprogram, which previously provided grants to federal agencies to meet energy management requirements. The request for building technologies would focus on the following priorities in FY2018: Support building energy R&D priorities such as cyber-physical systems for buildings-to-grid R&D and solid state cooling and non-vapor compression solutions for HVAC and refrigeration. Refocus on early-stage R&D for solid state lighting, building envelope, and building energy modeling. Continue to support fulfillment of U.S.-China Clean Energy Research Center. [$29.5 million] Refocus commercial and residential buildings integration on early-stage R&D with emphasis on connected, efficient, and secure building systems and advanced construction and retrofit design principles. [$12 million] Limit energy conservation standard compliance activities to the minimum to maintain compliance with statute. [$26 million] The request would not support late-stage R&D. This includes but is not limited to eliminations of funding for technology application R&D for solid-state lighting; cooperative research and development agreements (CRADAs) for heating, ventilation, air conditioning, and refrigeration; demonstration and deployment of transactive controls at the campus- and neighborhood-level; early adoption efforts for high impact technologies; commercial buildings funding opportunity announcements; and research evaluating linkages between energy efficiency and building financial performance metrics. Energy Star efforts that would be eliminated include Home Performance with Energy Star, test procedure development, and performance verification. The Administration's budget for FY2018 requests no funding for the Weatherization and Intergovernmental Programs that partner with state and local organizations to facilitate investments in states' energy priorities. The House Appropriations Committee reported its version of the FY2018 Energy and Water Development Appropriations bill with a manager's amendment by voice vote on July 12, 2017. The bill would provide funding for EERE of $1.1 billion—$1.0 billion below FY2017 and $449 million above the Administration request ( H.R. 3266 ). H.R. 3266 was incorporated as Division D of H.R. 3219 , the Defense, Military Construction, Veterans Affairs, Legislative Branch, and Energy and Water Development National Security Appropriations Act, 2018 (also referred to as the Make America Secure Appropriations Act, 2018). The House passed H.R. 3219 on July 27, 2017. H.R. 3219 was received in the Senate on July 31, 2017. The Senate Committee on Appropriations reported its version of the FY2018 Energy and Water Appropriations bill, S. 1609 , on July 20, 2017. S. 1609 would provide $1.9 billion for EERE—$153 million below the FY2017 level and $1.3 billion above the Administration request ( S.Rept. 115-132 ). The President signed P.L. 115-56 , Continuing Appropriations Act, 2018 and Supplemental Appropriations for Disaster Relief Requirements Act, 2017 on September 8, 2017, providing appropriations at the FY2017 level through December 8, 2017. There are several EERE issues before the 115 th Congress. Concerns may include not only the level of EERE appropriations for FY2018, but also which activities EERE should support. Congress might consider whether the goals of EERE can be met with the proposed funding cuts in the Administration's request, or whether to limit the scope of federal R&D activities. The issues described in this section—listed approximately in the order they appear in the Energy and Water Development appropriations bills—were selected based on the total funding involved, the percentage increases or decreases proposed by the Administration, and their possible impact on broader public policy considerations. For H.R. 3219 , the funding levels for specific offices and programs are those specified in H.Rept. 115-230 , the report accompanying H.R. 3266 , which reported $1.104 billion in total funding for EERE. The House-passed version of H.R. 3219 would provide $1.086 billion for EERE, $18.4 million less than the committee-reported bill. It is unclear how this reduction would be implemented. For S. 1609 , the funding levels for specific offices and programs are those that are in S.Rept. 115-132 , the report accompanying the committee-passed version of the bill. The reported funding levels are consistent with the total funding for EERE that would be provided in the Senate committee bill. According to the budget request, funding for EERE would focus on "early-stage R&D," and would result in a decrease of nearly 70% for EERE programs. The two appropriation bills before Congress— H.R. 3219 and S. 1609 —address the Administration's request for EERE to focus on "early-stage R&D" in different ways. According to H.Rept. 115-230 , the report accompanying H.R. 3266 , the House appropriations bill reflects "a gradual shift towards early stage research and development activities," and includes "a limited scope of deployment activities." The appropriation recommendation in S. 1609 affirms "the importance of the development and deployment of energy efficiency and renewable energy technologies, which are critical to expanding U.S. energy security and global leadership." Both statements are supported with proposed appropriations that would fund most EERE programs at levels above the Administration's request. Both H.R. 3219 and S. 1609 would provide appropriations for FY2018 above the Administration's request of $184 million for sustainable transportation. H.R. 3219 would appropriate $268 million for sustainable transportation in FY2018, while S. 1609 would appropriate $553 million. Both appropriations reports also express continued support for the following programs within vehicle technologies that the Administration's request would terminate: SuperTruck II, the Clean Cities program, and efforts to reduce energy consumption of the commercial off-road vehicle sector. H.R. 3219 would support these and other projects within vehicle technologies at $125 million, while S. 1609 would provide approximately $278 million. H.R. 3219 and S. 1609 both recommend appropriations for FY2018 above the Administration's request of $134 million for renewable energy. H.R. 3219 would appropriate nearly $190 million, while S. 1609 would appropriate nearly $390 million. Both bills would provide support for later-stage R&D and deployment projects in contrast to the Administration's request. For solar energy, both the House bill and Senate committee bill support research in thin-film photovoltaics. H.R. 3219 would also encourage access to solar energy for low-income communities. S. 1609 would support solar workforce development training for veterans and continued research for systems integration, balance of system cost reduction, and innovations in manufacturing competitiveness. For wind energy, the House bill supports efforts to lower market barriers for distributed wind including small wind for rural homes, farms, and schools. The Senate committee bill would support demonstration projects for distributed wind and offshore wind and would support testing facilities such as the National Wind Technology Center. For the water program, H.R. 3219 would continue to support the HydroNEXT initiative and research, development, and deployment of marine energy components and systems for marine hydrokinetic technology. S. 1609 would support funding for commercial viability of pumped storage hydropower and research into mitigation of marine ecosystem impacts and continued construction of an open-water wave energy test facility. For geothermal, there were no specific comments in H.Rept. 115-230 ; S. 1609 would continue to support low-temperature co-produced resources and FORGE in FY2018. Both bills would provide appropriations for FY2018 above the Administration's request of $160 million for energy efficiency. H.R. 3219 would appropriate nearly $481 million, while S. 1609 would appropriate nearly $737 million. For advanced manufacturing, H.R. 3219 would provide funds for improvements in steel industry and transient kinetic analysis, and would also support advanced textile research. The House bill would follow the Administration's request to eliminate funding for the Critical Materials Energy Innovation Hub, the Energy Water Desalination Hub, and the Clean Energy Manufacturing Innovation Institutes; however, the bill would support phasing out operations that ensure that the most promising early stage R&D efforts of the hubs and institutes are continued through competitive awards in similar areas. In contrast, S. 1609 would provide funding for the Manufacturing Demonstration Facility, the Critical Materials Energy Innovation Hub, the Energy Water Desalination Hub, and Clean Energy Manufacturing Innovation Institutes. It would also support the Combined Heat and Power Technical Assistance Partnerships (CHP TAPs) and related activities, and Industrial Assessment Centers, among other efforts. For building technologies, H.R. 3219 would continue to support the goals of the Transformation in Cities initiative and the research, development, and market transformation of direct use of natural gas in residential applications. S. 1609 would support ongoing efforts to work with state and local agencies to incorporate the latest technical knowledge and best practices into construction requirements and to engage with industry teams to facilitate widespread deployment. For commercial buildings, the report on S. 1609 encourages support for more cost-effective integration techniques and technologies to facilitate deep retrofits. S. 1609 also would support emerging technologies efforts, including transactive controls R&D, regional demonstration of utility-led efforts advancing smart grid systems in communities, advanced solid-state lighting technology, and R&D for energy efficiency efforts for natural gas applications. S. 1609 would also provide funding for equipment and building standards. The Administration's budget for FY2018 would terminate the Weatherization and Intergovernmental Programs. The Weatherization Assistance Program (WAP) provides funding through formula grants to states, tribes, the District of Columbia, and U.S. territories to provide weatherization services that reduce energy costs for low-income households by increasing the energy efficiency of their homes. The State Energy Program (SEP) provides funding and technical assistance to states, the District of Columbia, and U.S. territories to promote the efficient use of energy and reduce the rate of growth of energy demand through the development and implementation of specific state energy programs. Both H.R. 3219 and S. 1609 do not follow the Administration's request to terminate these programs and would continue to support WAP and SEP. The House bill would continue those programs at FY2017 funding levels—$225 million for WAP and $50 million for SEP. The Senate committee bill would fund those programs at $212 million for WAP and $50 million for SEP. | The U.S. Department of Energy's (DOE's) Office of Energy Efficiency and Renewable Energy (EERE) administers renewable energy and end-use energy efficiency technology programs in research, development, and implementation. EERE works with industry, academia, national laboratories, and others to support research and development (R&D). EERE also works with state and local governments to assist in technology implementation and deployment. EERE supports nearly a dozen offices and programs including vehicle technologies, solar energy, advanced manufacturing, and weatherization and intergovernmental programs, among others. Funding for EERE is provided in the annual Energy and Water Development (E&W) Appropriations bill. At issue for the 115th Congress is the level of EERE appropriations and which activities EERE should support, including whether to continue support for specific initiatives and programs. On May 23, 2017, the Trump Administration submitted the budget proposal for FY2018. The FY2018 budget request for DOE is $28.2 billion of which about 2% is for EERE. The budget request for EERE is $636.1 million, a decrease of $1.5 billion, or nearly 70%, from the FY2017 enacted level of approximately $2.1 billion. The proposed reduction, if enacted, would affect all offices within EERE. For FY2018, the bulk of the EERE request is allocated to three areas: 25% for energy efficiency programs, 21% for renewable energy programs, and about 29% for sustainable transportation programs. The request estimates that two-thirds of the current portfolio of 2,500 multi-year projects (e.g., early-stage R&D projects) would remain active in FY2018. DOE anticipates that eliminating one-third of these projects would result in a reduction of approximately 30% in EERE-funded full-time equivalent staff. The President's request would include two specific program eliminations: the Weatherization Assistance Program and the State Energy Program, which received FY2017 appropriations of $225.0 million and $50.0 million, respectively. The President's request for EERE emphasizes early-stage R&D, limited validation testing and simulation to inform R&D, and analysis to support regulatory activities. The DOE budget justification states that funding for EERE would focus on "early-stage R&D, where the Federal role is critically important, and reflects an increased reliance on the private sector to fund later-stage research, development, and commercialization of energy technologies." There are several bills before Congress that recommend FY2018 appropriations for EERE. The bills contain EERE funding levels that are below the FY2017 enacted level, but higher than the President's budget request. The House passed H.R. 3219, the Defense, Military Construction, Veterans Affairs, Legislative Branch, and Energy and Water Development National Security Appropriations Act, 2018, on July 27, 2017. Division D of H.R. 3219—which contains the E&W appropriations—provides funding of $1.1 billion for EERE, $1.0 billion below the FY2017 enacted level and $449 million above the request. Floor amendments to H.R. 3219 reduced funding for EERE in H.R. 3219 by $18.4 million from H.R. 3266, the House Appropriations Committee version of the FY2018 E&W appropriations bill. H.R. 3266 would provide funding of $1.1 billion to EERE—$986 million below the FY2017 enacted level and $468 million above the request (H.Rept. 115-230). The Senate Committee on Appropriations reported S. 1609, the Energy and Water Development and Related Agencies Appropriations Act of 2018, on July 20, 2017. S. 1609 would appropriate $1.9 billion to EERE—$153 million below the FY2017 enacted level and $1.3 billion above the request (S.Rept. 115-132). The President signed P.L. 115-56, the Continuing Appropriations Act, 2018 and Supplemental Appropriations for Disaster Relief Requirements Act, 2017 on September 8, 2017, providing FY2018 funding at the FY2017 appropriations level through December 8, 2017. |
The United Nations (U.N.) Conference on Sustainable Development (UNCSD or "Rio+20") will convene June 20-22, 2012, in Rio de Janeiro, Brazil. This conference marks the 20 th anniversary of the U.N. Conference on Environment and Development (UNCED) in Rio in 1992 and the 10 th anniversary of the World Summit on Sustainable Development (WSSD) in Johannesburg, South Africa. As many as 115 heads of state may attend, with up to 50,000 other participants. Rio+20 organizers seek three objectives: securing renewed political commitment to sustainable development, assessing the progress and implementation gaps in meeting already agreed commitments, and addressing new and emerging challenges. No legally binding agreements are expected to be made at the meeting. Government delegations may agree to a process to identify new Sustainable Development Goals (SDGs). In addition, reform of international environmental institutions is on the conference agenda, with a focus on the U.N. Commission on Sustainable Development and the U.N. Environment Program (UNEP). In 1992, governments attending the "Rio" conference (formally called the United Nations Conference on Environment and Development or UNCED) politically endorsed the objective of "sustainable development"—achieving economic, environmental, and social development that "meets the needs of the present without compromising the ability of future generations to meet their own needs ." High-level government representatives produced a political declaration, Agenda 21, and a Statement of Forest Principles—none of which contain legally binding commitments. Agenda 21 led to establishment of the U.N. Commission on Sustainable Development, under the U.N. Economic and Social Council, as well as creation of national commissions on sustainable development in many countries, including the United States. The Rio meeting also opened for signature two treaties: the United Nations Framework Convention on Climate Change (UNFCCC) and the United Nations Framework Convention on Biological Diversity (CBD). This report summarizes the objectives and major issues of Rio+20 and gives a sampling of the wide diversity of views to be discussed by government officials; non-governmental organizations (NGOs); business leaders and trade associations; and representatives of youth, women, land-locked countries, cities, researchers, artisans, farmers, and many, many others who will be present at Rio+20. It also outlines United States policy toward the conference and possible issues for congressional consideration, including possible action on conference outcomes, the role of Agenda 21, and, more broadly, the possible role of sustainable development in the United States and U.S. foreign policy. Few Members of Congress or their staffs are expected to attend Rio+20. Many experts anticipate no legally binding or immediately consequential outcomes from the conference and some might question the relevance of the conference to Congress. Nonetheless, it is possible that some elements of any communique may serve U.S. national interests and foreign policy. These may merit examination through briefings or hearings. Members of Congress may find it useful to be apprised of the active discussion occurring mostly outside the United States on sustainable development. Background documents prepared for Rio+20, including the Global Environmental Outlook, may provide data and descriptions of circumstances and policies in other countries that may be useful to congressional decision-making. There may be additional issues for Congress related to Rio+20 that merit attention or communication with constituents. For example, there may be differences of view between the federal executive and legislative branches of the United States on sustainable development and implementation of its principles. Also, some segments of the U.S. population have expressed suspicion and opposition to what they perceive sustainable development to be, and particularly about its potential impact on national sovereignty; some may query their Members' offices. Some have offered their concerns about Agenda 21 (see adjoining box), which is likely to be referenced in the 2012 conference. More broadly, there is some debate regarding the role of sustainable development in the United States. For much of the world, the striving for sustainable development is of central economic, social, and environmental importance. In the United States, there is lack of accord on the intersection among economic, social, and environmental policies. Almost any topic containing "sustainable" or "green" may elicit controversy in the United States. Dialogue in Congress on the concepts behind them may provide constructive opportunities for identifying common ground. Over the past decade, many stakeholders have grown increasingly impatient with, and resistant to, "top-down" decision-making by national governments and international entities. International processes have witnessed a shift toward greater inclusion of and decision-making by civil society, local communities, and the private sector. This movement seems welcomed by a large majority of Rio+20 participants. The broad inclusiveness of the conference may produce outputs that more resemble a cacophony of messages than an orchestrated plan with broad consensus. Like many international documents on issues that are complex, the output may offer length and ambiguity rather than clarity and consensus. Rio+20 is premised on analysis showing that the objectives of sustainable development of the 1992 Rio conference have not been achieved. The fifth Global Environmental Outlook (GEO-5, see section below) concluded in early June 2012 that significant progress has been made on only 4 of 90 assessed, internationally agreed goals associated with sustainable development. Nonetheless, the Rio+20 website indicates that "[g]overnments are expected to adopt clear and focused practical measures for implementing sustainable development, based on the many examples of success we have seen over the last 20 years." For optimistic observers, "the second Earth summit is a chance to take honest stock of the situation and present ways to break political deadlock and hasten progress on the ground, in the air and in the oceans." Others see the process in a stalemate that leaders in Rio are unlikely to resolve, and call for wholesale, perhaps radical, change. Among the jaded, one observer commented that "the United Nations seems to be more concerned about the number of paragraphs agreed upon than about concepts." Rio+20 includes three days of public meetings (Sustainable Development Dialogues), followed by three days of meetings among diplomatic delegations from 193 nations, including many heads of state. Governments outlined three overall objectives for the conference: 1. securing a renewed political commitment for sustainable development; 2. assessing progress and remaining gaps in implementation of sustainable development efforts; and 3. addressing new and emerging challenges. As part of these objectives, governments are expected to assess the implementation of international environmental agreements, such as the Kyoto Protocol under the U.N. Framework Agreement on Climate Change (UNFCCC), and the Millennium Development Goals (MDGs), a set of eight internationally agreed-to development goals created in 2000. Many participants and observers hope that Rio+20 outcomes will address the Rio+20 objectives in a Communique from high level officials, which may contain agreement to a process to produce new Sustainable Development Goals, and affirmation of—and a Framework for Action to implement—internationally agreed goals. The draft Communique, entitled The Future We Want , is eclectic and sweeping, like the background reports and side meetings. As of the beginning of the third and last Preparatory Committee, only one-quarter of the draft text had been agreed and was "unbracketed" (i.e., does not contain proposed alternative language). Tens of pages, however, had been eliminated from earlier drafts. Delegations will likely continue previous differences over proposals to create a new global environment agency, "strengthen" financing, enhance technology transfer, and increase capacity in nations. In addition, the Rio+20 conference process includes collection of voluntarily submitted commitments to action from all stakeholders. The U.N. established a registry for such commitments. The preparatory committees identified two main themes: the green economy in the context of sustainable development and poverty eradication; and the institutional framework for sustainable development (IFSD). The first theme of Rio+20 is "The Green Economy." Government delegations agreed that "[e]ach country will choose its own green economy approach and policy mix, assessing national priorities and adapting measures to national institutions and economic systems." A major point of discussion, however, has been lack of agreement on what the green economy is, and what its relationship to sustainable development may be. Some see it as an element of achieving sustainable development, which was described in 1992 as consisting of three "pillars"—economic, social, and environment—all of which were critical to supporting the edifice of development. Rio+20 organizers described the green economy as "the intersection between environment and economy"; others expressed concern that this formulation gave too much emphasis to the economic pillar and not enough to social aspects (e.g., equality of women, engagement of civil society in decision-making, etc.), and risked supplanting the three-pillar concept of sustainable development. Organizers may wish to see high-level officials agree at Rio+20 on policy options to facilitate the green economy and foster greater international cooperation. Background documents and side meetings identify a host of practices to foster a green economy by community, national, international, and corporate actors. The conference preparations emphasize a diversity across regions and countries of meanings and approaches to sustainable development. One element of the green economy that seems to enjoy widespread agreement is the importance of the private sector in sustainable development. Some observers have suggested that one outcome from the proceedings may be a large number of private deals on renewable energy, pollution control, water infrastructure, and other commercial and development investments. Issues of trade also have been examined, including risks of protectionism, subsidization, compatibility of national measures with World Trade Organization (WTO) rules, and the importance of countries' domestic conditions and institutions (e.g., protection of intellectual property) to enable trade. For example, participants may debate how technologies essential to environmentally compatible development should be developed and disseminated across countries, with disagreements on such topics as "transfer" versus commercial sales. The second theme of Rio+20 is the institutional framework for sustainable development (IFSD). Many stakeholders agree that reform of existing international processes and institutions on environmental matters could benefit the effectiveness and efficiency of environmental protections. There also seems to be general agreement on some type of high-level, intergovernmental body on sustainable development. Many stakeholders would like to strengthen the U.N. Environment Programme (UNEP); among these, some propose to make UNEP a "specialized agency" of the United Nations, with greater authority and standing than the current program. Some European delegations proposed creating a world environmental agency under the United Nations that would have stronger regulatory and compliance authority; such concepts are strongly opposed by the United States and many other countries, for both pragmatic and sovereignty reasons. Other proposals would expand membership in UNEP to all countries, and increase its financial base. Some delegations have proposed to create a new Council for Sustainable Development in the United Nations, parallel to the Economic and Social Council and the Security Council. Other proposals would strengthen the U.N. regional councils and support national sustainable development councils. Others seek greater engagement of the public ("civil society") in the United Nations and national decision-making regarding sustainable development. Rio+20 may launch a new process to develop Sustainable Development Goals to succeed and extend the MDGs ( Appendix B ). Some participants propose that SDGs could provide a framework for work toward sustainable development beyond 2015. Many ideas put forward for individual SDGs would expand the scope of the MDGs, and there remains little agreement on specific language. Moreover, views differ on whether the SDGs would be applicable to all countries and applicable uniformly, or whether there would be differentiation among categories of countries. The wealthier countries emphasize the growing importance of rapidly developing economies, and that the choices made in developing countries will have greatest effect on people and the global environment. Lower-income countries point to the greater capacities of the wealthier economies and argue that they must take on greater responsibilities and augment assistance to lower-income countries. If there is agreement to create SDGs, there are at least three remaining areas of contention: Integration : There remain differences of views on how the three "pillars" of sustainable development—social, economic, and environmental—might be integrated in the SDGs. Some participants have expressed concerns that social and economic priorities may not receive sufficient emphasis in SDGs, and some observers have expressed concern that SDGs risk evolving into a distinct track parallel to a post-MDG path. Others suggest that SDGs and post-2015 MDGs would be complementary. Process : The process by which SDGs may be developed remains unresolved as well. G-77 countries prefer that it be "inter-governmental" without oversight by the General Assembly or the Secretary-General, as was done for the MDGs. Others contend that a process would need guidance from some office or agency, with the Secretary General's office as the most likely contender, under the General Assembly. Priorities : While delegations appear to generally agree that priorities should be set among emergent SDGs, they diverge on what the priority areas should be. The United States, for example, has opposed inclusion of "equity" and "sustainable production and consumption" in a priority list. Of all the proposals, only two SDGs were agreed to ad referendum by government delegations in the early June preparatory meeting: SDG 1. We underscore that the MDGs are a useful tool in focusing achievement of specific development gains as part of a broad development vision and framework for the development activities of the United Nations, for national priority setting and for mobilisation of stakeholders and resources towards common goals. We therefore remain firmly committed to their full and timely achievement. SDG 2. We recognize that the development of goals could also be useful for pursuing focused and coherent action on sustainable development. We further recognize the importance and utility of a set of sustainable development goals, which are based on Agenda 21 and JPOI [Johannesburg Plan of Implementation], fully respect the Rio Principles, in particular common but differentiated responsibilities, build upon commitments already made, respect international law and contribute to the full implementation of the outcomes of all major Summits in economic, social and environmental fields, taking into account that these goals should ensure a holistic coherence with the goals set out in Agenda 21. These goals should address and incorporate in a balanced way all three dimensions of sustainable development and their inter-linkages. These goals should be incorporated and integrated in the United Nations Development Agenda beyond 2015, thus contributing to the achievement of sustainable development and serving as a driver for implementation and mainstreaming of sustainable development in the United Nations system as a whole. The development of these goals should not divert focus or effort from the achievement of the Millennium Development Goals. One of the key background documents for Rio+20 is the fifth Global Environmental Outlook (GEO-5), prepared under UNEP. Its "Summary for Policymakers" was negotiated and endorsed by many governments, including the United States, in January 2012. It concludes that, despite moderate successes in some areas on some environmental problems, neither the scope nor speed of adverse environmental changes worldwide has decreased over the past five years. GEO-5 identified 4 of 90 internationally agreed goals related to sustainable development on which significant progress has been made. Some progress has been made on 40 goals, such as reducing rates of deforestation and expanding protected areas. Little progress has occurred for others, such as abating human-induced climate change, preventing desertification, and maintaining fish stocks. The report observed deterioration for 8 goals, such as protecting coral reefs. GEO-5 raises many unresolved challenges of degrading "natural capital," on which the productivity of economies and human well-being depend. GEO-5 reports that statistics show deteriorating air quality and rising concentrations of greenhouse gases in the atmosphere; depleting groundwater reservoirs; eutrophying coastal waters and acidifying ocean waters; losses of vertebrate biodiversity of up to 30% in some areas with thousands more species at risk; declining reporting on hazardous wastes; and other problems. Many of these problems are most acute in rapidly developing but low-income countries that may lack adequate financial, institutional, and technical capacity to address them. Many of these problems also flow across national boundaries. In addition, GEO-5 urges more reliable and systematic monitoring by nations of their environments and of related economic, social, and environmental processes, in order to inform decision-making. It stresses the importance of improved standardization of methods and access by the public to data. The report identifies a host of best practices by issue area. Regarding the potentially controversial topic of environmental governance, GEO-5 identifies best practices as Multi-level/multi-stakeholder participation; increased introduction of the principle of subsidiarity; governance at local levels; policy synergy and removal of conflict; strategic environmental assessment; accounting systems that value natural capital and ecosystem services; improved access to information, public participation and environmental justice; capacity strengthening of all actors; improved goal setting and monitoring systems. To illustrate how U.S. interests, and therefore congressional interests, relate to the Rio+20 event and negotiations, this section discusses the U.S. interest in sustainable development and security issues related to freshwater in the international context. Water has played a prominent role in the dialogue leading up to Rio+20. While freshwater is not the focus of Rio+20 or other recent international negotiations (e.g., the climate change negotiations in Durban, South Africa, in 2011), the natural resource management challenge of water and attention to water's role in achieving poverty, health, and climate objectives is generating water-related discussions at U.N. conferences. Water was selected as a priority issue in all the GEO-5 scoping consultations (see "Water in GEO-5" box for assessment of progress on water indicators). International freshwater issues are receiving rising attention in the United States and elsewhere as a security issue. Although the argument that water and other environmental conditions can contribute to either improving or deteriorating community safety and political stability is not a new concept, attention to and analysis of the global water situation, its stressors, and linkages to other sectors is growing rapidly. A February 2012 Intelligence Community Assessment of Global Water Security illustrates the rising view of water as critical not only to public or environmental health but also to political stability, food and energy supplies, and climate change mitigation and adaptation. Specifically, the report warns that water is anticipated to increasingly contribute to instability in nations important to U.S. national security interests. Consequently, some U.S. decision makers and stakeholders are evaluating what actions and opportunities are available for influencing the future role of water in fostering improved international security. Rio+20 is seen by some stakeholders as one such opportunity. In preparation for Rio+20, conference organizers distributed for discussion a "zero draft" of the Communique. No legally binding commitments are expected in the version high-level officials may adopt. The portion of the draft specific to water reiterated the right to safe and clean drinking water and sanitation as a human right. This aim would be consistent with the 2010 United Nations Human Rights Declaration by the U.N. General Assembly on access to safe and clean drinking water and sanitation as a human right essential to the full enjoyment of life and all other human rights. The zero draft also supported "the necessity of setting goals for wastewater management" and proposed renewed commitment to integrated water resources management and water efficiency plans. These would be encouraged through capacity development; exchange of experiences, best practices, and lessons learned; and sharing appropriate environmentally sound technologies and know-how. In addition to the language in the zero draft, there were proposals for specific water targets and water-related discussion in other background and advocacy documents (e.g., how to meet and manage water use and promote water use efficiency in both agriculture and in energy development, water's role in natural disasters and resiliency to disasters and climate change, emerging water quality concerns). As previously noted, Rio+20 could launch a process to develop Sustainable Development Goals by 2015. These may supplement or replace the current MDGs; like the MDGs they would almost certainly be non-binding. Among the eight current MDGs ( Appendix B ), the one to "Ensure Environmental Sustainability" includes the target to "[h]alve, by 2015, the proportion of people without sustainable access to safe drinking water and basic sanitation." One proposal in the SDG discussion would elevate water to its own goal─"safe drinking water and sanitation for all," rather than water as a quantifiable target within a broader goal. Some proposals would give more attention to sanitation given the slow progress on it under the MDGs. The United States provided a submission of its views on November 1, 2011, entitled Sustainable Development for the Next Twenty Years . It identifies three "key messages" that guide the U.S. approach to Rio+20: 1. The Built Environment: Clean Energy and Urbanization , addressing Clean Energy, New Infrastructure, and Access for All; Urbanization and Sustainable Cities; Water Systems; Sustainable Manufacturing and Environmental Goods and Services; and Human Capacity and Green Jobs. 2. The Natural Environment: Ecosystem Management and Rural Development , comprised of Food Security and Sustainable Agriculture; Oceans, Coasts, and Fisheries; and Ecosystem Services and Natural Resource Management. 3. The Institutional Environment: Modernizing Global Competition , including Making New Connections: Linking Governments, Communities, and Businesses for Action; Transforming Traditional Institutions; Strengthening International Environmental Governance; and Informing Decisions, Catalyzing Action, and Measuring Progress. No comprehensive statement is available of how this U.S. vision translates into positions on specific elements of the Rio+20 proposals. Still, some views may be distilled from statements. As examples, the United States agrees with strengthening international environmental institutions, but opposes adding a Council on Sustainable Development to the U.N. architecture or making UNEP a specialized agency of the United Nations; views the transfer of technology as outside the scope of sustainable development commitments; opposes discussion of intellectual property rights; opposes a call for a new agreement to protect biodiversity in the marine environment in the high seas (i.e., outside of national jurisdictions); opposes proposals for significant new funding for sustainable development; encourages actions toward sustainable development by stakeholders, especially women and youth; seeks greater emphasis globally on transparency and public awareness of corporate and governmental performance on environmental responsibilities, facilitated by new communication technologies; and resists commitments related to climate change or other issues addressed in other fora. Appendix A. Timeline of Environment and Development Discussions Appendix B. The Millennium Development Goals (2000) On September 8, 2000, the United Nations General Assembly adopted the United Nations Millennium Declaration (A/RES/55/2). Among other aspects of the Declaration, the General Assembly adopted what are commonly called the eight Millennium Development Goals (MDGs), most to be achieved by 2015. The MDGs are aspirational and not legally binding. The Goals and their respective targets are described below. Eradicate extreme hunger and poverty 1. Reduce by half the proportion of people living on less than a dollar a day; 2. Achieve full and productive employment and decent work for all, including women and young people; 3. Reduce by half the proportion of people who suffer from hunger. Achieve universal primary education 1. Ensure that, by the same date, children everywhere, boys and girls alike, will be able to complete a full course of primary schooling and that girls and boys will have equal access to all levels of education. Promote gender equality and empower women 1. Eliminate gender disparity in primary and secondary education preferably by 2005, and at all levels by 2015. Reduce child mortality 1. Reduce by two-thirds the mortality rate among children under age five. Improve maternal health 1. Reduce by three-quarters the maternal mortality ratio. Combat HIV/AIDS, malaria, and other diseases 1. Halt and begin to reverse the spread of HIV/AIDS; 2. Achieve, by 2010, universal access to treatment for HIV/AIDS for all those who need it; 3. Halt and begin to reverse the incidence of malaria and other major diseases. Ensure environmental sustainability 1. Integrate the principles of sustainable development into country policies and programs; reverse loss of environmental resources; 2. Reduce by half the proportion of people without sustainable access to safe drinking water and basic sanitation; 3. Achieve significant improvement in lives of at least 100 million slum dwellers, by 2020. Develop a global partnership for development 1. Develop further an open, rule-based, predictable, non-discriminatory trading and financial system; 2. Address the special needs of landlocked developing countries and small island developing states; 3. Deal comprehensively with the debt problems of developing countries; 4. In cooperation with pharmaceutical companies, provide access to affordable essential drugs in developing countries; 5. In cooperation with the private sector, make available the benefits of new technologies, especially information and communications. | The United Nations (U.N.) Conference on Sustainable Development (UNCSD or "Rio+20") convenes June 20-22, 2012, in Rio de Janeiro, Brazil. This conference marks the 20th anniversary of the U.N. Conference on Environment and Development (UNCED) in Rio in 1992. Governments participating in the 1992 meeting politically endorsed the objective of "sustainable development" as achieving economic, environmental, and social development that "meets the needs of the present without compromising the ability of future generations to meet their own needs." Rio+20 begins from the premise and findings that the objectives of the 1992 Rio conference have not been achieved. The U.N.'s fifth Global Environmental Outlook, published in June 2012, found significant progress toward only 4 of 90 internationally agreed goals associated with sustainable development. It found back-tracking on 8 goals. Stakeholders widely agree that changes in policies and institutions are desirable to improve implementation, but do not agree on means. It seems unlikely that Rio+20 will produce any agreements that would require congressional action or be legally binding. Some proceedings, however, may engender congressional interest in concepts proposed for simultaneously achieving economic, social, and environmental objectives. Rio+20 could influence views and actions internationally on development paths and practices, thereby affecting regional and global economies, demand for development aid, transnational environmental issues, and conflict incidence and resolution. Therefore, Congress may take interest in the conference. In addition, proceedings may reference the non-binding Agenda 21 produced at UNCED in 1992; media coverage could raise questions from constituents that Members may wish to address. The Rio+20 organizers indicate that "[g]overnments are expected to adopt clear and focused practical measures for implementing sustainable development, based on the many examples of success we have seen over the last 20 years." However, with strongly divergent views among the expected 115 Heads of State and up to 50,000 participants, Rio+20 may be more like a trade show than political negotiations. Indeed, some observers suggest that the conference may yield many deals among private participants. It is not expected to produce a treaty or any other binding commitments of national governments. Some observers wonder whether a meaningful communique can be successfully negotiated. High-level participants will be prompted to address issues that include the definition of "green economy," and whether a definition gives adequate emphasis to social aspects (e.g., "fairness") of sustainable development; whether "Sustainable Development Goals" (SDGs) should replace or supplement the Millennium Development Goals (MDGs), agreed by the U.N. General Assembly in 2000 and expected to end in 2015, as well as how SDGs might be negotiated, and what priorities might be set among them; how to reform international environmental institutions, particularly whether the United Nations Environmental Program should be strengthened; what actions, if any, might lead to improved implementation of existing sustainable development goals, given slow progress so far; whether governments may commit to greater financial and technological assistance to low-income countries to support their sustainable development. |
Paragraph 5(a) of Senate Rule XXVI, sometimes referred to as the "two-hour rule," restricts the times that most Senate committees and subcommittees can meet when the full Senate is in session. The rule, which has evolved over the years, is intended to help balance the Senate's committee and floor work and to minimize the logistical conflicts that Senators face between participating in committee hearings and markups and attending to their duties on the chamber floor. The two-hour rule applies to all committee meetings, including hearings and markups. Pursuant to paragraph 5(a) of Senate Rule XXVI, no Senate committee or subcommittee (except for the Appropriations and Budget Committees and their subcommittees) can meet after the Senate has been in session for two hours or past 2:00 p.m. unless both the majority and minority leaders (or their designees) agree to permit the meeting and their agreement has been announced on the floor. The Senate can also, by unanimous consent, grant permission for committees to meet, and until recently the practice was for a Senator to ask unanimous consent that committees be authorized to meet, rather than for the leaders to announce their agreement that meetings be permitted. A third but arguably impractical option is for the Senate to adopt a privileged motion to allow the meeting. Most of the time, the restrictions of the two-hour rule are not invoked. It is a routine, often daily, occurrence for committees to be given permission to meet during periods proscribed by the rule after agreements are announced on the Senate floor that grant them the authority to do so. Committee staff, when preparing for a hearing or a markup, routinely notify floor staff of the time and date of the meeting to ensure it is included in any unanimous consent agreement or joint leadership announcement. Sometimes, however, the two-hour rule's restrictions on committee meeting are insisted upon, most commonly as a form of protest or to delay a committee's action on a specific measure or matter. To invoke the rule does not necessarily require any formal parliamentary action. Senators can object if a unanimous consent agreement for committees to meet is propounded on the floor. In practice, however, informal communication with leadership is likely required to invoke the rule. This is true not only because the leaders alone could grant permission for committees to meet but also because, from a practical perspective, it would be difficult for Senators to predict when any unanimous consent agreement might be propounded so that they could arrange to be present to object. It was the long-standing practice of the Senate that, after receiving the requests from committees and clearing them with the minority leader, the majority leader (or a designee) would state on the floor I have [number] unanimous consent requests for committees to meet during today's session of the Senate. They have the approval of the majority and minority leaders. I ask consent that these requests be agreed to and these requests be printed in the R ecord . If no Senator objected, the Congressional Record would print, as if they were spoken on the floor, a series of unanimous consent requests for each committee to meet at stated times, each request being ordered "without objection." Perhaps partly due to this practice, it was widely understood in the Senate that unanimous consent was necessary to permit committees to meet after the Senate was in session for two hours or past 2:00 p.m. If leaders usually honored any request to prevent committees from meeting, then that practice would also leave the impression that unanimous consent was required. Currently, permission for Senate committees to sit during times prohibited by the two-hour rule is being granted almost exclusively by joint leadership agreement instead of by unanimous consent, a change from prior practice. A Senator on the floor now typically states I have [number] requests for committees to meet during today's session of the Senate. They have the approval of the majority and minority leaders. The presiding officer responds, "duly noted" to the Senator; no opportunity is afforded for a Senator to object, because unanimous consent is not requested. The list of committees authorized to meet is then printed in the Congressional Record following the statement made on the floor . Joint leadership permission has been used over 130 times since November 30, 2016, to authorize one or more Senate committees to meet during restricted hours and now appears to be the preferred way to provide a waiver of the rule. The change in practice might be in response to an apparent increase in invoking the rule, discussed in the final section of this report. The consequences for a Senate committee of violating the two-hour rule are potentially significant. Any action taken by a committee during a meeting prohibited by the rule is "null, void, and of no effect." For example, a nomination reported by a committee when it did not have authority to meet "is not properly before the Senate and, on a point of order, will be returned to committee." If a Senate committee was meeting without permission, it would immediately have to adjourn when the restricted hour arrived in order to comply with the rule. In response to the two-hour rule being invoked, a Senate committee could cancel its meeting or reschedule it to periods not covered by the rule—for example, meeting early in the morning before the Senate has convened or after it has adjourned. The Senate could also recess or adjourn in order for a committee to sit during the hours restricted by the two-hour rule, and in some cases it has done so in order for a committee to hear testimony or act on an important measure or matter. There are examples of Senate committees adjourning an official hearing pursuant to the two-hour rule and continuing to interact with witnesses in a non-formal setting, characterized as a "briefing" or "listening session." Such gatherings are not official, however, and do not enjoy the same powers and protections of actual Senate hearings. For example, witnesses could not testify under oath at such a meeting, and no official transcript of the interactions would be kept. Senate rules restricting committee meeting times have existed for over 70 years and have evolved over time. A rule limiting committees from sitting while the Senate is in session was first enacted in Section 134(c) of P.L. 79-753, the Legislative Reorganization Act (LRA) of 1946, which stated No standing committee of the Senate or the House, except the Committee on Rules of the House, shall sit without special leave, while the Senate or the House, as the case may be, is in session. The stated intent of the1946 rule was to reduce scheduling conflicts between committee and floor work. The Senate committee report accompanying the 1946 act predicted that the new rule would "make for closer concentration on committee work, on the one hand, and for fuller attendance on the floor, on the other." Under the 1946 form of the rule, all Senate committees had to cease sitting when the Senate went into session unless the unanimous consent of the Senate to meet was obtained. The provisions of the 1946 LRA were superseded on January 30, 1964, by Senate adoption of S.Res. 111, which placed an amended restriction on committee meetings in (then) paragraph 5 of Rule XXV of the standing rules of the Senate. As adopted, S.Res.111 stated Sec.1 No standing committee shall sit without special leave while the Senate is in session after (1) the conclusion of the morning hour, or (2) the Senate has proceeded to the consideration of unfinished business, pending business, or any other business except private bills and the routine morning business, whichever is earlier. Sec.2 Section 134(c) of the Legislative Reorganization Act of 1946 shall not be applicable to the standing committees of the Senate. The 1964 amendment to the standing rules was intended to provide additional periods for Senate committees to meet. Legislative history documents accompanying S.Res.111 make clear that many Senators felt the 1946 LRA rule had been too restrictive and had impeded the ability of committees to conduct their work. As two Senators noted in individual views in the committee report accompanying S.Res.111 Every Senator has had the experience of having consideration of a measure in which he is vitally interested repeatedly put off because of the inability of standing committees to meet ... while the Senate is in session. The problem has now assumed a chronic and persistent character. Objections against committees sitting are lodged as a matter of course, and often it is only in the exceptional case that a committee is able to secure unanimous consent to sit.... As the sessions of the Congress drag on through the year, the problem of finding time for committee work grows progressively worse. Daily sessions of the Senate begin earlier and end later, occupying an increasingly greater share of the working hours of the day. And, as if matters were not bad enough, as the time available for committee work decreases, the need for time to clear committee dockets before the end of the session grows more urgent. Whereas, under the 1946 LRA provision, no Senate committee could meet at any time that the Senate was in session, the 1964 amendment effected by S.Res. 111 permitted committees to sit during the first two hours of Senate session on a new legislative day (a period known as the "Morning Hour") and immediately thereafter if the Senate was engaged in routine "housekeeping" business or the processing of private bills. Subsequently, Section 117(a) of P.L. 91-510, the Legislative Reorganization Act of 1970, enacted on October 26, 1970, established a provision in law that supplemented the 1964 version of the rule contained in paragraph 5 of Senate Rule XXV. That statutory provision stated Except as otherwise provided in this subsection, no standing committee of the Senate shall sit, without special leave, while the Senate is in session. The prohibition contained in the preceding sentence shall not apply to the Committee on Appropriations of the Senate. Any other standing committee of the Senate may sit for any purpose while the Senate is in session if consent therefor has been obtained from the majority leader and the minority leader of the Senate. In the event of the absence of either of such leaders, the consent of the absent leader may be given by a Senator designated by such leader for that purpose. Notwithstanding the provisions of this subsection, any standing committee of the Senate may sit without special leave for any purpose as authorized by paragraph 5 of rule XXV of the Standing Rules of the Senate. The cumulative effect of the 1970 statutory provision and the still-existing provisions of Senate Rule XXV adopted in 1964 were to exempt the Appropriations Committee from any restrictions on meeting and to permit a committee to sit during a restricted period not just if it obtained the unanimous consent of the Senate to do so but also if the majority and minority leaders (or their designees) jointly authorized it to do so. The present form of the two-hour rule, which combined the provisions of the 1964 standing rule and the 1970 statutory provision, was adopted by the Senate on February 4, 1977, via Section 402 of S.Res. 4 , a resolution implementing the recommendations of the Temporary Select Committee to Study the Senate Committee System. The 1977 rules change added an exception for the Committee on the Budget, created in 1974, from the existing restrictions on meeting. Subsequent Senate action relocated the two-hour rule unchanged from Rule XXV to its current place in Section 5(a) of Rule XXVI. Table 1 lists examples identified by CRS of the enforcement of the two-hour rule between 1985 and 2017. The table includes the date the rule was invoked; where possible, an identification of the committee or committees affected; a summary of the proceedings; and a citation to the Congressional Record page, news account, or hearing transcript used to identify the table entry. In preparing the table, CRS conducted full-text searches in the Congressional Record and electronic news databases for either discussion of the rule or instances of objection to unanimous consent requests authorizing committees to meet. Not included in the table are instances where Senators or their staff indicated an intention to invoke the two-hour rule but for which no further evidence demonstrates that the rule was enforced. CRS cannot guarantee that these records are comprehensive of all instances of the two-hour rule being invoked. First, as discussed above, public action is not necessary to invoke the rule. As seen from the cases in Table 1 , sometimes no statement regarding authority for committees to meet was made on the floor. The majority leader was simply made aware that there was not an agreement and therefore no consent request or announcement was ever made on the floor. In 2017, in contrast, announcements were sometimes made when agreement was not reached, an apparently new practice that could affect results. Second, because the research is necessarily partly dependent on news accounts, variations in the nature of reporting on Senate action could potentially affect the results, although it is reasonable to expect unexpected adjustments to committee meetings and schedules to be newsworthy over the entire period under study. Third, and finally, various full-text search strategies employed may not necessarily identify every reported instance or every objection to a unanimous consent request made on the floor. Nevertheless, the cases identified suggest two general trends in the use of the two-hour rule. First, as has been noted, for the life of the two-hour rule, it has been a routine occurrence for committees to be given permission to meet during restricted periods. In recent years, however, it appears that the restrictions on sitting contained in the rule are being invoked more frequently. Over the 32-year period examined, CRS identified 47 occasions where one or more Senate committees had a meeting restricted by invocation of the two-hour rule. Over half of these instances have occurred since 2005. The eight instances identified by CRS as occurring in 2017 represent the highest number in any year over the period. Second, these data suggest that, since 1985, when the two-hour rule restrictions on committee meetings have been invoked, it appears to have been done in a large majority of cases as a form of protest or to delay committee action on a specific measure or matter. Invoking the rule to delay the consideration of judicial nominations has been particularly common. | Paragraph 5(a) of Senate Rule XXVI, sometimes referred to as the "two-hour rule," restricts the times that most Senate committees and subcommittees can meet when the full Senate is in session. The rule is intended to help balance the Senate's committee and floor work and to minimize the logistical conflicts that Senators face between participating in committee hearings and markups and attending to their duties on the chamber floor. Under the terms of the rule, no Senate committee or subcommittee (except the Committees on Appropriations and Budget and their subcommittees) can meet after the Senate has been in session for two hours or past 2:00 p.m. unless one of the following things occur: (1) the Senate grants unanimous consent for them to meet; (2) both the majority and minority leaders (or their designees) agree to permit the meeting, and their agreement has been announced on the Senate floor; or (3) the Senate adopts a privileged motion to allow the meeting. Should a committee meet during a restricted time period without being granted permission, any action that it takes—such as ordering a bill or nomination reported to the Senate—is considered "null, void, and of no effect." Senate rules restricting committee meeting times have existed for over 70 years and have evolved over time. A rule limiting committees from sitting while the Senate is in session was first enacted in Section 134(c) of P.L. 79-753, the Legislative Reorganization Act (LRA) of 1946. Rules regulating the meeting times of Senate committees were amended in 1964 and again in 1970. The Senate adopted the present form of the two-hour rule on February 4, 1977, via Section 402 of S.Res. 4, a resolution implementing the recommendations of the Temporary Select Committee to Study the Senate Committee System. Permission for committees to sit during the hours restricted by the rule is routinely granted in the Senate. On occasion, however, the two-hour rule is invoked, most often as a form of protest or in order to delay committee action on a particular measure or matter. Invoking the rule for these reasons has increased in recent years. Permission to sit during times prohibited by the rule is now most often granted by joint leadership agreement instead of by unanimous consent, a change from prior practice. |
Canada has long been the United States' most important energy partner. Canada is the single largest foreign supplier of petroleum products, natural gas, and electric power to the United States—and the United States is the dominant consumer of Canada's energy exports. Canada is also the primary recipient of U.S. energy exports. The value of the energy trade between the two countries totaled nearly $100 billion in 2010, helping to promote general economic growth and directly support thousands of energy industry and related jobs on both sides of the border. Increased energy trade between the United States and Canada—a stable, friendly neighbor—is viewed by many as a major contributor to U.S. energy security. The U.S.-Canada energy relationship is increasingly complex, however, and is undergoing fundamental change, particularly in the petroleum and natural gas sectors. Congress has been facing important policy questions in the U.S.-Canada energy context on several fronts, including the siting of major cross-border pipelines, increasing petroleum supplies from Canadian oil sands, increasing natural gas production from North American shales, and the construction of new facilities for liquefied natural gas (LNG) exports. Legislative proposals in the 112 th Congress could directly influence these developments. For example, H.R. 1938 would direct the President to expedite the consideration and approval of the Keystone XL pipeline linking Canadian oil sands production to refineries in the Gulf of Mexico. H.R. 909 would encourage petroleum and natural gas production on the outer continental shelf, would prescribe requirements for coordination with adjacent states regarding associated pipeline construction, and would allow production of petroleum and natural gas from the Arctic National Wildlife Refuge, among other provisions. S. 304 would support a program to train workers in the construction, operation, maintenance, and performance of all related environmental processes involving oil and gas infrastructure in Alaska. Other proposals in Congress affecting hydraulic fracturing operations for natural gas production, offshore drilling, or U.S. oil shale development could also affect the U.S.-Canada energy trade. While specific energy policy issues arising in the United States and Canada may appear to be independent of one another, many have important physical, economic, and environmental links. Thus, U.S.-Canada energy policies established in one context may have important implications in others. This report provides an overview of the U.S.-Canada energy trade, with a focus on petroleum and natural gas. It summarizes important trends in both of these sectors and identifies key connections among these trends. Finally, the report discusses possible implications for the U.S.-Canada energy relationship going forward, highlighting considerations for Congress as it continues its oversight of the energy industry and considers new energy legislation. Although the report raises environmental issues in specific contexts, a broad discussion of environmental impacts from North American energy production and consumption is beyond its scope. In 2010, 30% of primary energy consumed in the United States was imported ( Figure 1 ). Approximately 29% of these energy imports were Canadian petroleum (18%) and Canadian natural gas (11%). Taken together, Canadian petroleum and natural gas accounted for 9% of total U.S. primary energy consumption in 2010, the largest contribution from any one foreign supplier. The value of energy imports from Canada in 2010 was $83.6 billion, accounting for about 3.5% of all U.S. imports of goods and services that year. These payments were primarily for petroleum and natural gas ( Figure 2 ). In addition to these imports, the United States exported $13.5 billion worth of energy commodities to Canada, including $5.3 billion of refined petroleum products. The North America Free Trade Agreement's (NAFTA's) extensive energy provisions have facilitated energy trade between the United States and Canada, underscoring the importance of this trade for both countries. NAFTA states, in part, "it is desirable to strengthen the important role that trade in energy and basic petrochemical goods plays in the free trade area...." By virtue of NAFTA and the private sector orientation of the energy sectors in both countries, U.S. and Canadian companies have become integrated in the development, production, transportation, and marketing of petroleum and natural gas. Joint ventures between U.S. and Canadian companies on petroleum and natural gas projects are common. These close connections, and geographic proximity, have led the U.S. and Canadian energy markets to be viewed as one. The United States and Canada are connected by high capacity pipelines carrying crude oil, other petroleum products, and natural gas. As Figure 3 shows, pipelines originating in Canadian supply basins are linked to major markets across the United States, comprising a large part of the North American pipeline system. There are five major Canadian petroleum export pipelines, discussed later in this report. Canadian natural gas exports cross into the United States at 25 entry points across the length of the border through major and minor pipelines. The primary receiving states are Idaho (21%), New York (20%), Montana (15%), North Dakota (15%), and Minnesota (15%). While pipelines carry most Canadian energy exports to the United States, significant volumes are also transported by truck, train, and marine vessel. Although the United States and Canada have a long-established trade relationship in petroleum and natural gas—both have been shipped across the border since the late 1800s—several aspects of that relationship have been undergoing a transformation in recent years. These changes include the rapid growth in petroleum supplies from Canadian oil sands, the siting of major cross-border petroleum pipelines, renewed attempts to commercialize Arctic natural gas, a sharp rise in natural gas production from U.S. shales, and the development of new liquefied natural gas (LNG) facilities. In each of these areas new technology and infrastructure investments may have a significant effect on the balance of energy supply, demand, and trade between the United States and Canada. In some cases, they may also create new competition between the two countries in developing specific mineral resources and infrastructure projects. In 2010, Canada was the largest supplier of imported petroleum to the United States. Of the 11.8 million barrels per day (Mbpd) the United States imported last year, Canada supplied 2.5 Mbpd (22%), more than the imports from the next two largest suppliers combined—Mexico and Saudi Arabia ( Figure 4 ). Canadian imports have grown fairly steadily since the early 1980s and are expected to continue growing as new U.S.-Canada pipeline capacity is added and Canadian petroleum resource development expands. The Canadian Association of Petroleum Producers (CAPP) projects crude oil output to increase more than 50% from 2010 to 2025, with most of this production destined for the United States. As noted earlier, the United States also exports a limited amount of petroleum to Canada, mostly as refined products. Petroleum production from oil sands is the key driver behind the growth in Canadian petroleum exports. Oil sands are mixtures of sand, water, and bitumen. When oil sands, also known as tar sands, are included, Canada's petroleum reserves rank second in the world behind Saudi Arabia's. Canada has an estimated 143.1 billion barrels of petroleum reserves, of which 81% are from oil sands. According to CAPP projections, by 2025, oil sands will account for about 80% of total Canadian oil production, up from 50% currently. Notwithstanding its rapid growth, petroleum production from Canadian oil sands is controversial because it has significant environmental impacts, including emissions of greenhouse gases during extraction and processing (that exceed emissions from conventional oil production), disturbance of mined land, and impacts on wildlife and water quality. Since bitumen in oil sands cannot be pumped from a conventional well, it must be mined, usually using strip mining or open pit techniques, or the oil can be extracted using underground heating methods, which require large amounts of water and natural gas (for heating). The magnitude of the environmental impacts of oil sands production, in absolute terms and compared to conventional oil production, has been the subject of numerous, and sometimes conflicting, studies and policy papers. Cross-border pipeline infrastructure for Canadian petroleum exports to the United States has been growing rapidly. Five major pipelines with a combined capacity of 3.3 Mbpd currently link Canadian petroleum producing regions to markets in the United States ( Table 1 ). Two of these pipelines, Alberta Clipper and Keystone, with a combined capacity of just under 0.9 Mbpd (26% of the total) began service last year. A permit application for a sixth pipeline, Keystone XL, which would add an additional 0.8 Mbpd of capacity, is in the final stages of review by the U.S. State Department. If approved and constructed, Keystone XL would bring Canada's total U.S. petroleum export capacity to over 4.1 Mbpd, enough capacity to carry over 34% of U.S. petroleum imports in 2010. Given that Canada actually supplied the United States 2.5 Mbpd in 2010, large increases in Canadian supply will ultimately be possible, although the industry anticipates significant excess pipeline capacity for the next decade. In addition, several large pipeline projects are proposed within the United States to increase movements of Canadian petroleum to key U.S. market hubs, including refineries in the Midwest and on the Gulf Coast that employ complex technology in order to process "heavy" crude oils like those from Canada, Mexico, and Venezuela. Note that whether a pipeline is located in one country or the other has little bearing on its ownership; Kinder Morgan is a U.S. company while Enbridge and TransCanada are Canadian companies ( Table 1 ). The recent expansion of petroleum pipelines from Canada has generated considerable controversy in the United States. Proponents of these pipelines, including Canadian government agencies, petroleum industry stakeholders, and pipeline construction workers, have based their public interest justifications primarily on increasing the diversity of the U.S. petroleum supply and on expected economic benefits to the United States, including near-term job creation associated with pipeline construction and operation. Opponents, primarily environmental groups and affected communities along pipeline routes, have objected to these projects principally on the grounds that Canadian oil sands development has negative environmental impacts and that it promotes continued U.S. dependency on fossil fuels. Some opponents also argue that, given the excess capacity anticipated in the existing Canadian petroleum pipelines noted above, additional pipelines are not needed. These issues have come into particular focus in the context of the Keystone XL pipeline proposal, which applied for a Presidential Permit from the U.S. Department of State in 2008. The State Department expects to make a decision regarding this permit by the end of 2011. H.R. 1938 (Sec. 3) would require this decision by November 1, 2011. The Arctic region has substantial natural gas resources. For example, the U.S. Geological Survey (USGS) estimates that conventional natural gas reserves just on Alaska's North Slope potentially exceed 100 trillion cubic feet (Tcf), over four times the total annual gas consumption of the United States. The Mackenzie River Delta region in the Canadian Arctic contains an estimated 40 Tcf of natural gas. The USGS's assessment of undiscovered conventional natural gas resources across the entire Arctic region concluded that over 1,600 Tcf of additional natural gas resources remain to be found, much of it under Canadian and U.S. territory. Both the United States and Canada have long recognized the potential of these natural gas resources and have pursued policies to develop them. Principal among these policies has been promoting the construction of natural gas pipelines from the Arctic to markets in the lower-48 United States. While Arctic natural gas pipeline projects have been on and off the drawing board for decades, serious interest in Arctic natural gas pipeline revived around 2000 because of accelerated growth in U.S. natural gas demand, rising natural gas prices, and increased importation of liquefied natural gas (LNG) from overseas. Moreover, many industry analysts expected a U.S. policy of carbon dioxide control could further increase natural gas demand for electric power generation and, possibly, transportation fuel. These factors led both U.S. and Canadian officials to restart the process of Arctic natural gas pipeline development. Important milestones in Arctic pipeline activity were Alaska's 2008 award to TransCanada of a license to build an Alaska natural gas transportation system from Prudhoe Bay, AK, through Canada to the lower-48 states, the concurrent announcement of a competing pipeline proposal (Denali) along a similar route, and revival of a third proposal for an all-Canada pipeline originating in the Mackenzie Delta ( Figure 5 ). Since large sections of either of the proposed Alaska natural gas pipelines would pass through Canadian territory, Canada has cooperated with the United States on their development. However, because the Mackenzie pipeline would commercialize a major new source of North American natural gas, and would draw on a limited pool of construction resources and materials available for such a project, it has been viewed by some as a direct competitor to an Alaska gas pipeline. Notwithstanding recent development progress, there have been many obstacles to Arctic natural gas pipelines—most notably natural gas prices in the lower-48 states, the primary market for Arctic natural gas. As discussed below, a rapid and largely unanticipated increase in natural gas production from U.S. shales has lowered natural gas price forecasts for the foreseeable future. Given this drop in prices, Arctic natural gas projects may not be economically viable at present. In March 2011, Canadian authorities provisionally approved the Mackenzie pipeline project, although some analysts believe it may not be constructed without new government subsidies. In May 2011 the developers of the Denali pipeline proposal discontinued the project, citing a lack of commitment to contract for pipeline capacity among potential Arctic gas producers (two of which—BP and ConocoPhillips—were Denali sponsors). TransCanada officials have stated that they remain committed to developing their Alaska pipeline project, although some industry analysts are skeptical. If either the TransCanada or Mackenzie pipeline is ultimately constructed and begins transporting natural gas to lower-48 markets, it could have a significant impact on U.S. energy prices, energy security, and emissions of carbon dioxide. Canada is the dominant foreign supplier of natural gas to the United States. Of the 3,683 billion cubic feet (bcf) of natural gas the United States imported in 2010, Canada supplied 3,222 bcf (88%), almost 20 times the next largest supplier. This level of Canadian natural gas exports to the United States comprised approximately 13% of total U.S. natural gas consumption last year. Canadian natural gas exports to the United States saw rapid growth beginning in the mid-1980s, rising more than 400% between 1984 and 2002. These imports have begun to decline, however, due to increases in U.S. imports of LNG from overseas and, more recently and importantly, due to increases in domestic natural gas production. At the same time, the United States has begun to export significant volumes of U.S.-produced natural gas to markets in eastern Canada, displacing Canadian supplies ( Figure 6 ). In 2010, the United States exported 738 billion cubic feet of natural gas to Canada, mostly via Michigan. In May, the U.S. Federal Energy Regulatory Commission approved a new pipeline from Marcellus shale gas fields in the United States to Canada, potentially increasing northward natural gas exports. The rise in U.S. domestic natural gas supplies has been driven by an unanticipated growth in natural gas production from shale, a widespread type of geologic formation that often holds large quantities of natural gas but poses technical challenges for extraction. In recent years, energy companies have overcome these challenges, making large natural gas resources in U.S. shales commercially available. For example, in its 2011 Annual Energy Outlook , the Energy Information Administration more than doubled its estimate of shale gas resources to 827 Tcf from its 2010 Annual Energy Outlook estimate of 347 Tcf—due primarily to a re-evaluation of shale gas supplies. Because U.S. shale gas reserves are located close to major natural gas markets, U.S. shale gas has an advantage over traditional supply basins in Western Canada and the U.S. Gulf Coast. Large shale gas reserves are also found in Canada, although they are several years behind the development of U.S. reserves because of limited pipeline infrastructure and because transportation costs make them less competitive than other North American supplies. The reversal of Canada-U.S. natural gas export trends is driving fundamental changes in the North American natural gas industry. For example, due to sharply declining long-haul contract volumes on its Canadian natural gas pipelines to the United States, TransCanada has had to drastically restructure its pipeline tariffs to maintain the economic viability of certain lines. Likewise, as discussed earlier, shale gas plays have hurt prospects for Arctic natural gas development in both Alaska and Arctic Canada. On the other hand, low natural gas prices benefit the production of petroleum from oil sands, which requires large volumes of natural gas for extraction and processing. It remains to be seen how the development of additional North American natural gas reserves and associated pipeline infrastructure will turn out over time as Canada seeks to develop its own resources (with the help of U.S. companies) in response to U.S. shale gas developments. At least in the near term, however, it appears that recent trends of reduced U.S. imports of Canadian natural gas will continue. Liquefied natural gas (LNG) shipments from overseas historically have played a minor role in North American energy markets. However, in reaction to rising natural gas prices in the early 2000s and a fear of impending shortages of pipeline natural gas, demand for LNG imports to the United States was expected to increase. To meet this anticipated growth in LNG demand, developers expanded existing LNG terminals and constructed or proposed numerous new LNG import terminals in both the United States and Canada. In the United States, between 2001 and 2011, 3 existing LNG import terminals were expanded, 7 new LNG terminals were constructed, and 16 were approved but not constructed. In Canada during this period, one new LNG import terminal was constructed and two more were approved. Because Canada's new LNG terminals would serve the same Northeast markets as several of the proposed U.S. terminals, there was considerable competition among the developers of these projects. In one instance, this competition even reportedly created diplomatic tension between the two countries. But the building boom in LNG terminals was premature. As North American natural gas supplies from shale plays rapidly increased, the anticipated rise in demand for LNG imports did not materialize, leaving most of the new LNG import capacity unutilized. In a somewhat ironic turn of events given the origins of the aforementioned LNG terminal building boom, some terminal owners and developers are now proposing to export North American natural gas to China, Japan, and other foreign buyers. At least two groups have proposed Canadian LNG export terminals in British Columbia, anticipating significant natural gas supplies from shales in Western Canada. Many analysts view such exports as the only way to economically develop gas reserves from these western shales, which might otherwise not be competitive with U.S. natural gas supplies. Likewise at least three U.S. developers have filed applications for LNG export facilities (modifying existing import terminals), and more such filings are anticipated. On May 20, 2011, the U.S. Department of Energy issued its first conditional authorization for LNG exports from the Sabine Pass LNG Terminal in Louisiana to non-NAFTA countries. If U.S. and Canadian LNG export projects are developed, LNG developers in the two countries could again find themselves in competition, only this time in seeking to supply overseas LNG buyers. The potential effects on North American natural gas prices are difficult to predict, but exports to foreign markets would create upward price pressures. Furthermore, a large LNG export trade might limit U.S. natural gas exports to Canada in the future. The United States and Canada, while independent countries, effectively comprise a single integrated market for petroleum and natural gas. These markets are physically linked by billions of dollars of transportation and refining infrastructure, and are economically linked by direct participation in the same regional and global energy markets. Canada is the largest foreign supplier of energy to the United States and will continue to be for the foreseeable future. The United States depends on Canada for oil and natural gas supplies that it cannot currently produce itself. As the primary supplier of U.S. imports of petroleum and natural gas, Canada is viewed as a stabilizing factor for U.S. energy supplies; although petroleum prices are set in a global market, the likelihood that Canada would cut off oil and natural gas supplies is remote. But Canada is equally dependent upon the United States to buy energy exports that might not easily find a market elsewhere due to geographical constraints. The United States is also a critical supplier to Canada of refined petroleum products. U.S.-based companies invest heavily in assets and energy resources in Canada and vice versa. Although individual companies in both countries may compete for specific energy opportunities (e.g., LNG terminals), the overall energy relationship between the United State and Canada is mutually beneficial. Traditionally, the energy trade between the United States and Canada, while intertwined, has been uncomplicated—taking the form of a steadily growing southward flow of crude oil and natural gas to markets in the U.S. Midwest and Northeast. But recent increases in oil sands and shale gas production, expansion of cross-border pipeline capacity, prospects for LNG exports, and renewed interest in Arctic natural gas have greatly complicated that energy relationship, creating new competition and interconnections. Consequently, while energy policies in one country have always inevitably affected the other, their cross-cutting effects in the future may not be widely understood and, in some cases, may be largely unanticipated. For example, policies affecting U.S. shale gas production could affect North American natural gas prices overall, and thus, the costs of producing petroleum from oil sands (which requires large volumes of natural gas for heating). Changing oil sands costs could, in turn, affect Canadian petroleum supplies to the United States, affecting north-south pipeline use and changing U.S. petroleum import requirements from overseas. Changing natural gas prices would also change the economics of Arctic natural gas, however, and influence the development of the Arctic natural gas pipelines, which could provide an alternative source of economic natural gas for oil sands production in Alberta. How such scenarios could play out in reality is open to debate, but they illustrate the tangled web policymakers in both countries must navigate as they consider future energy, environmental, and transportation decisions. As Congress debates legislative proposals affecting the petroleum and natural gas industries, it may be helpful to consider these proposals in the broadest possible North American context, recognizing that the energy sector in Canada may be moved in one direction or another based on policies in Washington, DC. For example, developers are already pursuing western Canadian routes for petroleum exports to Asia as an alternative to U.S. exports, especially if the latter should fail to grow as expected. Ultimately, the energy market effects of specific energy policies and projects must be weighed against their broader economic value, energy security implications, and environmental impacts. To date, the judgment of Congress has favored a growing U.S.-Canada energy partnership—but ensuring that this relationship continues to be as mutually beneficial as possible will likely remain a key oversight challenge for the next decades. If the balance tips the other way—either in the eyes of developers or the federal government—Congress may need to reconsider its position on key energy and related initiatives to meet the United States' long-term policy objectives. | The United States and Canada, while independent countries, effectively comprise a single integrated market for petroleum and natural gas. Canada is the single largest foreign supplier of petroleum products and natural gas to the United States—and the United States is the dominant consumer of Canada's energy exports. The value of the petroleum and natural gas trade between the two countries totaled nearly $100 billion in 2010, helping to promote general economic growth and directly support thousands of energy industry and related jobs on both sides of the border. Increased energy trade between the United States and Canada—a stable, friendly neighbor—is viewed by many as a major contributor to U.S. energy security. The U.S.-Canada energy relationship is increasingly complex, however, and is undergoing fundamental change, particularly in the petroleum and natural gas sectors. Congress has been facing important policy questions in the U.S.-Canada energy context on several fronts, including the siting of major cross-border pipelines, increasing petroleum supplies from Canadian oil sands, increasing natural gas production from North American shales, and the construction of new facilities for liquefied natural gas (LNG) exports. Legislative proposals in the 112th Congress could directly influence these developments. These proposals include H.R. 1938, which would expedite consideration of the Keystone XL pipeline proposal; H.R. 909, which would encourage petroleum and natural gas production on the outer continental shelf and in the Arctic National Wildlife Refuge; and S. 304, which would support a program to train workers involved with oil and gas infrastructure in Alaska. Other proposals in Congress affecting hydraulic fracturing operations for natural gas production, offshore drilling, or U.S. oil shale development could also affect the U.S.-Canada energy relationship. Traditionally, the energy trade between the United States and Canada, while intertwined, has been uncomplicated—taking the form of a steadily growing southward flow of crude oil and natural gas to markets in the U.S. Midwest and Northeast. But recent developments have greatly complicated that energy relationship, creating new competition and interconnections. Consequently, while energy policies in one country have always inevitably affected the other, their cross-cutting effects in the future may not be widely understood and, in some cases, may be largely unanticipated. For example, policies affecting U.S. shale gas production could affect North American natural gas prices overall, and thus, the costs of producing petroleum from oil sands (which requires large volumes of natural gas for heating). Changing oil sands costs could, in turn, affect Canadian petroleum supplies to the United States, affecting north-south pipeline use and changing U.S. petroleum import requirements from overseas. Changing natural gas prices would also change the economics of Arctic natural gas, however, and influence the development of the Arctic natural gas pipelines, which could provide an alternative source of economic natural gas for oil sands production in Alberta. How such scenarios could play out in reality is open to debate, but they illustrate the tangled web policymakers in both countries must navigate as they consider future energy, environmental, and transportation decisions. As Congress debates legislative proposals affecting the petroleum and natural gas industries, it may be helpful to consider these proposals in the broadest possible North American context, recognizing that the energy sector in Canada may be moved in one direction or another based on policies in Washington, DC. To date, the judgment of Congress has favored a growing U.S.-Canada energy partnership—but ensuring that this relationship continues to be as mutually beneficial as possible will likely remain a key oversight challenge for the next decades. |
On March 12, 2002, Governor Tom Ridge—then Director of the White House Office of Homeland Security (OHS), and formerly Secretary of the Department of Homeland Security (DHS)—announced the establishment of the Homeland Security Advisory System (HSAS). The HSAS is designed to measure and evaluate terrorist threats and communicate these threats to federal, state, and local governments, the public, and the private sector in a timely manner. Although HSAS is a nationwide system, it can also be used at a smaller scale to warn of threats against a state, city, critical infrastructure, or industry. From inception to August 2004, the HSAS has been raised from "elevated" to "high" seven times, and raised to severe once. (see Table 2 ). The HSAS was developed by OHS using information collected from state and local first responders, business leaders, and the public. Following the March 12 announcement, the general public and the private sector were asked to provide comments on the system, with a deadline for comments on April 26, 2002. Within DHS, the Undersecretary for Information Assurance and Infrastructure Protection—as head of the Information Assurance and Infrastructure Protection directorate (IAIP)—is responsible for administering the HSAS. Specifically, IAIP is responsible for providing, in coordination with other agencies of the federal government, specific warning information and advice about appropriate protective measures and countermeasures to state and local government agencies and authorities, the private sector, other entities, and the public. The advisory system is based on five threat levels: low, guarded, elevated, high, and severe. Each level, with its corresponding identification color, indicates protective measures mandatory for federal departments and agencies. DHS receives threat information from the Federal Bureau of Investigation (FBI), the Central Intelligence Agency (CIA), the National Security Agency (NSA), the Drug Enforcement Agency (DEA), the Department of Defense (DOD), the Terrorist Threat Integration Center (TTIC), and other agencies. DHS uses this information to determine what terrorist threat level to set. Assigning a threat condition involves a variety of considerations, among which are the following: To what degree is the threat information credible? To what degree is the threat information corroborated? To what degree is the threat specific and imminent? How grave are the potential consequences of the threat? The DHS Secretary decides to raise or lower the threat level in consultation with the Homeland Security Council. When the decision to change the threat level is made, DHS sends an electronic notification to state homeland security centers and to federal, state, and local agencies via the National Law Enforcement Telecommunications System (NLETS). If circumstances and time permit, the DHS Secretary or his representative makes an advance conference call to alert governors, state homeland security advisors, and mayors of selected cities that the terrorism threat level has been changed and that electronic notification is about to be sent. Following the first conference call and electronic notification via NLETS, DHS makes a second conference call to as many state and local law enforcement associations as can be reached. Following the second conference call, DHS initiates a secure call using the Business Roundtable's Critical Emergency Operations Communications Link (CEO COM LINK) to notify chief executive officers of the nation's top businesses and industries. They are asked to dial into a secure conference call, and after each CEO goes through a multi-step authentication process to ensure security, DHS or other federal officials brief them on developments and threats. Following the conference call via CEO COM LINK, DHS makes a public announcement through a press conference. Finally, critical infrastructure associations and other business groups are notified. Several bills were introduced in the 109 th Congress that addressed administration of the HSAS or alert notification of federal, state, and local entities; the private sector; and the public. Some of these included H.R. 2101 , S. 1753 , and H.R. 5001 . H.R. 2101 proposed to require DHS to establish a telephone alert network to warn the public of imminent or current emergencies caused by terrorist incidents and disasters. The warning would have provided information on appropriate protective measures. S. 1753 proposed to establish a National Alert System administered by a National Alert Office. The National Alert Office would have been established within the National Oceanic and Atmospheric Administration, and the National Alert System would have provided a public alert on national, regional, and local emergencies requiring a public response. H.R. 5001 would have required the DHS Undersecretary for Information and Analysis to implement changes to HSAS. The proposed changes included the requirement for every HSAS alert to be accompanied by information on the threat and appropriate protective measures. The HSAS warning would have been limited in scope for every warning to a specific region, locality, or economic sector believed to be at risk. Finally, H.R. 5001 would have required DHS to use some means of warning the nation without the use of color designations. Since the creation of the HSAS, a number of issues have arisen, among which are: the vagueness of warnings disseminated by the system; the system's lack of protective measures recommended for state and local governments, and the public; the perceived inadequacy of disseminating threats to state and local governments, the public, and the private sector; and how best to coordinate HSAS with other existing warning systems. In the 109 th Congress, the House of Representative's Committee on Government Reform's Subcommittee on National Security, Emerging Threats, and International Relations held a hearing on the HSAS, its threat codes, and public response to it. This hearing focused on the information DHS issued the public the seven times the HSAS threat level was raised from "yellow" to "orange." These issues and pertinent oversight options available to Congress are discussed below. The HSAS threat level has been raised seven times from "yellow" to "orange" since its activation on March 12, 2002, and once to "red" on August 10, 2006. With each change, the Attorney General or DHS Secretary cited intelligence information but offered little specificity, except on August 1, 2004, when former DHS Secretary Ridge identified financial institutions in New York, Washington, DC, and New Jersey as being targeted by Al Qaeda. The only other time any specifics were given on possible terrorist attack targets was on February 7, 2003, when former DHS Secretary Ridge cited intelligence reports suggesting Al Qaeda attacks on apartment buildings, hotels, and other soft skin targets. But in this case, no region, state, or city was identified as possible locations of attacks. Moreover, DHS has never explained the sources and quality of intelligence upon which the threat levels were based. Some observers have asserted that when federal government officials announce a new warning about terrorist attacks, the threats are too vague. The vagueness that characterized the eight increases in the threat condition in the past two years has raised concerns that the public may begin to question the authenticity of the HSAS threat level. Former Secretary Ridge told reporters on June 6, 2003, that DHS is worried about the credibility of the system. He said that the system needs to be further refined. Questions about the credibility of the threat, say other observers, might cause the public to wonder how to act or whether to take any special action at all. Some observers maintain that, without specific terrorist threat information, there is no basis for formulating a clear, easily understood public announcement of what appropriate protective measures to take. Others assert that the continued lack of specific information arguably can lead to complacency. DHS officials cite the lack of specificity in intelligence as the reason for a lack of detailed information when the threat level is changed. Former Secretary Ridge has been quoted saying that the intelligence gathered so far has been generic; but he maintained that DHS, and the federal intelligence community that provides information about terrorist threats will improve. Option 1: Status Quo . Congress may view the evolution of the process, and decisions relating to it are best left to the Department. The lack of specificity may be due to the need to protect intelligence sources or a desire by DHS to issue warnings when threat information is generic, but nonetheless credible. Maintaining the status quo places the burden of responding to complaints about the vagueness of HSAS warnings and the critiques of DHS's perceived inability to give adequate terrorist attack warnings on the Department. Option 2: Provide General Warnings . Due to the reported misunderstanding of HSAS threat levels, and the system's lack of recommended protective measures for state and local agencies, the public, and private-sector entities, Congress could consider directing DHS to issue general warnings concerning the threat of terrorist attacks without using the HSAS to notify state and local governments, the public, and the private sector. General warnings via public statements, in coordination with HSAS warnings to the federal government, would ensure that notices of terrorist threats are issued to state and local governments, the public, and the private sector. DHS chose to provide general warnings on September 4, 2003, and November 21, 2003. On September 4, 2003, DHS cited recent federal interagency reviews of information that raised concerns about possible Al Qaeda plans to attack the U.S. and U.S. interests overseas. This general warning listed aviation, critical infrastructure, WMD, and soft target threats, however, no specifics were given on possible location or type of attacks. Another general warning was issued on November 21, 2003, when DHS cited a high volume of reports concerning the possible threats against U.S. interests during the Muslim holiday of Ramadan. These reports suggested Al Qaeda remained interested in using commercial aircraft as weapons against critical infrastructure; however, no location of possible attacks was specified. This approach would address the concerns of some who have asserted that the HSAS causes misunderstanding at the state and local level, but it would not address the issue raised by those who say DHS does not give enough specificity in its terrorist attack warnings. Option 3: Increase Specificity of Warnings . Were Congress to decide that the terrorist warnings issued by DHS are too vague and cause complacency in state and local agencies, the public, and the private sector, it might instruct DHS to use the HSAS to provide specific warnings to targeted federal facilities, regions, states, localities, and private sector industries to the extent that is possible. DHS has said that its goal is to have the capability to issue high alerts to designated cities, geographical regions, industry, or critical infrastructure. This approach arguably would address the concerns about the perceived vagueness of HSAS warnings. One could argue that DHS is getting better at providing specificity with the latest alert issued on August 1, 2004. The HSAS provides a set of protective measures for each threat condition, but these protective measures are identified only for federal agencies. DHS only recommends protective measures for states, localities, the public, or the private sector, however, the recommended protective measures are the same ones issued to federal agencies. These recommended protective measures provide no specificity for states, localities, the public, or the private sector. HSAS silence with regard to protective measures for the public, the private sector, and state and local governments has drawn the attention of some interested observers. Early on, William B. Berger, President of the International Association of Chiefs of Police, testified before the Senate Governmental Affairs Committee that the lack of defined response protocols for state and local governments was an area of concern among local law enforcement agencies. Citing what some contend is a lack of DHS guidance on protective measures, non-federal entities are beginning to fill the perceived void. For example, the American Red Cross recommends protective measures for individuals, families, neighborhoods, schools and businesses at each of the HSAS threat levels. Further, the State of Maryland has adopted the American Red Cross protective measures. Without federal guidance, some cities have adopted the following types of protective measures when the HSAS threat condition is raised to "orange": Surveillance cameras are activated. Law enforcement officers are not granted time off. Port security patrols are increased. Law enforcement officers are required to carry biological/chemical protective masks. First responders are placed on alert. Mass transit authorities broadcast warnings and instructions. Mass transit law enforcement officers increase patrols. Law enforcement agencies make security checks in sensitive areas, such as bridges, shopping centers, religious establishments, and courthouses. Option 1: Status Quo . The HSAS was designed for federal government use and Congress may deem the system adequate for the federal government. This approach can encourage states and localities to conduct threat and vulnerability assessments that would then assist in the development of specific protective measures geared to each state and locality's homeland security needs. On the other hand, this approach might cause confusion among states and localities in their attempts to prepare for terrorist attacks without federal guidance on protective measures. Option 2: Federal Guidelines for State and Local Protective Measures . If Congress decided that there were a need for more guidance for states, localities, the public, and the private sector, it could either encourage DHS to establish HSAS protective measure guidance for states, localities, the public, and the private sector, or it could enact legislation mandating these activities. These protective measures could match the federal government preparedness and response activities identified in the HSAS. This approach could provide federal government guidance on how to be prepared for and mitigate against a terrorist attack. A list of general protective measures for states, localities, the public, and the private sector may not, however, be as effective as state and locally devised protective measures. DHS uses a variety of communications systems to provide terrorist threat warnings to states, localities, the public, and the private sector. These systems include, for an example, conference calls, public announcements, CEO COM LINK, and NLETS, but DHS has no single communication system it uses to issue HSAS terrorist warnings. On April 30, 2003, Jeffery Horvath, chief of the Dover, Delaware police department told the Senate Governmental Affairs Committee that his department has never received any official notification of a change of HSAS threat condition and has relied on the news media for this information. Michael J. Chitwood, chief of the Portland, Maine police department reiterated this point, and specifically identified the Cable News Network (CNN) as the news medium through which he receives notifications of changes in the HSAS threat level. He added that he received official notification from state authorities eight hours later. Fire chief Edward P. Plaugher of Arlington County, Virginia, also identified CNN as the primary source for notification of changes in the HSAS threat level. When testifying before the Senate Governmental Affairs Committee, former DHS Secretary Ridge said that the process for notifying state, and local agencies and authorities of a change in the HSAS threat condition needs improvement. The public is alerted to a change in HSAS threat condition through the news media, following a public announcement from DHS or media leak of the information. There is no Emergency Alert System (EAS) type communication activated to alert the public to a change in threat condition, so the public is not informed of the change until they monitor a public news source. Private sector alerts are through systems like CEO COM LINK and conference calls. DHS uses CEO COM LINK to notify private sector entities that participate in the system, and then makes calls to other critical infrastructure and business associations. This arguably results in a de facto prioritization of alerted private sector entities, which could result in a targeted private sector entity being attacked without a timely and effective alert. Option 1: Status Quo . Congress may decide to allow DHS to deal with issues relating to HSAS advisories at this stage of HSAS development. This approach would encourage the continued utilization of the DHS terrorist threat communication systems. Since the HSAS is designed for federal government use, there may be no need for DHS to establish any other communication systems that disseminate changes in the HSAS terrorist threat levels. This would, however, not address the issues some have raised about the dissemination of HSAS advisories. Some would argue that before DHS establishes a specific system that communicates a change in HSAS terrorist threat levels, DHS needs to establish protective measures for states, localities, the public, and the private sector. This argument is based on the belief that there is little value in knowing of a change in the HSAS terrorist threat level in the absence of recommended protective measures. Option 2: Revise the HSAS Notification Process . Congress could encourage, or enact legislation instructing DHS to revise the HSAS notification process to ensure that state and local law enforcement, and emergency management agencies are informed of changes of the terrorist threat level in a more effective and timely manner. This approach could address the problem of states and localities receiving the notification via the news media without first receiving official notification from DHS. This approach, however, would not address the issue of the public, and private sectors receiving timely notification of changes in the HSAS threat level. A possible communications system DHS could use for disseminating threat level changes of the HSAS is the Homeland Security Information Network (HSIN). DHS announced an expansion of its HSIN on February 24, 2004. The HSIN is a computer-based counterterrorism communications network connecting DHS to all 50 states, five territories, and 50 major urban areas for a two-way flow of terrorist threat information. This communications system delivers real-time interactive connectivity among state and local partners with the DHS Homeland Security Operations Center (HSOC) through the Joint Regional Information Exchange System (JRIES). The community of users include State Homeland Security Advisors, State Adjutant Generals, State Emergency Operation Centers, and local emergency response providers. HSAS is not the only federal warning system; eight separate systems exist to provide timely notification about imminent and potentially catastrophic threats to health and safety. The types of hazards covered by these systems include severe weather, contamination from chemical and biological weapon stockpiles scheduled for destruction, terrorist attacks, and any other emergency or hazard the President decides is significant enough to warrant public notification. Some argue for the consolidation of the existing warning systems into one "all-hazard" system. The Partnership for Public Warning is one organization advocating this type of consolidation. Other organizations, such as the Federal Communications Commission's (FCC) Media Security and Reliability Council (MSRC) have recommended that the Emergency Alert System (EAS) should be established and implemented uniformly in all parts of the United States. This enhanced EAS would be fed information from systems such as the HSAS. Consolidation and coordination of these warning systems would present challenges to administering an "all-hazard" warning system. Some of the challenges include the administration of the warning system, interoperability of existing warning systems, and the involvement of industry. Congress has directed the President to insure that all appropriate federal agencies are prepared to issue warnings of potential disasters to state and local officials, and that federal agencies provide technical assistance to state and local governments to insure that timely and effective disaster warnings are provided. The President is authorized to utilize or make available to federal, state, and local agencies the facilities of the civil defense communications system, or any other federal communications system, for the purpose of providing warnings to governmental authorities and the civilian population in areas endangered by disasters. Federal agencies that currently administer warning systems include National Oceanic and Atmospheric Administration, Federal Communications Commission, Federal Emergency Management Agency, and Department of Defense. DHS is also responsible for coordinating and distributing warnings to the public. Existing warning systems are not interoperable. Reasons for this are: separate transmitting and receiving equipment; separate standard message protocols; separate procedures for how warnings are input into dissemination systems; and separate training, exercising, and testing of the system. Since this technology is primarily researched, developed, and operated by private industry, the federal government could establish a relationship with the corporate suppliers of these technologies, a relationship to encourage development and effectively consolidate or provide the means to make the current warning systems interoperable. Consolidating and coordinating federal warning systems, however, may cause a loss of concentration on the systems' traditional hazards. Mature warning systems have established alerting protocols and routines that, if consolidated, could become too broad, which may result in less effective warnings. Option 1: Status Quo . Without congressional intervention, federal agencies responsible for issuing warnings will likely continue to narrowly focus on traditional hazards. This approach allows mature warning systems to continue communicating alerts and protective measures to an identified audience. Also, this approach would not incur an increased need for federal funding that would be required to update, test, and ensure compatibility of the systems. On the other hand, this approach would not address issues such as overlap of hazards (terrorist threat warnings of HSAS, and any presidential declared emergency warning issued by EAS), and the potential need to reach a wide audience through the use of multiple warning systems. Option 2: Coordination and Update of Warning Systems . If Congress decided to address the issue of coordinating warning systems, it could require all federal agencies with hazard warning responsibilities, to establish, and develop a means for coordinating and updating existing warning systems. This approach could allow any warning of man-made or natural hazards to be issued on the full range of federal warning systems. This could ensure that a larger number of the state and local governments, the public, and private sector entities would receive the specific warning in an effective and timely manner. It would require a communication protocol to be developed that allowed one federal warning system to "talk" to a different system. Updating of warning systems would not only include the ability of one system to "talk" to another, but could also include the ability of such systems as EAS to be transmitted on off-the-shelf telecommunication devices such as cellular phones. Given the widespread use of wireless communications, some observers have argued for warnings to be issued on wireless devices. In the 108 th Congress, S. 564 proposes such an approach that would facilitate the deployment of wireless networks in order to extend the range and reach of EAS. It would also ensure emergency personnel priority access to communications facilities in times of emergency. Option 3: Consolidation of Warning Systems . If Congress decided that there needs to be an all-hazard warning system, it could enact legislation requiring the federal agencies that have warning responsibilities to develop and implement such a system to warn states, localities, the public, and the private sector. This approach could ensure that any warning of a hazard—man-made or natural—would be disseminated to as many entities as necessary in a timely and effective manner. In the 108 th Congress, two bills, S. 118 , and H.R. 2537 , propose such an approach to all-hazard warnings. The bills propose the establishment of a single all-hazard warning system that would ensure that states, localities, the public, and the private sector would be alerted to specific risks from man-made, and natural hazards. This approach, however, would arguably require federal funding and effort to research, test, develop, and implement an all-hazard warning system. An increase in the HSAS threat level imposes both direct and indirect costs on federal, state, and local governments, the private sector, and the public. These costs include the increased security measures undertaken by states and localities, loss to tourism, and the indirect cost on the economy during a period of heightened threat level. In FY2003, the Office for Domestic Preparedness (renamed the Office of Grant Programs in FY2007) Critical Infrastructure Protection grant program authorized state and local governments to use allocated grants to fund overtime costs associated with heightened threat levels. According to the Office of Grant Programs's State Homeland Security Grant and Urban Area Security Initiative grant programs guidance, overtime is an authorized expenditure only associated with training or exercises. Office of Grant Programs's Law Enforcement Terrorism Prevention Program, however, does allow overtime costs specifically related to homeland security efforts. Local governments incur direct costs when they put in place additional security measures to deal with a higher threat condition. An example of this is the cost of random car searches at Atlanta's Hartsfield airport, which reportedly requires $180,000 a month for labor and signage. This cost is borne by Atlanta's police department and airport administration. Because of the budget crisis that many states are experiencing, additional homeland security costs during heightened threat periods are seen as an additional fiscal burden. The costs associated with threat level changes have prompted many state and local officials to complain to DHS. The United States Conference of Mayors released a 145-city survey that reported that during periods of heightened alert homeland security costs increased to additional $70 million a week. This increase in homeland security costs during heightened threat periods also has localities arguing for direct funding from the federal government. FEMA's Assistance to Firefighters is the only assistance that provide 100% of the funding to localities. The Office of Grant Programs's Urban Area Security Initiative grants, however, first pass through the state, which causes some localities to complain about a delay in receiving funding. Authorized program expenditures are another point of contention that states and localities have with homeland security funding and costs. All homeland security grant programs list authorized equipment and activities that grant allocations can be used to fund. States and localities may argue that these authorized expenditures do not address their specific homeland security needs. These direct homeland security costs occur not only at the state and local level: when the threat level changes, federal departments and agencies have to adopt prescribed protective measures outlined in the different threat condition levels of the HSAS. An indirect cost of a heightened threat level is the negative effect on tourism in cities perceived as potential targets of terrorism . It has been observed that increased threat levels and the need for heightened security have hurt the tourism industry of such metropolitan areas as Washington, DC, New York, and Chicago. Washington's Mayor Anthony Williams urged residents to be alert for suspicious activities. He also wanted the city to remain friendly, open, and safe to minimize the affects of the terrorist threat level on tourism. D.C. Delegate Eleanor Holmes Norton agreed with the need to keep Washington open to tourism. She said that the city's tourism industry had been hurt by changes in threat condition, and that she feared some officials would overreact and shut down public buildings. An example of the impact on tourism is the decision by some schools to cancel trips to Washington because of the threat of terrorist attack. Some municipal officials have had to make a costly decision between homeland security and tourism. Philadelphia's mayor, John F. Street, for instance, chose not to close down a street around Independence Hall after he received a call from DHS Secretary Ridge, who advised its closing. Mayor Street cited traffic and tourism concerns as the reason he chose not to respond to the recommendation. Another indirect cost may be how a change in the HSAS threat condition affects the stock markets. Option 1: Status Quo . Congress may decide that the Office of Grant Programs homeland security assistance adequately meets the needs of states and localities' homeland security costs due to a heightened HSAS threat. It may be an appropriate approach for ensuring the splitting of homeland security costs among the several tiers of government. This policy approach would not however, address such issues as the needs of some state and local first responder agencies, of hiring additional personnel, the loss of revenue generated by tourism due to an increased terrorist threat level, or the cost the economy incurs when the terrorist threat level is raised. Option 2: Funding Through Established the Office of Grant Programs . Should Congress decide that more funding needs to be provided to cover costs incurred by states and localities due to an increased terrorist threat level, it could consider establishing grant programs that specifically fund such terrorist prevention, preparedness, and mitigation activities as overtime pay for first responders and the purchase of equipment and personnel for the protection of critical infrastructure. In the 108 th Congress, S. 1245 proposed such an approach by recommending that a consolidated homeland security grant program provide grant allocations for overtime expenses related to training, activities (as determined by the DHS Secretary) relating to an increase in the HSAS threat level, and emergency preparedness responses to a WMD incident. Option 3: Funding Specifically for Heightened Threat Levels . Should Congress decide to provide funding for costs incurred during heightened threat level periods, it could appropriate funds, in addition to the Office of Grant Programs homeland security assistance, specifically to states, localities, and private sector entities to compensate for costs associated with a change in the HSAS threat level. In the 108 th Congress, S. 728 proposed such an approach by compensating state and local law enforcement for costs associated with airport security. | The Homeland Security Advisory System (HSAS), established on March 12, 2002, is a color-coded terrorist threat warning system administered by the Department of Homeland Security (DHS). The system, which federal departments and agencies are required to implement and use, provides recommended protective measures for federal departments and agencies to prevent, prepare for, mitigate against, and respond to terrorist attacks. DHS disseminates HSAS terrorist threat warnings to federal departments, state and local agencies, the public, and private-sector entities. DHS, however, only provides protective measures for federal departments. This dissemination of warnings is conducted through multiple communication systems and public announcements. HSAS has five threat levels: low, guarded, elevated, high, and severe. From March 2002 to the present, the HSAS threat level has been no lower than elevated, raised to high seven times, and raised to severe once. The first time it was raised to high was on September 10, 2002, due to the fear of terrorist attacks on the anniversary of the terrorist attacks of September 11, 2001. The most recent time it was raised to high was on July 7, 2005, due to terrorist bombings of the London mass transit systems. DHS raised the threat level for mass transit systems only. The only time HSAS has been raised to severe (red) was on August 10, 2006, due to a terrorist plan to bomb flights originating in the United Kingdom. DHS raised the threat level for the aviation sector only. In the 109th Congress, the House of Representative's Committee on Government Reform's Subcommittee on National Security, Emerging Threats, and International Relations held a hearing on the HSAS, its threat codes, and public response to it. This hearing focused on the information DHS issued the public the seven times the HSAS threat level was raised from "yellow" to "orange." While the need for terrorist threat warnings seems to be widely acknowledged, there are numerous issues associated with HSAS and its effects on states, localities, the public, and the private sector. These issues include the following: vagueness of warnings; lack of specific protective measures for state and local governments, the public, and the private sector; dissemination of warnings to states, localities, the public, and the private sector; coordination of HSAS with other federal warning systems; and cost of threat level changes. This report will be updated as congressional or executive actions warrant. |
This country has long debated how best to meet the needs of the poor. Some argue that income supplements that allow families to participate in the consumer market are the most effective and efficient means for the government to ensure that the basic needs of the poor are met. Others argue that poor people cannot effectively participate in the free market for a variety of reasons beyond income, and, as a result, society has a responsibility to provide them with the goods and services they need to survive. The social welfare programs run by the federal government have shifted from time to time in their relative emphasis on providing cash welfare versus subsidizing the costs of goods and services. Looking at the changes in welfare and housing programs over time helps to illustrate this tension. During and after the Great Depression, the government created a number of programs that provided both cash welfare and subsidized goods and services to the poor. The Social Security Act of 1935 offered grants to states to help fund cash aid for three groups of needy persons: children (Aid to Dependent Children), aged persons (Old-Age Assistance), and blind persons (Aid to the Blind). The Housing Act of 1937 created a federal construction program both to create jobs and to stimulate the economy, as well as to build low-cost housing for the poor. By the late 1930s and early 1940s, the federal government was providing surplus food to the poor in select cities. In 1964, the Food Stamp program was enacted both to eliminate surplus food as well as supplement the food needs of the poor. In 1965, the Medicaid program, which provided access to health care for the poor was created. By the late 1960s, the children's cash welfare program (renamed Aid to Families with Dependent Children (AFDC)) had become the target of widespread criticism. Some argued that cash welfare programs for single mothers promoted out-of-wedlock childbirth and dependency while discouraging work. At the same time, critics attacked federal housing programs, citing rising crime in publicly constructed housing developments and chronic fraud and abuse in their management. In 1969, President Nixon proposed a radical change to the federal social welfare system, a guaranteed minimum income in the form of a negative income tax. Nixon's plan was not adopted, but some reforms were made to the cash welfare program. By 1973, Nixon declared a moratorium on all federal housing construction programs. In their place, a number of programs were developed, the largest being a system of rental subsidies which families could use in the private market. Since the 1970s, federal social welfare policies have not resolved the debate between cash and services. Instead, a hybrid of both has developed and been maintained. The Earned Income Tax Credit (EITC) was created in the late 1970s and provides income supplements to working families. Market-based housing vouchers have grown to the point where more people are now served by vouchers than live in public housing. AFDC was abolished in 1996 and replaced by a state block grant called Temporary Assistance to Needy Families (TANF). This last change, from AFDC to TANF, has been one of the most dramatic. Whereas AFDC provided ongoing cash payments for poor families, TANF was designed to provide families with a temporary cash benefit while they transitioned into work. Under TANF, states have new flexibility, which, paired with a large reduction in the welfare caseload in the mid-1990s, has made it possible for them to use their TANF funds to provide a wide range of services including child care and job-search assistance. Spending on services now accounts for a larger portion of TANF spending than does spending on cash benefit payments. Given the array of federal support for both cash aid and goods and services, questions can be raised as to whether the existing programs are well-coordinated for the purposes of effectiveness and efficiency. This paper explores the overlapping areas of housing assistance and welfare, their areas of alignment and disconnect and proposals that have been made to encourage coordination between them. Enacted as a part of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) ( P.L. 104-193 ) as a replacement for the former welfare program, Aid to Families with Dependent Children (AFDC), TANF provides fixed grants to states for time-limited and work-conditioned aid for low-income families. The goals of TANF are to: Aid needy families so that children may be cared for in their homes or those of relatives; End dependence of needy parents upon government benefits by promoting job preparation, work, and marriage; Prevent and reduce out-of-wedlock pregnancies and establish goals for preventing and reducing their incidence; and Encourage the formation and maintenance of two-parent families. States have the flexibility to use their TANF grants not only for cash assistance, but for a wide range of services that seek to advance any of the goals of the program. States have used that flexibility to fund, for example, child care, transportation, job search assistance, and, in some cases, even housing assistance. States have implemented their TANF programs very differently and some states provide a wider array of services than others. In addition to greater flexibility in using funds, the conversion to TANF has brought a combination of policies to promote work, including stronger sanctions for nonparticipation in work, "Work First" policies and financial work rewards. Since TANF was enacted, the goal of moving families off of cash assistance and into employment has been largely met, as caseloads now are one-half their historic peak size. However, it is less clear whether the incomes of the families who have left the caseloads (or not entered them) provide "self-sufficiency." Studies indicate that most families who have left cash assistance still require some form of public assistance. According to studies funded by the Department of Health and Human Services (HHS), about two-thirds of families who leave welfare receive food stamps within the first year and three out of five adults leaving welfare and 60-90% of their children are enrolled in Medicaid. Funding for the TANF block grant was originally set to expire on September 30, 2002, but it has been renewed through a series of short-term legislative actions. Several bills were introduced in the 108 th Congress to reauthorize TANF through FY2008. The House passed the Personal Responsibility, Work, and Family Promotion Act of 2003 ( H.R. 4 ), on February 13, 2003. The Senate Finance Committee reported the Personal Responsibility and Individual Development for Everyone (PRIDE, H.R. 4 ) on October 3, 2003. Both bills contained proposals similar to the Administration's welfare reauthorization proposals, such as requiring states to engage more families in work, and requiring families to work more hours. Neither was enacted before the end of the 108 th Congress. The argument for some form of subsidy to offset housing costs for certain families is often justified by looking at the percentage of income that these families pay for housing. The general rule used by HUD is that housing is "affordable" if it costs no more than 30% of a low-income family's annual gross income. Many low-income families pay much more than 30% of their incomes towards housing costs. According to the 2003 State of the Nation's Housing, released by the Harvard Joint Center for Housing Studies, there were over 14 million households who were severely rent-burdened, meaning that they paid more than half of their income towards rent. Almost 75% of these 14 million severely rent-burdened households were in the bottom income quintile. The poorest are the most rent burdened, with almost half of all households in the bottom income quintile facing a severe rent burden. Many argue that "affordable" housing is simply unavailable for low-income families. The National Low Income Housing Coalition conducted research looking at wages and housing costs and found that, in most major cities, it is highly unlikely that households with earnings from the minimum wage of $5.15 per hour up to nearly $10 per hour could find an "affordable" apartment. In order to address the need for "affordable housing," a number of direct housing assistance programs have been developed. These programs are administered by the Department of Housing and Urban Development (HUD) and authorized under the Housing Act of 1937 ( P.L. 93-383 ), as amended. According to the 1937 Act: It is the policy of the United States ... that our Nation should promote the goal of providing decent and affordable housing for all citizens through the efforts and encouragement of Federal, State and local governments, and by the independent and collective actions of private citizens, organizations, and the private sector. The three major forms of direct housing assistance currently administered by HUD are: the low-rent Public Housing program, the Housing Choice Voucher program and project-based assistance programs. Public Housing is rental housing that was constructed using federal funds and is publicly owned and managed by local, quasi-governmental Public Housing Authorities (PHAs). Low-income families who live in public housing pay approximately 30% of their incomes for rent. The costs of maintaining the buildings, beyond what can be supported by tenant rents, are subsidized by the federal government. In FY2003, there were 1.2 million public housing units under management. Originally referred to as the Section 8 voucher program, the Housing Choice Voucher program provides federally funded subsidies, administered by local PHAs, to low-income families and individuals to lease housing from private landlords. Families who receive vouchers pay between 30% and 40% of their incomes towards rent and the federal government subsidizes the remainder. In FY2003, there were approximately 2.2 million authorized vouchers. Project-based rental assistance programs include privately-owned buildings for which the tenant rents, and in some cases construction costs, are subsidized by HUD. Although these programs are not generating new contracts, they were initially authorized under multi-year contracts, many of which have not yet expired. Tenants who live in these buildings pay approximately 30% of their incomes towards rent and the federal government pays the remainder to the landlord. In FY2003, there were approximately 1.6 million project-based rental assistance units under government contract. Currently, only about one quarter of eligible low-income households actually receive housing assistance, mainly due to funding limitations. Anecdotal evidence indicates that waiting lists for housing assistance, especially in major cities, are years long and many are not accepting additional names. Table 1 compares some of the key aspects of TANF and HUD's housing assistance programs. Note that the programs are administered by different levels of government (state vs. local) and that, in most cases, states have greater flexibility in administering TANF than do the PHAs and local agencies that administer housing assistance programs. States use TANF funds to provide cash assistance as well as programs and services to eligible households. While states are required to report the number of people who receive direct cash assistance from TANF, they are not required to track the number of people who participate in TANF funded services. Approximately 2.2 million families received cash assistance from TANF in FY2003. In FY2003, 24% of adults who received cash assistance from TANF were employed in paid jobs. Their average monthly earnings were $621 while on the TANF rolls. This amount is well below the poverty level and low enough that most families working and on the TANF caseload would be eligible for housing assistance. However, only approximately 20% of the caseload reported receiving some form of housing assistance. States are not required to track those who have left the TANF cash assistance caseloads. Although national data are unavailable, some researchers have tried to study this population, referred to as "welfare leavers." HHS-funded leaver studies have found that, for most leavers, year-round work paid more than welfare. However, the average monthly income for leavers from all sources, including income, generally lies near the poverty line. Many leavers come back to welfare; the leaver studies found that between one-quarter and one-third of all families who left welfare returned within one year. It was estimated that in FY2004, approximately 5 million housing units were eligible to receive some form of direct housing assistance. Because housing assistance is provided through multiple programs, data on the entire population of housing assistance recipients are not readily available. However, data are available on the characteristics of the populations of the individual programs. This program specific data can be used to make some generalizations. As Table 2 illustrates, a large percentage of the housing assistance caseload is elderly or disabled. This portion of the housing assistance caseload is much less likely to be eligible for TANF cash assistance. Families who might qualify for TANFânon-elderly, non-disabled households with childrenâconstitute over half of the housing voucher caseload, more than one-third of the public housing caseload, and a little over a fifth of the Section 8 project-based caseload. Of the non-elderly, non-disabled portion of the housing assistance caseload, more than half reported some income from work; less than 10% reported combining welfare and work. About one-fifth of these households were receiving income from welfare but not from work. Given that the caseload is approximately 5 million households, that around half of those households are non-elderly, non-disabled (2.5 million), and that about one fourth of those households are receiving welfare, we can very roughly estimate that around half a million households are receiving both TANF assistance and housing assistance. This estimate was confirmed in conversations between the author and staff in the Policy Development and Research division of HUD. The interaction of TANF and direct housing assistance can be assessed in two ways. First, one can look at how the rules of the two types of programs either complement each other or conflict and the implications that may have for households who receive both benefits. The conflict in these rules has been discussed both by housing and welfare advocates. Second, one can look at how the provision of services under one program can help further the goals of the other program, regardless of whether a family is participating in both. Both housing research and welfare research have attempted to measure the impact of these programs on family outcomes. For families who receive benefits from both TANF and HUD housing assistance programs, the different features of the two programs can create unintended consequences. The emphasis of TANF on work, sanctions, and time limits could have implications for the cost of housing assistance programs. Additionally, the benefit structure of housing assistance programs may undermine the work incentives built into TANF. While the TANF goals do not explicitly include increasing families' incomes, the program's emphasis on work, sanctions and time limits has the potential to significantly impact the incomes of welfare recipients. When TANF was enacted, some low-income housing advocates were concerned that, since housing assistance benefit levels are based on family income, if TANF caused fluctuations in family incomes, it could have serious impacts on the federal housing budget. For example, if under TANF, more families are working and states are maintaining generous earnings disregards, it is possible that families' incomes will rise. If families' incomes rise, they require less housing assistance and the housing assistance programs could cut their costs or serve more families. If under TANF, many families are sanctioned from cash assistance or reach their time limit, it is possible that families' incomes will drop. If families' incomes drop, they require more housing assistance, and PHAs could either request additional federal funds or cut the number of people they serve. Preliminary research findings have shown that TANF, while promoting work, has not significantly increased or decreased the incomes of current or former recipients. Housing research that sought to monitor the influence of TANF on housing assistance recipients has similarly found few changes in income. As a result, welfare reform has not had a major impact on the housing budget. However, to the extent that TANF, or changes made to TANF, raise or lower the income of families in the future, the housing budget could be impacted. While one of the major goals of the TANF program is to promote work, the benefit structure of the HUD housing assistance programs may undermine TANF work policies. The amount of housing assistance a family receives fluctuates with the family's income. If a family's income falls, the family's housing assistance will typically rise to make up for that fall in income. As a result, the family may be cushioned from the full impact of sanctions and time limits and, therefore, might have fewer incentives to meet work requirements. In the other direction, if a family's income rises as a result of work, then the amount of housing assistance a family receives is typically reduced. The family may not feel the full impact of an increase in earnings, and as a result, might have fewer incentives to increase earnings under TANF. Furthermore housing assistance is targeted at extremely low-income households, putting less-poor, potentially working households at a disadvantage when it comes to receiving housing benefits. Several policies have been adopted to help improve the compatibility of TANF and housing assistance program rules. QHWRA . The Quality Housing and Work Opportunity Reconciliation Act of 1998 (QHWRA) ( P.L. 105-276 ) required PHAs to adopt several policies designed to encourage families living in public housing to work. QHWRA required PHAs to adopt flat rents as a policy to promote work. Flat rents are market equivalent rents that a family can opt to pay in lieu of an income-based rent. Under a flat rent structure, if a family's income rises to a point where 30% of its income is higher than the flat rent, it can switch to the flat rent and further income increases will not be offset by increases in rent. Second, QHWRA directed PHAs to adopt an earned income disregard. Under the earned income disregard for public housing, certain amounts of a qualifying adult's verified earned income are not counted toward rent. Specifically, income due to earnings are completely disregarded in calculating rent for 12 months, after which half of any increased earnings are excluded for an additional 12 months. A PHA can also choose to set up Individual Savings Accounts (ISAs) in addition to earned income disregards. When a PHA has set up an ISA program, a family can opt to pay increased rent rather than take the disregard, but the increased amount is deposited into a savings account on the family's behalf. Another rent policy dictated by QHWRA attempts to prevent rent changes from undermining TANF sanctions. For voucher-holders and residents of public housing, decreases in income resulting from non-compliance with TANF rules (or fraud) cannot be offset by rent reductions or increases in housing subsidies. Therefore, families are not cushioned from rent increases if their incomes fall as a result of non-compliance. However, reductions in TANF assistance resulting from time limits or failure to find a job do not count as non-compliance for this purpose. Therefore, if a family hits a time limit or loses TANF because they cannot find a job, their housing benefits will increase to reflect the family's loss of income. In addition to changes in rent determination policies, QHWRA introduced a community and self-sufficiency requirement to public housing. Under these rules, non-elderly, non-disabled adults who live in public housing are required to work or participate in community service at least 8 hours per month. This provision was suspended in FY2002, but upon passage of the FY2003 appropriations law ( P.L. 108-7 ), the community service and self-sufficiency provision was reinstated. The Family Self Sufficiency and the Resident Opportunities for Self Sufficiency Program . Under the Housing Choice Voucher program, some families are able to participate in a work incentive program entitled the Family Self Sufficiency Program (FSS). PHAs employ FSS program coordinators who link housing assistance recipients to the supportive services they need to achieve economic self-sufficiency. Families who wish to participate in the FSS program must sign an FSS contract. The contract requires that the family comply with the lease, that all family members become independent of welfare, and that the head of the family seek and maintain suitable employment within five years. An interest-bearing FSS escrow account, similar to an ISA, is established by the PHA for each family that participates in the FSS program. Any increases in rent resulting from increases in earned income are credited to the account during the term of the FSS contract. The PHA may make a portion of this escrow account available to the family during the term of the contract to enable the family to complete an interim goal such as education. If the family completes the contract and no member of the family is receiving welfare, the amount of the FSS account is paid to the family. If the PHA terminates the FSS contract, or if the family fails to complete the contract before its expiration, the family's FSS escrow funds are forfeited. The Resident Opportunities for Self Sufficiency Program (ROSS) is designed to link public housing residents with supportive services, resident empowerment activities, and assistance in becoming economically self-sufficient. ROSS grants may be made to PHAs, resident associations or non-profits operating programs that benefit public housing residents. The grant money can be used to fund a range of activities including resident self-sufficiency initiatives, resident small business development, other job training and support and service coordinators. Welfare to Work Vouchers . To address a perceived lack of housing available to families attempting to transition from welfare to self-sufficiency, in 1999 Congress authorized HUD to award approximately 50,000 additional housing choice vouchers to housing authorities throughout the country through its Welfare to Work (WtW) Voucher Program. WtW vouchers target families who have a critical need for housing in order to obtain or retain viable employment. In order to be eligible for a WtW voucher, a family must be both eligible for housing assistance and for TANF cash assistance. In order to be eligible to administer WtW vouchers, PHAs must develop plans in partnership with welfare and workforce development agencies to ensure that the housing assistance is combined with job training, child care, and other services families need to make the successful transition from welfare to economic independence. No new WtW vouchers have been authorized by Congress since 1999, although the existing WtW vouchers have been renewed. TANF Funding and Housing . States have wide flexibility under TANF to fund programs designed to better coordinate and fulfill the service needs of families transitioning from welfare to work. As of 2002, 12 states were using their TANF block grant funds to provide some form of housing assistance to families, ranging from home buyer support to rental assistance. While TANF funds can currently be used for one-time or ongoing housing-related assistance, housing aid lasting beyond four months counts as "assistance," which triggers time limits, work requirements and child support reporting requirements for recipients. Some advocates have proposed that the welfare law be changed to allow housing benefits to count as "non-assistance," thus not triggering time limits, work requirements or child support reporting requirements. While this change may prompt more states to use TANF funds for housing, states feel pressure to use TANF funds for many competing purposes, including for funding for child care. Several studies have been conducted to test whether and how the receipt of housing assistance impacts low-income families, including families who have or are receiving cash assistance. These studies have looked at the impact of housing assistance on a number of outcomes, including employment and TANF receipt. According to a study by the Brookings Institution, poor families who had left welfare but maintained housing assistance experienced higher employment rates and incomes than welfare leavers without housing assistance. Similar findings resulted from a study of Minnesota's welfare reform initiative (MFIP); the Manpower Demonstration Research Corporation (MDRC) found that residents of public and subsidized housing benefitted more from MFIP than similar families without housing assistance. Despite these positive findings on the relationship between housing assistance and income and earnings, other studies have demonstrated a lack of clear relation between housing assistance and employment and/or earnings. The Department of Housing and Urban Development conducted a study of housing assistance recipients who received welfare in two states. While no statistically significant differences were found in earnings and employment outcomes between welfare recipients with and without housing assistance, the non-experimental component of this analysis indicated a possible positive interactive effect between welfare reform and housing vouchers. Although studies have been ambiguous regarding the impact of housing assistance on employment and earnings, the relationship between neighborhood poverty rates and employment and earnings is well documented. A number of studies have found that neighborhoods with high poverty rates negatively impact families' employment, earnings and earnings growth and increase welfare recidivism and the length of a family's stay on welfare. While public housing is often located in areas of high concentrations of poverty, the portable voucher program allows families the flexibility to move to housing virtually any place in the U.S. While voucher families typically live in areas with lower concentrations of poverty than do families in public housing, families with vouchers still often live in neighborhoods with high poverty. An experiment undertaken by HUD, the Moving to Opportunity (MTO) Fair Housing Demonstration, was designed to test the impact on families of requiring them to move from areas of high concentrations of poverty to areas with low concentrations of poverty. Preliminary findings indicate that families who used vouchers to move to low poverty areas had improved health outcomes, improved educational test scores, and lower rates of juvenile crime. These preliminary findings have not yet shown any wage or employment effects. The research seems to indicate that, at the least, housing assistance does not appear to hurt the employment and earnings efforts of families leaving welfare; instead, housing assistance may actually improve their outcomes. Furthermore, housing assistance that provides for families to move to areas of lower poverty may actually improve other aspects of the families' lives including health and education outcomes. After observing the ways in which federal housing and welfare programs do and do not work together, possible changes may be considered to the programs to help improve their coordination. Several program changes have been considered in past Congresses that may be introduced again. These changes fall into two broad categories: adjusting program rules, and increasing the amount of housing assistance available. There are several areas in which existing housing and welfare program rules are in conflict and adjustments could be made to alleviate that conflict. As noted earlier, housing assistance programs, for the most part, do not have the same emphasis on work as do welfare programs. This difference in focus may lead to conflicting messages for dual program participants who eventually see benefits reduced as income increases. However, housing assistance program features which promote employment, such as the Family Self Sufficiency (FSS) program, may enhance the effectiveness of welfare-to-work programs. Currently, FSS funds, which are issued by HUD to PHAs, can be used only for families who live in public housing or receive tenant-based Section 8 housing choice vouchers; some have argued to allow PHAs to use FSS funds for families with project-based Section 8 vouchers. FSS funds can be used to provide case management and services to assist families in attaining educational and employment goals. Similarly, ROSS funds, which are also issued by HUD to PHAs, are only available to public housing residents; proposals have been made to make ROSS funds available to PHAs for use with Section 8 voucher recipients. One concern that has been raised is that by expanding the use of these funds without expanding the amount of funding available would result in greater competition for the existing funds. Housing programs and welfare programs are administered at different levels of government, which may contribute to the difficulty in coordinating these two sets of programs. As a result, some have proposed to make changes to the administration of housing programs in order to enhance compatibility with welfare programs. A "superwaiver" was proposed by the Administration, and a version of this proposal was included in the Administration-based welfare reform bills. The superwaiver would enable states to request waivers of the statutory or regulatory rules for a wide range of work support programs, including housing assistance programs. The superwaiver provision has several potential implications for housing. Advocates of the superwaiver provision assert that it will foster greater coordination among work support programs and will allow localities to better adjust programs to meet the special needs of their population. One potential use of the superwaiver, cited by The Midwest Welfare Peer Assistance Network (WELPAN), could be to override the six-month restriction on follow-up and supportive service assistance to recently housed homeless families that exists in the Supportive Housing for the Homeless Program. WELPAN asserts that a superwaiver would allow administrators to extend follow up and supportive service assistance to meet the needs of individual families beyond the current six-month cap. Those who oppose the expanded waiver authority express concern that states would have too much authority to undermine the goals of programs for the poor, as established by Congress. For example, the Center on Budget and Policy Priorities has expressed concern that superwaiver authority could allow a state to sell off a large public housing building that currently serves extremely low-income families and then use the money for housing assistance for moderate-income individuals. If housing assistance helps improve the outcomes of families transitioning from welfare to work, low-income housing advocates argue, then more housing assistance should be made available to these families. There are two ways to do this: one, increase the amount of housing assistance provided; or two, prioritize these families for existing assistance. The first is difficult because housing assistance is very expensive. The second is difficult because of the competing needs of the elderly and disabled. The following strategies have been suggested for creating additional housing assistance for welfare families. While new housing assistance money can be difficult to obtain in a tight budget year, states can use their existing TANF funds to support housing, both in the form of ongoing housing assistance as well as rehabilitation of the housing occupied by TANF recipients. As noted earlier, while TANF funds can currently be used for one-time or ongoing housing related assistance, housing aid lasting beyond four months now counts as "assistance," which triggers time limits, work requirements and child support reporting requirements. Proposals to redefine housing as non-assistance were included in the Senate Finance Committee's welfare reauthorization bill from the 107 th Congress, which was not enacted. It is thought that such changes to the law would entice more states to use TANF funds to provide housing assistance. Local communities can set local preferences for distributing housing assistance. If preference is given to families leaving TANF, more assistance may be available to this population. However, PHAs face a tension between prioritizing working families moving off of welfare and prioritizing the elderly and/or disabled. One way to avoid this tension is to create and fund vouchers specifically for families moving from welfare to work. Fifty-thousand Welfare-to-Work (WtW) housing vouchers were authorized and funded in the 1999 Veterans Administration-Department of Housing and Urban Development and Other Independent Agencies (VA-HUD) appropriations legislation ( P.L. 105-276 ). None has been funded since then, and the program has never been authorized. The WtW voucher program targets families who have a critical need for housing in order to obtain or retain viable employment. In order to participate in the WtW program that was appropriated in 1999, housing authorities were required to develop Welfare-to-Work Voucher plans that demonstrated how housing assistance is combined with job training, child care, and other services families need to transition from welfare to work. Some low-income housing advocates have argued on behalf of authorizing the WtW housing voucher program. However, it is expensive to create new vouchers. Congress has not created any new vouchers since 2002. In fact, in the face of recent budget constraints, Congress has placed funding restrictions on the voucher program in both FY2004 and FY2005 that have led to reductions in the number of available vouchers in some parts of the country. For more information on current issues in the voucher program, see CRS Report RL31930, Section 8 Housing Choice Vouchers: Funding and Related Issues . Because the populations that are served by HUD housing assistance and welfare programs overlap, the pressure to ensure that the programs are well-coordinated will likely continue to face Congress. While several changes have been made in recent years to improve this coordination, the differences inherent in the two sets of programs, such as the high proportion of elderly and disabled households served by housing programs, the different levels of government that administer housing and welfare programs, and the costs associated with providing additional services, may make further changes difficult to enact. | The 1995-1996 debate over creation of a block grant to states for cash aid to needy families with children (Temporary Assistance for Needy FamiliesâTANF) focused on reducing welfare rolls by promoting work. Except for child care costs, it gave scant attention to other living expenses of low-income parents. The issues of housing cost and affordability were essentially absent from the debate, although rent is the largest expense for many low-income families. The important role housing plays in families' lives has been recognized through a system of programs, administered by the Department of Housing and Urban Development (HUD), that subsidize the housing costs of low-income families. The three major direct housing assistance programs are the low-rent public housing program, the Housing Choice Voucher program (also known as Section 8 vouchers) and project-based rental assistance. Both housing programs and TANF are designed to serve the needs of low-income households. As a result, many low-income families who receive TANF cash assistance or services, or have in the past, also qualify for housing assistance. It is estimated by CRS that possibly half a million households were receiving both cash welfare assistance and housing assistance in 2001. Although the two programs, in many cases, serve the same populations, the structures and rules of the two programs are often in conflict. This inconsistency in program rules can lead to inefficiencies for dual program participants. Some changes have been made to enhance the compatibility of housing and welfare programs. Further changes to one or both of the programs to enhance coordination have been considered as a part of the debate surrounding both welfare reauthorization and proposed housing reform measures. This paper will introduce the reader to federal housing assistance and welfare programs, the people they serve, how the programs interact and current issues. It will be updated to track relevant legislation. |
For some 45 years, the primary international organization for coordinating restrictions on dual-use exports was COCOM, the Coordinating Committee For Multilateral Export Controls. COCOM was formed in 1949 to limit military-related transfers to Communist countries. At the time of its termination at the end of March 1994, it consisted of 17 industrial countries, including all members of NATOâexcept Icelandâand Japan and Australia. COCOM operated on the basis of "consensus," and functioned without the existence of a treaty or specific international legal authorization. In reality, COCOM "consensus" gave any memberâand that member was most likely to be the United Statesâa veto over the export by any other member of a controlled good or technology. The day-to-day operations of COCOM involved meetings of a Secretariat in Paris at which the members agreed upon the technical specifications of the dual-use items that were being considered for export to Eastern Europe, the former Soviet Union, and the People's Republic of China. The Secretariat also decided whether to allow exceptions to agreed-upon restrictions. Irregular COCOM "High Level" meetings set or enunciated overall policy for the members. To provide guidance, COCOM created three lists of controlled items: an International Industrial List, an International Atomic Energy List, and an International Munitions List. The export control organizations of the member countries then incorporated some variant of the listed items. In the United States, the Export Administration Regulations contained the U.S. version of the items on the COCOM lists. Since COCOM had no independent legal existence, implementation of COCOM decisions depended upon the effectiveness of the export control laws and bureaucracies of each of the individual members. It was the responsibility of COCOM member countries to pass and enforce adequate laws and regulations to control exports. The comprehensiveness of the member countries' export control regimes, the degree of high level attention given to export controls, and the effectiveness of the export control bureaucracies varied considerably. In almost every instance, the United States was the most active in pursuing COCOM limitations on exports, while its major trading partnersâespecially France, the United Kingdom, and West Germanyâoften seemed more concerned about facilitating exports. After the dissolution of the Soviet Union, COCOM members agreed, in November 1993, to disband COCOM, replace it with a new entity, and to move to "national discretion" in export licensing decisions as of January 1994. National discretion meant that each country, not COCOM as an entity, would determine what should be exported, and no country could veto the export decisions of another. Beginning in November 1993, Clinton Administration representatives undertook a major effort to create a "broadly based" replacement accord for COCOM which, as initially conceived would include the formerly COCOM-proscribed countries. It was initially hoped that this successor accord would be in place by the time that COCOM was disbanded on March 31, 1994. That deadline was not met. This effort resulted in the establishment of initial elements of the Wassenaar Arrangement, by 28 nations at the Hague on December 19, 1995, subject to the approval of their governments. After meetings in early April and mid-July 1996, the Secretariat of the Arrangement was established in Vienna in 1996. Initially called the "New Forum", the Wassenaar Arrangement has as its primary focus two basic areas: (1) conventional weapons exports and, (2) sensitive dual-use items and technologies with military end uses. The Clinton Administration viewed the new accord as the "centerpiece" of its efforts to promote "multilateral restraint" in conventional arms sales and transfers of sensitive military technologies. The Clinton Conventional Arms Transfer Policy, set out in February 1995, was a restatement of a policy approach that has guided U.S. arms transfers since the Reagan Administration. The Wassenaar Arrangement (formally titled the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies) does not appear to break any new ground in the multilateral conventional arms control area. Previous attempts to achieve regional conventional arms sales agreementsâmost notably the effort in 1991-1992 by the George H.W. Bush Administration aimed at securing restraint on Middle East arms sales by the five permanent members of the U.N. Security Councilâfailed due to the lack of consensus among the parties regarding which weapons could be sold and to whom. Elements of the Wassenaar Arrangement dealing with conventional weapons transfers depend for their success on securing the agreement of other weapons suppliers to forego activities that might otherwise be to their political or financial benefit. There are four major areas of policy concern within the Wassenaar Arrangement. These areas are membership, target countries, materials to be controlled, and organization/operational procedures. The initial negotiations on the successor accord among the 17 COCOM members were expanded to include, in addition to the original members, several new European countries and New Zealand as participants. Then at the January 1994 Moscow summit, Secretary of State Christopher and Russian Foreign Minister Kozyrev issued a joint statement welcoming the decision to establish a new multilateral regime and indicating Russia's wish to join. In the spring of 1994, State Department officials stated that they would oppose the accession of Russia to the new regime as long as it continued weapons sales to Iran. The Russian decision to sell nuclear power reactors to Iran further complicated matters. By early 1995, the United States still was unwilling to agree to Russian participation in the formation of the new regime, while other members of COCOM were unwilling to start the new regime without the Russians. The matter was resolved in June 1995 at a Gore-Chernomyrdin meeting when the Russians agreed not to make any new weapons contracts with Iran or to sell nuclear reprocessing equipment. The "agreed membership criteria" under the Wassenaar Arrangement are that participants have adequate export controls, adhere to the major existing nonproliferation regimesâthe Missile Technology Control Regime, Australia Group, and Nuclear Suppliers Groupâand have "responsible" export control policies toward the so-called pariah countries: Iran, Iraq, Libya, and North Korea. According to Clinton Administration officials, China has not been invited to join the new regime because of concerns by the United States and its allies regarding Chinese weapons exports to Iran, Pakistan, and other shortcomings in meeting membership criteria. Closely related to the question of Russian participation, has been the participation of the other members of the former Soviet Union. The export control system that existed in the Soviet Union was centralized in Moscow. The countries that had been part of the Soviet Union had few responsibilities for controlling exports. Since 1991, the amount of attention paid by these newly independent countries to developing adequate export controls has varied greatly. Even now, a high level of uncertainty continues to exist as to the export control capabilities and the willingness of leaders of these countries to support export controls generally, and an association such as the Wassenaar Arrangement specifically. A second major area of policy concern relates to countries against which the new Arrangement is to be targeted. From the outset, the United States has wanted to target "countries of concern," specifically identified as Iran, Iraq, Libya, and North Korea. However, most of the countries participating in the negotiations have preferred setting a general objective of promoting security and stability and then letting each member country determine its export control policies and target countries. As currently constructed, Wassenaar "will not, however, be directed against any state or group of states; impede bona fide civil transactions; nor interfere with the rights of states to acquire legitimate means with which to defend themselves." France, Germany, and Russia, in particular, are opposed to a U.S. proposal to require advance notification of arms sales to regions of concern. However, former Under Secretary of State Lynn Davis noted that participants in the Wassenaar Arrangement have national policies banning arms and related exports to Iran, Libya, Iraq, and North Korea. Secretary Davis also noted the U.S. will continue to insist that prospective new members adhere to such policies. Based on discussions at the December 1996 plenary session, Secretary Davis said that no participating country was currently transferring arms or ammunition to Afghanistan in keeping with a recent U.N. Security Council resolution. Under the Wassenaar Arrangement, member states have agreed to control exports or retransfers of items and technologies contained on an agreed basic list of Dual-Use Goods and Technologies, and a separate Munitions List. Information on transfers of more than 100 sensitive dual-use goods and technologies on the agreed list are to be shared by members of the Arrangement. Arms transfer reporting is currently confined to the categories of major weapons systems used for the CFE (Conventional Forces, Europe) Treaty and the United Nations Arms Register. Related to the questions concerning which items should be controlled is the issue of regime organization and operations. None of the participants in the process appears to favor the types of strong controlsâand U.S. dominanceâthat existed under COCOM. National discretion with coordination is the most rigorous procedural option that emerged from the negotiations. Indeed, American officials have publicly acknowledged that only the United States favors prior notification of transfers, and this procedure is not part of the new regime. During plenary sessions and working group discussions, under Wassenaar, member governments are to share information on potential threats to peace and stability. They are to examine closely dubious weapons or technology acquisition trends. Specific information regarding global transfers to non-participating countries of arms in the seven categories, including model and type, (and technology) is to be made available in this manner, as are notices of denials of transfers of specific items on the lists established by the Wassenaar Arrangement. Members will regularly review the dual-use and Munitions List to reflect technological advancements and experience gained. The Arrangement envisions "more intensive consultations and more intrusive information sharing" among 6 major weapons suppliers: the United Kingdom, the U.S., France, Russia, Germany, and Italy. Through transparency of national activities involving weapons and technology transfers, it is hoped that dangerous acquisition patterns can be detected and halted before they become problematic. At the July 11-12, 1996 meeting in Vienna, the 33 Wassenaar states approved the "Initial Elements" to govern the Arrangement, and set November 1, 1996, as the date to launch both the control aspects of the agreement and the information exchange. Under the Arrangement, twice a year Participating States report all transfers or licenses issued for sensitive dual-use goods or technology (items in Annex 1 which is a subset of the Dual-Use list)âcurrently for transfers in the seven U.N. categories. In the case of conventional arms transfers, a biannual data exchange among participants gives details of arms deliveries . Twice a year, Participating States also report denials of licenses to transfer items on the Dual-Use list to non-member states. When a Participating State denies an export license for sensitive dual-use items, it is to notify other participants on an early and timely basis (preferably within 30 days, but definitely within 60 days). The Arrangement does not prohibit a participating country from making an export to a particular destination that has been denied by another participant (this practice is called "undercutting"). But participants are required to notify other participants within 60 days, and preferably within 30 days, after they approve a license for an export of sensitive dual-use goods that are essentially identical to those that have been denied by another participant during the previous three years. At the December 1999 plenary session of Wassenaar Arrangement members, the U.S. team proposed reporting on specific exports rather than aggregated reporting, reporting on exports of all listed items (not just the sensitive and very sensitive items), extensive pre-export reporting, and a "no undercut rule" which would ban exports by a Wassenaar partner of goods already denied by another partner. Russian and Ukrainian delegates reportedly blocked these reforms and the primary accomplishment was a joint statement of the importance of strong enforcement based on national laws. Beginning with the December 2000 plenary meeting, member states continued to reaffirm their concern regarding the threats posed by the illicit possession and use of Man Portable Air-Defence Systems (MANPADS) and agreed on elements of export controls on such weapons. In subsequent December plenary meetings of the Wassenaar Arrangement, through 2005, member states have also reaffirmed their commitment to prevent the acquisition of conventional arms and dual-use goods and technologies by terrorist groups and organizations and by individual terrorists, agreed to a document setting out detailed "best practice" guidelines and criteria for small arms and light weapons (SALW) exports, and agreed to impose strict controls on the activities of those who engage in the brokering of conventional arms by introducing and implementing adequate laws and regulations based on agreed Elements for Effective Legislation on Arms Brokering. The agreed membership criteria of the Wassenaar Arrangement basically rely upon statements by members that they will abide by fairly general standards. Since the Russian export control system and those of other NIS countries lack substantial transparency, what steps can be taken to ensure that the membership criteria will be complied with by these states and others with traditions of weak export control systems? Is there an effective means by which the United States can induce acceptance of higher standards for evaluating sensitive technology transfers by other participating states? Is legislation sanctioning nations that continue to transfer weapons and technology to aggressive nations in regions of tension such a mechanism? Would a greater emphasis on use of oversight mechanisms in U.S. law, such as the Arms Export Control Act, or the reauthorization of the Export Administration Act provide the United States with a more effective means of achieving some of the fundamental goals it has been pursuing through the Wassenaar Arrangement? | This report provides background on the Wassenaar Arrangement, which was formally established in July 1996 as a multilateral arrangement aimed at controlling exports of conventional weapons and related dual-use goods and military technology. It is the successor to the expired Coordinating Committee for Multilateral Export Controls (COCOM). This report focuses on the current status, features, and issues raised by the establishment and functioning of the Wassenaar Arrangement. It will be updated only if warranted by notable events related to the Arrangement. |
The 112 th Congress may consider legislation to fund, reauthorize, and amend the Public Works and Economic Development Act (PWEDA) of 1965, P.L. 89-136 (79 Stat. 552, 42 U.S.C. §3121). It will do so within the context of the more prominent policy debates regarding efforts to reduce federal spending to address growing budget deficits and the national debt; concerns about the duplication, fragmentation, and effectiveness of federal economic development assistance; and efforts to support economic recovery and job creation following the worst economic recession since the Great Depression. The PWEDA, whose statutory authority expired at the end of September 2008, authorized the creation of the Department of Commerce's Economic Development Administration (EDA). EDA's primary focus is to help regions experiencing long-term economic distress or sudden economic dislocation through grants in public infrastructure, the provision of technical assistance and research, and the development and implementation of comprehensive economic development strategies. EDA funds are competitively awarded to states and local governments, colleges and universities, Economic Development Districts, multi-jurisdictional planning organizations established by the states, and nonprofit organizations created under applicable state statutes. EDA assistance programs include the following grants: Public Works grants are used to finance infrastructure-related activities that support job creation, including, but not limited to, water and sewer facilities, industrial parks and business centers, broadband facilities, port and rail improvements, and business incubator facilities. Economic Adjustment Assistance (EAA) grants are used to fund strategic planning and implementation activities, including the same activities eligible under Public Works grants. Assistance may also be used to capitalize Revolving Loan Funds (RLFs) targeted to assist businesses in areas experiencing sudden economic dislocation. Planning grants are used for direct and indirect administrative expenses of Economic Development Districts (EDDs) and Indian tribes or other organizations charged with formulating and implementing Comprehensive Economic Development Strategies (CEDS) in EDA-designated distressed areas. Technical Assistance grants provide management and technical services, including conducting feasibility studies for projects located in distressed areas. Research and Evaluation grants support research into the practices, principles, and innovations that guide the effective formulation and implementation of economic development strategies. Trade Adjustment Assistance grants support technical assistance to firms and communities adversely affected by international trade, to help recipients develop and implement recovery strategies. Climate Change Mitigation grants are used to support projects that promote energy efficiency and curb greenhouse emissions in economically distressed communities. The agency has six regional offices whose primary responsibility is to review requests for EDA funding by state, provide technical assistance, and administer EDA grants. As Congress debates legislation to reauthorize and appropriate funding for the programs of EDA, it may consider questions such as the following: Should grantees administering Revolving Loan Funds (RLFs) be granted greater flexibility in the management and conversion of RLF assets for other EDA-eligible activities? Should Congress modify the current federal-local cost share thresholds based on factors intended to measure relative need in order to provide additional assistance to the most distressed areas? Should Congress change the current requirements governing the transfer of federal interest in EDA-financed construction projects in an effort to encourage local flexibility in the use of EDA funds? Should Congress expand the role of the regional Economic Development Districts beyond the planning function of developing Comprehensive Economic Development Strategies? Should Congress mandate greater cooperation and coordination across federal agencies and with state and local governments and other entities involved in economic development? A grantee awarded an EAA grant—as part of its Comprehensive Economic Development Strategy (CEDS)—may use the assistance to capitalize an RLF. An RLF, which requires a matching contribution from the grantee, allows the grantee to award low-interest loans to businesses that can demonstrate that they are unable to obtain bank financing. Loan repayments by qualified businesses to an RLF are used to cover administrative costs of the program and to recapitalize the RLF in order to make additional loans. Local administrators of RLFs are required to operate the funds in perpetuity as long as there is a federal interest in assets of the RLF. However, RLFs may be terminated for cause by EDA. According to EDA, in FY2009, 458 recipient organizations administered 578 RLFs with total capital assets of $852 million. This amount is approximately three times the size of the EDA total appropriation for FY2010 and represents a significant source of funding for the recipient organizations. EDA's RLF program has not been without controversy, including issues of inadequate monitoring and reporting. In March 2007, the Department of Commerce's Office of Inspector General (OIG) released an audit report that was critical of EDA's administration of RLFs. The report noted the following: EDA (1) failed to ensure efficient capital utilization by RLF grantees, (2) did not ensure grantee compliance with critical reporting requirements, (3) does not have an adequate tracking and oversight system, and (4) does not utilize single audit reports to improve grantee monitoring. The report also noted that much of the RLF information available to EDA that would allow it to administer the program effectively was incomplete or inaccurate. The OIG recommended that EDA take the following actions: develop a plan of action to address the problems in the program; require EDA regional staff to provide written evaluations of appropriate capital utilization percentages for all RLFs with a capital base exceeding $4 million; develop policies and procedures that will promote a uniform approach to sequestering excess cash; consistently collect and evaluate grantee financial reports; and develop and implement a database and reporting requirements that will allow EDA to monitor RLF programs effectively. On January 27, 2010, EDA published in the Federal Register final rules intended to address the unresolved issues discussed in the OIG report. The revised regulations noted that EDA had developed a web-based reporting system allowing grantees the option of uploading or manually entering data into the system. The agency also: revised its semi-annual reporting forms to allow it to monitor program performance more closely, including identifying RLFs with high loan default rates; identified specific violations of policies that would cause EDA to suspend or terminate an RLF program, in an effort to encourage grantees to comply with program reporting requirements; and required each grantee administering an RLF to hire an independent third party to conduct a compliance and loan quality review of its RLF every three years. Although EDA has moved to address many of the management concerns identified in the OIG report, other issues may require congressional action. Of particular concern to local administrators of RLF programs is the permanent federal nature of RLFs, which they find too restrictive. Local administrators would like the flexibility of using RLFs to cover the costs of other EDA-eligible activities. This view was articulated during May 21, 2009, testimony before the Senate Committee on Environment and Public Works by a representative of the National Association of Development Organizations (NADO), who complained that the permanent federal nature of RLFs inhibits local flexibility and requires RLF grantees to comply with "costly reporting and audit requirements." The NADO representative recommended that the committee, when amending the PWEDA, consider provisions that would allow EDA-capitalized RLFs to relinquish their federal identity after initial funds have been loaned, repaid, and fully revolved. The economic development analyst argued that this would reduce EDA's management burden and allow local grantees greater flexibility in the use of funds than federal regulations currently allow. It might be argued, however, that recent regulatory changes allow grantees more flexibility. For example, current regulations allow RLF administrators to use repayments to RLFs to cover the cost of administrative expenses, including a compliance audit that must be conducted every three years by a qualified independent third party. In addition, according to EDA, the new streamlined web-based reporting system eliminates duplication and will "reduce the average paperwork burden per RLF [semi-annual] report on the RLF recipient from 12 hours to 2.9 hours." Currently, the statute governing EDA assistance limits the federal contribution for an EDA-financed project to no more than 50% of a project's total cost when the project is located in an area whose unemployment rate for the latest 24-month period is at least one percentage point above the national average or whose per-capita income for the latest 24-month period is not more than 80% of the national average. A community that successfully competes for EDA funds, having met the minimum unemployment and per-capita income thresholds for eligibility, is required to provide 50% of the cost of a project from non-EDA funds. For a community whose unemployment rate exceeds or whose per-capita income falls below the minimum eligibility thresholds for EDA assistance, EDA may provide additional (supplemental) grants to reduce the community's 50% cost-share obligation, resulting in an increase (of up to 30%) in the percentage of a project's cost covered by EDA. As directed by the statute, EDA has developed and established in regulations a set of thresholds intended to measure an applicant's relative need for the purpose of identifying the maximum amount of a project's cost EDA will cover by awarding a supplemental grant. EDA's cost-share thresholds are based on the extent to which an applicant's unemployment rate or per-capita income exceeds the national average (see Table 1 ). It might be argued that the thresholds for receiving a higher federal cost share are arbitrary and artificially high, with the result that few areas qualify for the maximum percentage of EDA supplemental assistance. For example, of the approximately 750 areas that received grants from EDA in FY2008, fewer than 100 counties were eligible for the 80% federal cost share. A provision included in S. 782 would establish in statute lower eligibility thresholds for EDA supplemental grants. The new thresholds would be a return to those in place before 2006, when EDA issued final rules governing assistance programs. In addition, for Indian tribes, presidentially declared disaster areas, and areas where the state or local governments have exhausted their taxing and borrowing powers, EDA may assume the total cost of a project (see Table 2 ). Under current law, EDA retains an interest in property financed and constructed with EDA Public Works and Economic Adjustment Assistance funds for a period of at least 20 years after the initial date the EDA grant was awarded. EDA may retain its interest in the property for the useful life of the property, which may extend beyond the 20-year minimum period. If an EDA-financed property is to be sold prior to the expiration of its useful life, the recipient of EDA funds must repay EDA the full federal interest in the project, based on the current fair market value. Recipients of Public Works grants have been critical of the provisions governing the repayment of the federal interest in EDA-financed projects before the expiration of their useful life. In an effort to enhance local flexibility, EDA supports: changes in the law that would reduce the time horizon before EDA-financed assets could be sold; and changes in the method used to calculate the repayment of EDA interest upon resale. Provisions to reflect these recommendations were included in S. 782 , The Economic Development Revitalization Act of 2011, and are discussed in the next section of this report. On May 2, 2011, the Senate Committee on Environment and Public Works reported S. 782 , the Economic Development Revitalization Act of 2011. The bill would reauthorize and amend the Public Works and Economic Development Act (PWEDA) of 1965. S. 782 , discussed below, would address issues identified in the previous section of this report, including those relating to eligibility factors, federal cost shares, the use of RLFs, and the conversion of the federal interest in EDA projects. S. 782 was introduced on January 10, 2011, by Senator Boxer, chair of the Senate Committee on Environment and Public Works, with the support of the committee's ranking Member, Senator Inhofe. The Senate Committee on Environment and Public Works considered, marked up, and approved, by voice vote, an amended version of the bill on April 14, 2011. The bill includes an amendment introduced by Senator Inhofe, and approved by voice vote, that would require the General Accountability Office (GAO) to identify and submit to the committee within 90 days of passage of the act, other federal programs that duplicate EDA program activities. The bill was reported on May 2, 2011 ( S.Rept. 112-15 ), and placed on the Senate calendar. In general, the bill proposes some significant modifications to existing provisions of the PWEDA while including technical changes and minor modifications to other provisions. Most of the substantive changes to existing law proposed by the bill are intended to increase local flexibility in the use of EDA assistance. In addition to recognizing business incubators as a key strategy for developing high-skill, high-wage jobs, and fostering regional cooperation through the planning process, the bill proposes to add outmigration and job losses in specific industry sectors (manufacturing and information technology) to the definition of economic distress; adjust the relative need measures used to calculate the federal-local cost share of EDA-financed projects; allow greater flexibility in the conversion and management of EAA financed RLFs; modify the rules governing the transfer or buyout of the federal interest in property financed with EDA Public Works or Economic Adjustment Assistance; target assistance to communities with the greatest need as measured by economic distressed; encourage regional and interagency cooperation in carrying out economic development strategies; and authorize $500 million in funding for each of the next five fiscal years for EDA activities, including an annual minimum allocation for planning assistance grants. In general, areas that have a 24-month unemployment rate that is at least one percentage point above the national average, or a per-capita income that is not more than 80% of the national average, might qualify to apply for EDA's competitively awarded public works or economic adjustment assistance grants. In addition, assistance under these two grant programs, EDA's largest sources of assistance to distressed areas, is also available to areas that EDA has determined have or is about to experience a "special need" arising from actual or threatened severe unemployment or economic dislocation. Because of these broad parameters for eligibility, many counties may meet or exceed EDA's economic distress thresholds. According to a study by Rutgers University, [c]hanges in the criteria for designating areas eligible for EDA assistance have increased the number of economically distressed areas over time [....] Unemployment adds little to the designation of economic distress; nearly 90 percent of qualifying counties qualify on the basis of income alone. Locations that qualify on the basis of unemployment are more likely to be urban areas; rural areas qualify on the basis of income. Figure 1 identifies all U.S. counties that currently qualify for EDA development assistance based on an unemployment rate at least one percentage point above the national average for the 24-month period from April 2009 to March 2011 (the latest period for which data are available) or per capita income of 80% or less than the national average. The bill, S. 782 , includes a provision that would authorize EDA to extend Economic Adjustment Assistance (EAA) grants to communities affected by the loss of information technology, manufacturing, natural-resource based, agricultural, or service sector jobs to be used to assist affected communities reinvesting in and diversifying their economies. In addition to the loss of jobs in these sectors, communities may qualify for EAA grants if they are affected by international trade, fishery failure, disaster or emergencies, military base closures, realignments, or Department of Energy or Department of Defense-related funding reductions. The inclusion of additional factors for "economic distress" follows a pattern that has allowed more areas in the country to become eligible for EDA assistance over the years, even as funding for the agency has declined. When EDA was first authorized in the mid-1960s, only counties that had an income not more than 40% of the national income level were eligible. By 1998, this figure had increased to not more than 80% of the national income level (or an unemployment rate at least one percentage point higher than the 24-month unemployment rate for the nation, or a "special need"). According to the previously cited Rutgers University study, [t]he number of EDA's designated areas grew in response to both political and economic realities over the life of the agency, and particularly in the early 1970s. Areas of short-term unemployment were added between 1965 and 1971. New legislative mandates also expanded the types of counties that could be assisted. In 1970, 983 areas qualified for EDA assistance; by 1973, that number had nearly doubled to 1,818 areas [....] By 1998, approximately 90 percent of the counties in each year studied qualified. The statute governing EDA assistance limits the federal contribution to an eligible project or activity's cost and in most instances requires a local matching share. S. 782 would adjust the federal-local cost share requirements for EDA projects based on unemployment and per-capita income levels. The bill would restore the federal cost share rates in place before regulations promulgated in 2006. As established in program regulations, the federal share of a project's cost can run from 50% to 80%, based on where the area's long-term unemployment rate or per-capita income falls relative to the respective national average. As Table 3 shows, areas with 24-month unemployment rates 200% higher than the national average or those whose per-capita incomes are 50% of the national average would be subject to the 80% federal and 20% local matching fund requirement. Conversely, projects in areas with unemployment rates at least one percentage point above the national average or whose per-capita incomes are not more than 80% of the national average would continue to be (as at present) subject to a 50% federal–50% local match requirement. S. 782 would include EDA cost-share rates in law (rather than in regulation) and would lower some of the unemployment and per-capita income thresholds currently in place. The bill would establish several federal cost-share levels. Four of the levels would determine federal-local cost shares based on long-term unemployment or per-capita income data (See Table 3 ). The bill includes exceptions to the cost share schedule outlined in Table 3 . S. 782 includes language that would allow EDA to establish additional eligibility criteria for areas impacted by or experiencing outmigration or sudden and severe economic dislocation, or other condition; however, the federal share of EDA assistance awarded to projects in such areas could not exceed 80% of project cost. Additional Criteria- The Secretary may establish eligibility criteria in addition to the criteria described in this paragraph to address areas impacted by severe outmigration, sudden and severe economic dislocations, and other economic circumstances, on the condition that a Federal share established for such eligibility criteria shall not exceed 80 percent.... Section 503(a) of the Public Works and Economic Development Act of 1965 (42 U.S.C. 3193(a)) is amended by inserting "outmigration" after "regional unemployment." (S. 782) Another provision would change current statutory language governing Indian tribes. S. 782 would allow EDA to cover between 75% to 100% of the total cost of the project, whereas currently EDA finances 100% of the project cost undertaken by Indian tribes. Also, for a federally declared disaster area, EDA could increase the federal share of a project's cost up to 100%. Other existing statutory language includes exceptions that allow EDA to cover 100% of a project or activity's cost if EDA determines that a state or local government lacks the taxing or borrowing capacity to cover its share of a project or activity's cost. The provision also applies to an eligible nonprofit entity that lack the borrowing capacity to cover its share of a project's cost. S. 782 would grant administrators of RLFs the flexibility to convert the assets of RLFs to other uses. The bill identifies the methods and requirements for conversions, and the conditions under which this could occur. Specifically, the recipient/administrator of an RLF would be allowed to seek EDA's permission to convert RLF assistance to other uses on the following grounds: the recipient has determined that RLF assistance is no longer needed to achieve the goals outlined in its comprehensive economic development strategy; or given the current economic development needs of the recipient, it could make better use of the RLF if it were allowed to carry out other activities eligible for EDA assistance. S. 782 would allow RLF conversions by one of two means. The administrator of an RLF would be allowed to sell the assets of the RLF to a third party and use the proceeds to carry out other PWEDA-eligible activities, or could retain repayments to the RLF in accordance with a strategic reuse plan rather than relend them. The changes are sought as a means of helping underfunded EDDs, one of the primary administrators of RLFs, access additional resources to address budget shortfalls. In addition, the bill would allow EDA to set aside 2% of the amounts made available for RLFs to develop and maintain an automated tracking and monitoring system and would direct EDA to solicit input from the public, RLF grantees, national experts, and federal employees, to improve the administration of RLFs. This provision is consistent with recommendations included in the 2007 OIG report. S. 782 includes a provision authorizing an appropriation of $5 million for each of the fiscal years 2011 through 2015 to be used to fund Brightfield Demonstration projects. This program was previously authorized by the EDA Reauthorization Act of 2004 ( P.L. 108-373 , 118 Stat. 1756), but funds were never appropriated. Under S. 782 , EDA would allocate funds to projects that would redevelop brownfield sites to house new ventures for creating jobs through the advancement of renewable energy technologies, including solar, wind, and geothermal technologies. In addition, the bill includes a provision that directs EDA to support economic development activities that enhance energy and water efficiencies and that would reduce the country's dependence on foreign oil. The bill would shorten the period during which EDA could hold a reversionary interest in property financed with EDA assistance from the current minimum 20 years to 10 years from the date the grant was awarded. It would require EDA—before providing assistance for a construction project—to establish a time frame for the achievement of the project's economic development objectives. During that period, EDA would hold an undivided equitable reversionary interest in the property. S. 782 outlines the methods and conditions under which federal interest in a property could be terminated. One provision of the bill would allow EDA to terminate the federal reversionary interest in a project if the recipient met its obligations and objectives within the time frame established when the project was first funded. Alternatively, a recipient could initiate a request that EDA terminate reversionary interest in a property. If this request is submitted during the 10-year period starting with date the assistance was initially provided, the recipient must repay EDA 100% of the fair market value of the prorated federal share of the project. If the request is submitted after the initial 10-year period, a recipient must pay EDA the fair market value of the federal share of the project as if that value had been amortized over a period established for completion of the project, which might be more than 10 years, based on straight-line depreciation of the project over its estimated useful life. Under this provision, the cost to the recipient of buying out the federal interest in the property would be discounted based on the remaining useful life of the EDA-assisted property. S. 782 would establish 10 years as the minimum period an EDA-assisted property must be held without the EDA recipient being required to repay 100% of the federal interest in the property. To support the planning and economic development activities of Economic Development Districts (EDDs), S. 782 would establish a minimum appropriation of $31 million or 12% of the amount appropriated for EDD activities for each of the fiscal years 2011 through FY2015. This amount would increase if EDA received appropriations equal to or greater than $291 million. In addition, S. 782 would strengthen the role of EDDs. The bill specifies that EDDs are to be involved in the full range of EDA-funded activities, including coordination of activities related to Comprehensive Economic Development Strategies (CEDS), and implementation activities involving states and federal agencies, as well as research and planning activities. The bill would require EDA promulgate regulations to ensure that EDDs arees given an opportunity to review and comment on proposed EDA-funded projects that might directly impact he region's economy. The legislation seeks to promote intergovernmental and interagency cooperation and coordination in the development and implementation of regional economic development activities. It would amend Section 3(8) of the PWEDA by recognizing three new regional commissions in addition to the four that are currently established. Newly proposed for inclusion are the Southeast Crescent Regional Commission, Northern Border Regional Commission, and Southwest Border Regional Commission. Inclusion of these organizations would allow them to be eligible for EDA assistance, including technical assistance grants. In addition, the bill would amend Section 101 of the PWEDA to include university centers and EDDs as recipients of EDA technical assistance grants. These grants may be used to encourage the formation of public-private partnerships in support of regional economic development. Supporters of including regional commissions in EDA legislation argue that it promotes greater regional and federal cooperation. Detractors, however, might counter that overlap exists between the work of regional commissions and EDA, which could lead to duplication and dilution of EDA's programs. The bill includes a provision that directs EDA and the Department of Labor to cooperate in support of economic and workforce development strategies and regional clusters. The provision also includes language encouraging EDA cooperation and coordination with other federal, state, local government, and consortia of local governments. In addition, in order to encourage regional coordination between two or more EDDs, the bill would allow EDA to increase the federal share of EDA of planning assistance grants or the of total amount of planning grant assistance. The bill would expand the type of activities eligible for research and technical assistance grants to include the creation of peer exchange programs intended to promote industry leading practices and innovations, including those related to regional initiatives of EDDs. The bill includes a provision requiring the General Accountability Office (GAO) to submit to the Senate Committee on Environment and Public Works, within 90 days following the enactment of the bill, a list of other federal programs that may duplicate the programs administered by EDA, including programs administered by the Department of Housing and Urban Development, the Department of Agriculture, and the Small Business Administration. During testimony before the House Small Business Administration, a representative of GAO stated that the agency had identified 80 programs administered by the four agencies (HUD, SBA, DOC, and USDA) that may overlap or duplicate efforts. Concerns about duplication and fragmentation among federal assistance programs has become a growing concern as Congress has expressed the desire to reduce federal spending in an effort to address the federal budget deficits. The bill would establish a multiyear funding level of appropriations for EDA. A total of $500 million would have been authorized for each fiscal year through FY2014. In addition, the legislation would authorize the use of technical assistance and research grants to support program evaluation and economic analysis that may be useful in assisting in the location of technology and manufacturing jobs in the United States or that may aid in understanding, preventing, alleviating, or mitigating conditions that contribute to unemployment or outmigration. The Senate began consideration of S. 782 on June 8, 2011. For six days—over a two-week period that ended on June 21, 2011—the Senate debated the bill. A cloture motion was filed on June 16, 2011. Successful adoption of the cloture motion would have limited time for debate on the bill, prohibited consideration of non-germane amendments, and allowed the Senate to vote on passage of S. 782 . On June 21, 2011, the chamber rejected the cloture motion, 49-51. The bill has been set aside and may be considered at a future date in the 112 th Congress. The effort to adopt a cloture motion was intended to stop what Senator Boxer, floor manager of the bill, considered the filibustering of the legislation. Opponents, such as Senator Coburn, raised objections about EDA and its programs, including their effectiveness in creating private sector jobs, and whether they were redundant given other federal programs. During Senate consideration of the bill a total of 99 amendments were filed. The majority of these amendments were not relevant to the underlying legislation—the Public Works and Economic Development Act of 1965—and were not considered by the Senate during floor debate on S. 782 . Several amendments relevant to the underlying legislation, PWEDA, were introduced during floor debate on S. 782 , including proposed amendments that called for: terminating EDA and its programs ( S.Amdt. 403 and S.Amdt. 449 ); eliminating EDA's Brightfield Demonstration Program and the Global Climate Change Mitigation Incentive Fund ( S.Amdt. 436 ); reducing the federal cost share for EDA projects ( S.Amdt. 447 ); transferring EDA functions to the U.S. Department of Housing and Urban Development ( S.Amdt. 448 ); and eliminating funding for all EDA programs except Economic Adjustment Assistance (EAA) and authorizing an annual appropriation of $150 million for EAA activities ( S.Amdt. 452 ). Although these and other relevant amendments were introduced, none were considered and voted on during Senate debate on S. 782 . In addition to EDA-related amendments a number of non-germane amendments to S. 782 were introduced and considered. The subject of these amendments included proposals to improve the regulatory process for small businesses ( S.Amdt. 390 ); to reform electronic debit card transactions ( S.Amdt. 392 ); to prohibit the use of federal funds for ethanol blender pumps and facilities ( S.Amdt. 782 ); and to repeal the volumetric ethanol excise tax credit ( S.Amdt. 476 ). Of the 99 amendments proposed for inclusion in S. 782 only S.Amdt. 476 was agreed to by a vote of 73 to 27. S. 782 proposes to amend and reauthorize EDA and its programs at a funding level of $500 million for each of the fiscal years from 2011 through 2015. This level of funding is 50% more than the $325 million requested by the Obama Administration for FY2012 budget and 76% more than the $283 million appropriated for EDA for FY2011. Although supportive of EDA and its programs, the Obama Administration, in its Statement of Administration Policy on S. 782 , objected to the proposed authorization levels and noted that "the bill would authorize spending levels higher than those requested by the President's Budget, and the Administration believes that the need for smart investments that help America win the future must be balanced with the need to control spending and reduce the deficit." The Administration's FY2012 request of $324.9 million for EDA, including salaries and expenses, represented a 14.6% increase from the FY2011-enacted funding level of $283.4 million, which included $245.5 million for EDA program activities and $37.9 million for salaries and expenses. The FY2012 request would have provided $40.6 million for the salaries and expenses account and $284.3 million for Economic Development Assistance Programs. The programs and their requested funding levels included $96.0 million for the 21 st Century Innovation Infrastructure program (the proposed successor to the long-standing EDA Public Works program); $84.9 million for the Economic Adjustment Assistance program; $27.0 million for the Partnership Planning Grants Program (the proposed successor to the EDA Planning program); $18.4 million for Technical Assistance; $1.5 million for Research and Evaluation; $16.5 million for Sustainable Economic Development (proposed successor to the Global Climate Change Mitigation Incentive Fund); and $40.0 million for the new Regional Innovation (Growth Zones) Program established under the America COMPETES Act ( P.L. 111-358 ). The Administration did not request funding for the Trade Adjustment Assistance programs. On July 20, 2011, the House Committee on Appropriations reported ( H.Rept. 112-169 ) H.R. 2596 , a bill recommending FY2012 spending levels for the Departments of Commerce and Justice, and Science and Related Agencies. The House Committee on Appropriations' recommendation for EDA was 20.7% less than the Administration's FY2012 request and 9.1% less than the FY2011-enacted amount. The committee recommended $219.8 million for Economic Development Assistance Programs, which was $25.7 million below the FY2011-enacted amount and $64.5 million below the Administration's request. The committee recommended $37.9 million for EDA salaries and expenses, which was the same as the FY2011 amount and $2.7 million below the Administration's request. See Table 4 for a detailed review of EDA FY2012 funding requests, recommendations, and final appropriations. The Senate Committee on Appropriations reported S. 1572 , its version of the Department of Commerce and Justice, and Science, and Related Appropriations Act of FY2012, on September 15, 2011. The bill recommended an appropriation of $392.2 million, including $37.2 million for salaries and expenses and $135 million for disaster recovery activities targeted to areas included in 2011 presidential disaster declarations. Excluding the $135 million recommended for disaster recovery activities, the Senate bill recommended $257.2 million for other EDA activities. Because Congress did not complete action on FY2012 appropriations before the end of FY2011, short term funding for EDA programs was included in P.L. 112-36 , a continuing budget resolution that expired on November 18, 2011. In an effort to expedite consideration of several appropriations measures before the expiration of P.L. 112-10 , the Senate consolidated three appropriations measures into a single legislative bill, H.R. 2112 . The so-called "Minibus" was approved by the Senate on November 1, 2011. The Senate-passed version of H.R. 2112 recommended $757.2 million for EDA in FY2012, including $37.2 million for EDA salaries and expenses. The bill, as passed by the Senate, also included $500.0 million for disaster recovery activities targeted to areas included in 2011 presidential disaster declarations. This was a substantial increase from the $135 million initially recommended by the Senate Appropriations Committee. During its consideration of the bill, the Senate passed by voice vote, on October 21, 2011, an amendment ( S.Amdt. 836 ) proposed by Senator Lautenberg that would have increased EDA disaster assistance funding by an additional $365 million to $500 million. The amendment exempted the additional $365.0 million in EDA disaster assistance from the sequestration process outlined in the Budget Control Act of 2011. Excluding the $500.0 million for disaster activities, the Senate recommended $257.2 million for EDA activities and salaries and expenses. This amount was $500,000 less than the $257.7 million recommended by the House Committee on Appropriations, $67.8 million less than the $324.9 million requested by the President, and $26.3 million less than the $283.4 million enacted for FY2011. The bill recommended $20.0 million in support of the Administration's Regional Innovation Program, which was $20.0 million less than requested by the Administration. The House did not include a recommended FY2012 appropriation for this program. On November 14, 2011, House and Senate conferees reported H.R. 2112 ( H.Rept. 112-284 ). The bill was approved by both houses on November 17, 2011, and signed into law by the President on November 18, 2011 ( P.L. 112-55 ). P.L. 112-55 appropriates $457.5 million in EDA assistance and salaries and expenses, including $200 million in supplemental disaster assistance for states and communities in presidentially-declared disaster areas, and $37.5 million for EDA salaries and expenses. The act also appropriates $220 million for EDA assistance programs, including $111.6 million for public works projects, $50 million for economic adjustment assistance activities, and $29 million for planning grants. The act includes several set asides within the economic adjustment assistance subaccount. Specifically, the act directs EDA to allocate up to $5.0 million for each of these activities: $5.0 million in support of the repatriation of jobs of small to mid-size U.S. companies, particularly those involved in manufacturing, research, or services; $5.0 million in credit subsidies in support of loan guarantees to small or medium-size manufacturers involved in the use of or production of innovative technologies; and $5.0 million in grants or loan guarantee credit subsidies in support of the creation of regional innovation clusters. The act limits the loan guarantee commitments for innovative technologies and regional clusters to no more than $70.0 million. The conference report accompanying the act directs EDA to commission a review of the University Centers program funded under the Technical Assistance subaccount; directs EDA to focus trade adjustment assistance on manufacturers impacted by trade; and encourages EDA to use a portion of funds allocated for regional innovation program activities in support of science parks. The Administration's FY2013 request of $220 million for EDA represents a 14.6% decrease from the FY2012-enacted funding level of $257.5 million, which included $220 million for EDA program activities and $37.5 million for salaries and expenses. The FY2013 request includes $38 million for the salaries and expenses account and $182 million for EDA assistance programs. The specific programs and their requested funding levels include $40.5 million for the 21 st Century Innovation Infrastructure program (the proposed successor to the long-standing EDA Public Works program); $60.2 million for the Economic Adjustment Assistance program; $27.0 million for the Partnership Planning Grants Program (the proposed successor to the EDA Planning program); $12.0 million for Technical Assistance; $1.5 million for Research and Evaluation; $15.8 million for Trade Adjustment Assistance; and $25.0 million for the new Regional Innovation (Growth Zones) Program established under the America COMPETES Act (P.L. 111-358). The Administration did not request funding for the Global Climate Change Mitigation Fund. The Administration's FY2013 budget request for EDA activities represents a shift in programmatic focus. The budget proposes to reduce overall funding for EDA programs, excluding salaries and expenses and supplemental disaster funding, by 17.3%, from $220 million to $182 million. The reduction in overall EDA funding may be viewed by some observers as an acknowledgement by the Administration of the need to reduce federal spending. The budget also proposes to reduce what has been EDA's most highly funded program, public works grants, by 64%, from $111.6 million in FY2012 to $40 million in FY2013. The proposed reduction in funding for public works coupled with a proposed 20% increase in funding for Economic Adjustment Assistance (from $50 million to $60 million), and a $25 million appropriation request for the Administration's new Regional Innovation Strategies program marks a shift in the focus of EDA assistance. The proposed budget would place greater emphasis on projects intended to support job creation through regional innovation clusters; facilities that support innovation such as research parks and business incubators; and strategic planning activities, and would de-emphasize EDA's capacity to fund public works projects. On April 19, 2012, the Senate Committee on Appropriations reported S. 2323 , Commerce, Justice, Science and Related Agencies Appropriations Acts for FY2013 ( S.Rept. 112-158 ). The Senate bill recommends a total appropriation of $238 million for the activities of the EDA, including $200 million for programs administered by the agency. Excluding the $200 million in additional funding appropriated in FY2012 for disaster relief activities, the bill reported by the Senate Committee on Appropriations would reduce funding for EDA programs by 10%, or $20 million, less than the $220 million appropriated in FY2012. Conversely, S. 2323 recommends $18 million, or 9.9%, more than requested by the Administration. Noteworthy is the bill's recommendation to appropriate $60.2 million for EDA's public works program activities, which is $51.4 million, or 46%, less than the amount appropriated in FY2012. However, S. 2323 , as reported by the Senate Committee on Appropriations recommends a funding level for public works activities that is $19.7 million, or 48.6%, more than the $40.5 million requested by the Administration. The bill also recommends $7 million of the amount allocated to EAA be used to provide loan guarantees and grants in support of regional innovation cluster. The Administration's budget request includes $25 million to support regional innovation cluster activities. The bill approved by the House does not include funding for regional innovation clusters. On April 26, 2012, the House Appropriations Committee on Appropriations adopted and posted on its website an un-numbered bill, along with its accompanying draft report, that would appropriate funds for the Departments of Commerce, Justice, Science and Relate Agencies for FY2013. The bill includes $220 million for EDA programs and salaries and expenses. The House bill recommends $182 million for EDA programs. This is $38 million, or 17%, less than the $220 million appropriated in FY2012. This is the same amount as requested by the Administration, and $18 million, or 9%, less than recommended by the Senate Committee on Appropriations. The bill also recommends $26 million, or 23%, less than the $111.6 billion appropriated for public works activities in FY2012. In addition, the bill includes two set asides of EAA funds: $5 million to support the repatriation of jobs to the United States and $5 million to support for small and medium size manufacturers. The bill recommends maintaining funding for salaries and expenses at the same level of $38 million as enacted for FY2012, and as requested by the Administration, and recommended in the bill reported by the Senate Committee on Appropriations. | The primary focus of the Department of Commerce's Economic Development Administration (EDA) is to help regions experiencing long-term economic distress or sudden economic dislocation attract private-sector capital and create higher-skill, higher-wage jobs through investments in public infrastructure, the provision of technical assistance and research, and the development and implementation of Comprehensive Economic Development Strategies (CEDS). EDA was created with the passage of the Public Works and Economic Development Act (PWEDA) of 1965, P.L. 89-136 (79 Stat. 552, 42 U.S.C. §3121). The 112th Congress may consider legislation to reauthorize and amend PWEDA, whose statutory authority expired on September 30, 2008. As part of those deliberations, Congress may consider a number of changes in the structure of EDA assistance programs. At least one bill, S. 782, the Economic Development Revitalization Act, has been reported by a congressional committee. The Senate Committee on Environment and Public Works reported the bill on May 2, 2011. The bill includes several provisions intended to encourage regional and interagency cooperation, expand the role of regional Economic Development Districts, and modify the factors used to determine the federal share of EDA-funded projects and activities. The bill also includes proposals that would address a number of programmatic concerns raised by grant recipients, including provisions that would grant eligible entities, including EDDs, administering revolving loan funds (RLF) greater flexibility in the management and conversion of RLF assets for other EDA-eligible activities; and change the current requirements governing the transfer of federal interest in EDA-financed construction projects in an effort to encourage local flexibility in the use of EDA funds. The Senate began consideration of S. 782 on June 8, 2011. For six days—over a two-week period that ended on June 21, 2011—the Senate debated the bill. In an effort to end debate and bring the bill to a floor vote, a cloture motion was filed on June 16, 2011. Successful adoption of the cloture motion would have limited time for debate on the bill, prohibited consideration of non-germane amendments, and allowed the Senate to vote on passage of S. 782. On June 21, 2011, the chamber rejected the cloture motion, 49-51. Currently, the bill has been set aside and may be considered at a future date in the 112th Congress. The reauthorization of EDA and its programs will take place within the context of more prominent policy debates regarding efforts to reduce federal spending to address growing budget deficits and the national debt; concerns about the duplication, fragmentation, and effectiveness of federal economic development assistance; and efforts to support economic recovery and job creation following the worst economic recession since the Great Depression. On November 18, 2011, the President signed into law P.L. 112-55, which appropriated $457.5 million in EDA assistance and salaries and expenses, including $200 million in supplemental disaster assistance for states and communities in presidentially declared disaster areas. For FY2013, excluding supplemental disaster assistance, the President has proposed to reduce program funds by $38 million to $220 million, including $182 million for program activities and $38 million for salaries and expenses. A bill, S. 2323, reported by the Senate Appropriations Committee recommends $200 million for EDA activities while a bill reported by the House would appropriate $182 million for EDA programs for FY2013. This report will be updated as events warrant. |
Casework , in a congressional office, refers to the response or services that Members of Congress provide to constituents who request assistance. As part of the process of determining how to carry out their congressional duties, Members of Congress largely determine the scope of casework and their other constituent service activities. Typically with casework, Members and their staffs help individual constituents deal with federal administrative agencies by acting as facilitators, ombudsmen, and, in some cases, advocates. Some congressional offices may consider their liaison activities between the federal government and local governments or businesses concerned with the effects of federal legislation or regulation to be casework. Other offices may include interactions with communities and nonprofit organizations seeking federal grants or other assistance as casework. Common congressional casework requests include tracking a misdirected benefits payment; helping to fill out a government form; applying for Social Security, veterans', education, and other federal benefits; explaining government activities or decisions; applying to a military service academy; seeking relief from a federal administrative decision; and immigrating to the United States or applying for U.S. citizenship. Contrary to the widely held public perception that Members of Congress can initiate a broad array of actions resulting in a speedy, favorable outcome, there are significant limitations on the degree of permissible intervention from a Member office. More of these restrictions are described later in this report: see " 3. What rules govern casework? ". Casework is not required of Members of Congress, but it is commonly expected by constituents. Some constituents may view a Member's office as the best point of a contact for assistance with the federal government. It appears that each Member office today provides some type of casework, reflecting a broadly held understanding among Members and their staff that casework is integral to the representational duties of a Member of Congress. Some also believe that casework activities can be part of an outreach strategy to build political support among constituents. Casework may also be viewed as an evaluative stage of the legislative process. Some observers suggest that casework inquiries afford Members the opportunity to evaluate whether a program is functioning as Congress intended. Constituent inquiries about specific policies, programs, or benefits may also suggest areas in which programs or policies require additional oversight, or further legislative consideration. Federal statute prohibits Members of Congress, chamber officers, and congressional staff from representing anyone before the federal government, except in the performance of their official duties. House and Senate rules and federal law also prohibit ex parte , or off-the-record, communications with agency employees reasonably expected to be involved in case adjudication. Generally, a Member of Congress may do the following on behalf of eligible individuals seeking their assistance, under House and Senate guidelines: request information or a status report; urge prompt consideration; arrange for interviews or appointments; express judgments; call for reconsideration of an administrative response that the Member believes is not reasonably supported by statutes, regulations, or considerations of equity or public policy; or perform any other service of a similar nature consistent with the provisions of the rules of the House or Senate. Under the Privacy Act of 1974, executive branch agencies cannot share records containing an individual's personally identifiable information with any outside entity unless that individual has authorized the release of that information. Agencies may request a particular format or types of information on a Privacy Act release. Requests involving medical information might require an additional waiver, pursuant to rules promulgated under the Health Insurance Portability and Accountability Act of 1996 (HIPAA). House rules regarding casework services are discussed in the House Ethics Manual . Guidelines in the House Ethics Manual say that when contacting a federal agency on behalf of a constituent, a Member, officer, or employee of the House should not make prohibited, off-the-record comments, receive things of value for providing casework assistance, or improperly pressure agency officials. Casework requests typically do not involve the courts, but guidelines in the House Ethics Manual  provide a range of options to Members who might choose to participate in judicial proceedings. Senate Rule XLIII and the Senate Ethics Manual establish parameters for casework services in that chamber. Senate Rule XLIII (3) prohibits the provision of casework assistance on the basis of contributions or services to organizations in which the Senator has a political, personal, or financial interest. The Senate Ethics Manual describes constituent service as something that occurs with respect to the executive branch and is silent on service before the courts. Because casework is often viewed as a representational activity, the primary recipients of an office's casework services are usually considered to be individual constituents residing within a House Member's district, or a Senator's state. Yet there are reasons why other persons or entities might seek assistance from a Member's office. For example, foreign-born individuals seeking to immigrate to the United States may contact a Member of Congress for assistance. A family member or other concerned party outside of a Member's district may contact an office on behalf of a resident constituent. Strict definitions of who is eligible for casework assistance are not provided by the House or Senate; however, other guidelines may imply certain parameters. Senate Rule XLIII recognizes that not everyone who seeks assistance from a Senator will be a constituent of the state the Senator represents, and uses the term "petitioner" to refer to the casework requester. No such distinction is drawn in the House Ethics Manual , which uses the term "constituents" to refer to the recipients of Members' casework services. In the House, guidance issued by the Committee on Ethics suggests that "particular care should be exercised when providing assistance to individuals who are not from the Member's congressional district." The guidance also indicates that a Member should not use official resources to provide casework for individuals who live outside the district the Member represents. When a Member of the House is unable to assist a non-constituent, the Member may refer the person to his or her own House Member or Senators. Matters regarding the management of casework activities are at the discretion of individual congressional offices, subject to the rules of their respective chambers, relevant law, and the priorities of that office. The number and type of constituent requests, how an office defines casework, Member priorities, and the distribution of responsibilities among office locations and staff are some of the factors that can affect a congressional office's casework policies and procedures. Most casework is conducted by staff in state or district offices, and staff are commonly hired in these locations to work on casework or other constituent services. Offices often establish and document procedures for how they handle casework; this is not required, but some offices find it useful to specify casework goals, management procedures, or expectations of staff. This can help ensure that all cases are addressed in a similar manner, and that all appropriate staff can process new casework requests and access casework records if needed. Offices sometimes create their own forms to serve as Privacy Act waivers or to gather necessary case-related information from constituents. Most constituents expect that offices will handle their personal information carefully and discreetly. Casework and other records created in a congressional office are considered to be the personal property of the Member; the House and Senate provide guidance for managing these materials. Many state or district offices have enough constituent requests to assign at least one staff member to work specifically on casework. Congressional staff serving as caseworkers typically act as liaisons between constituents and federal agencies. The decision to hire a caseworker, the specific qualifications for that role, and job responsibilities, however, are left to each Member office to determine. In some offices, certain caseworkers work with particular agencies or on certain types of cases; in other offices, all caseworkers work on all types of cases. For some staff, casework is their primary job responsibility; others perform casework alongside another role in the office. Caseworkers generally first obtain information about the constituent's situation from the person requesting assistance. This often involves understanding the problem presented by, or on behalf of, the constituent. Caseworkers may need to establish what services or benefits the constituent may be eligible for. They may also need to request documentation, like copies of birth certificates or military service or other records, to provide to the agency in support of a case. Caseworkers also identify the appropriate way to address the constituent's concerns. Often, this involves contacting a federal agency's congressional liaison. To receive any information from federal agencies about a constituent, caseworkers must provide a Privacy Act waiver, signed by the constituent, which allows the agency to share the constituent's personal information with a Member. Throughout the process, caseworkers try to communicate with the constituent about realistic expectations. While many congressional offices focus on national agencies, some issues presented by constituents may lead caseworkers to contact state or local governments, or nonprofit or community organizations; in some instances, these entities may be able to provide intermediary or alternative assistance to constituents. Caseworkers also determine when a case may require additional support from a Member of Congress, other officials, or other staff. Additional information for caseworkers on working with constituents is available on the CRS casework resources website ( http://www.crs.gov/resources/casework ) or by contacting CRS. Often, federal agencies have designated legislative affairs or congressional relations staff assigned as general points of contact for congressional caseworkers. Many of these contacts are listed in CRS Report 98-446, Congressional Liaison Offices of Selected Federal Agencies . Congressional liaisons generally are not agency decisionmakers, and essentially serve as a resource available to assist Members and congressional staff on legislative and constituent service matters. Individuals serving in this capacity commonly work in an agency's legislative or intergovernmental affairs office. Although most of these congressional liaisons are located in Washington, DC, agency locations, they can refer caseworkers to the appropriate local or regional office staff members, if needed, for further assistance. Caseworkers may also need to identify other sources of assistance for constituents. Frequently, caseworkers can utilize contacts known to their offices. This can include local leaders or community organizations that may be able to provide alternative means of assistance for constituents. Caseworkers may also learn about helpful points of contact through other caseworkers who have worked on similar issues in another congressional office. In addition to developing a broad network of contacts, caseworkers often develop expertise through their interactions with agencies and insights into what agency acronyms or terminology mean in practical terms for the constituent. This sometimes enables caseworkers to provide information to constituents that the constituents may not have otherwise gleaned from the agency's formal response. Although Members and caseworkers are limited in how much they can directly intervene in an agency's decisionmaking process on behalf of a particular case, there are several reasons why agencies typically are responsive to congressional concern. Congress, broadly, is responsible for creating federal agencies and programs, determining their scope, providing their funding, and overseeing their activities. Because some constituents seek congressional assistance only after other means of working with an agency have failed, agencies may view congressional casework inquiries as micro-level exercises of oversight and respond to them accordingly. Response times, whether for an acknowledgment that a case inquiry has been received, or for a response the agency considers final, can vary considerably from agency to agency. Waiting periods may be determined in part by the priority agencies place on constituent service, the type or complexity of an individual case, or the volume of cases to which an agency responds. In some instances, agency response practices might result in slower response than constituents and some congressional offices expect or would prefer. Federal agencies might have different protocols that apply for emergency or time-sensitive situations, and congressional liaisons can share these methods with caseworkers. There are, however, limits on what caseworkers and agency officials can do to expedite requests. As constituents wait for an agency response, caseworkers might try to provide information about how long the process could take, based on information from or past work with the agency. Caseworkers may choose to provide regular updates to constituents at defined intervals to help assure constituents that their case is still being considered by the agency. Federal agencies are required to comply with statutes and regulations governing their activities, including decisions regarding services and benefits provided to constituents. As a consequence, an agency might sometimes be unable to provide a response that is satisfactory to the constituent. If there is reason to believe that incomplete information was available to the agency, or that an agency decision was not in keeping with its statutory or regulatory requirements, a Member office may, pursuant to House or Senate rules, request reconsideration of a constituent's concerns. Caseworkers can sometimes refer constituents to state, local, or community resources that might address some of the challenges a constituent is experiencing. Nonfederal entities that provide services to veterans, the elderly, or others with specific needs might offer services while a constituent awaits an agency decision or fashion a remedy if no agency resolution is available. CRS has a number of casework resources for congressional offices, accessible online through http://www.crs.gov/resources/CASEWORK . These resources include an introductory video on casework (CRS Video WVB00093, Introduction to Congressional Casework ); a longer report on casework practices (CRS Report RL33209, Casework in a Congressional Office: Background, Rules, Laws, and Resources ); a report on U.S. service academy nominations (CRS Report RL33213, Congressional Nominations to U.S. Service Academies: An Overview and Resources for Outreach and Management ); and a list of frequently updated congressional liaison contacts (CRS Report 98-446, Congressional Liaison Offices of Selected Federal Agencies ). CRS periodically hosts seminars for district and state staff that can provide additional information; upcoming programs are listed at http://www.crs.gov/events . Congressional offices may also contact CRS analysts directly to address more specific questions or concerns related to casework. Further case support may be obtained by contacting local or state officials, professional associations, or community groups that help individuals facing similar situations; these entities may have access to additional resources that can help resolve or alleviate a constituent's problem. Caseworkers working in district offices may find it useful to contact staff in the Member's Washington, DC, office for additional information about policies or programs that affect casework. Similarly, information from fellow caseworkers in neighboring states or districts where constituent and agency experiences may be similar can be useful in providing caseworkers with contacts, resources, or advice. | Constituents often contact a congressional office looking for assistance; the work congressional offices do in response to these requests is generally referred to as casework . Members of Congress determine the scope of their constituent service activities, including casework. Many requests for casework come from constituents seeking assistance from federal agencies, but offices may also receive requests from non-constituents. Congressional offices can have different conceptualizations of casework based on Member preferences, district needs, and constituent expectations. This report addresses frequently asked questions (FAQs) about congressional casework. It is intended to provide resources for congressional offices and individual caseworkers. This includes the casework rules and guidelines established by the House and Senate, as well as some observations about how congressional offices generally approach casework and work with federal agencies on behalf of constituents. Casework practices are largely left to each Member office to determine, like many other aspects of congressional operations. Each constituent's situation is unique, and federal agencies vary in their casework practices, which makes it difficult for either chamber to issue prescriptive guidelines regarding casework. The degree of flexibility afforded to offices can help caseworkers tailor their assistance to best meet constituents' needs. The relative autonomy afforded to congressional offices regarding casework also means that many of the answers provided here are necessarily broad-based. Further resources are available from CRS that can provide more specific, context-specific information. Several of these CRS resources are discussed throughout this report, including the following: CRS Video WVB00093, Introduction to Congressional Casework , by [author name scrubbed] CRS Report RL33209, Casework in a Congressional Office: Background, Rules, Laws, and Resources , by [author name scrubbed] CRS Report RL33213, Congressional Nominations to U.S. Service Academies: An Overview and Resources for Outreach and Management , by [author name scrubbed] and [author name scrubbed] CRS Report 98-446, Congressional Liaison Offices of Selected Federal Agencies , by [author name scrubbed] the CRS resources website, "Constituent Services: Casework," by [author name scrubbed], available at http://crs.gov/resources/casework |
This report provides answers to 20 frequently asked questions regarding contractors and HealthCare.gov, the federal online health insurance portal called for by the Patient Protection and Affordable Care Act (ACA) ( P.L. 111-148 , as amended). Over 50 contractors, including CGI Federal and Quality Software Services, Inc. (QSSI), helped in building the site, which was reportedly largely unusable when it first became available to the public on October 1, 2013, and has been the subject of ongoing work since then. Exactly what went wrong in terms of HealthCare.gov's rollout has been explored in several congressional hearings, and is under investigation by the Department of Health and Human Services inspector general. Litigation between the contract parties over costs or damages is also possible. The questions and answers in the report are organized into three broad categories addressing (1) the processes whereby the Centers for Medicare and Medicaid Services (CMS) selected vendors; (2) the terms of the vendors' contractual relationships with the government; and (3) potential amendments to federal procurement law that, some commentators suggest, could help prevent issues of the sort experienced with HealthCare.gov. The questions in this report are those that happen to have been frequently asked of the Congressional Research Service by congressional staffers. The inclusion of a particular question, or the exclusion of another question, should not be taken to indicate that particular factors didâor did notâcontribute to the problematic rollout of HealthCare.gov. In addition, answers to these questions must often be provided in general terms, in part, because specific language in the parties' contracts may be subject to multiple interpretations and has not been construed by any court. In addition, the parties' conduct in the course of performing the contractâthe details of which are still emergingâcan affect their rights. For example, the government could potentially be found to have waived certain rights that the contract's plain language would appear to grant to it by engaging in conduct that warrants an inference that it has relinquished the right. The authors of this report rely upon third-party investigations of the facts and circumstances surrounding HealthCare.gov, and additional information may emerge regarding topics discussed herein. There is also a video, CRS WVB00013, Contractors and HealthCare.gov: Background in Brief , by [author name scrubbed] and [author name scrubbed], that addresses certain of these questions. The Competition in Contracting Act (CICA) generally requires that executive agencies "obtain full and open competition through the use of competitive procedures" when awarding contracts. However, the award of a contract is not the only way in which agencies may assign work to specific vendors, and CICA's requirements as to "full and open competition" generally do not apply when agencies assign work to a vendor without awarding a contract. One way in which agencies can select vendors to perform work without awarding a contract is by issuing a task or delivery order under an existing contract. Some contracts are known as indefinite-delivery/indefinite-quantity (ID/IQ) contracts , because they generally permit the government to issue orders for whatever quantities of supplies or services it needs, whenever during the contract's term it needs them. The order must be within the scope of the contract. However, contracts can be drafted to encompass broad categories of supplies and services. There is a "preference" for multiple-award ID/IQ contracts, meaning that the agency awards a contract to multiple vendors, each of whom is generally entitled to a "fair opportunity to be considered" for orders valued in excess of $3,000. Vendors that do not hold the underlying ID/IQ contract are ineligible to compete for orders issued under it, and some commentators have characterized this as "uncompetitive." CMS selected CGI Federal as the "lead" contractor for HealthCare.gov's rollout by issuing an order in 2011 under an ID/IQ contract for information technology (IT) services that had been awarded in 2007. CGI Federal was one of 16 vendors awarded this contract, and three of these vendors submitted proposals to perform the order that was issued to CGI Federal. Agencies currently have the legal authority to take the performance problems of predecessor firms and key employees into account when selecting vendors in certain procurements, and when determining whether prospective vendors are responsible. For example, when selecting vendors in negotiated procurements, agencies must generally consider past performance or some other "non-cost evaluation factor," such as compliance with solicitation requirements, technical excellence, management capability, personnel qualifications, or prior experience. The past performance of predecessor firms and key employees "should" also be "take[n] into account," when "relevant" to the acquisition. However, in order to consider this information, the agency generally must have indicated its intent to do so at the time when it issued the solicitation; it generally cannot do so on an ad hoc basis after issuing the solicitation. Moreover, the Federal Acquisition Regulation (FAR) requires agencies to take into account "[t]he currency and relevance of the information," as well as its source, context, and general trends in performance. Thus, any performance problems experienced by a vendor (or a vendor's predecessor firm, as in the case of CGI Federal ) would not necessarily cause the vendor to be downgraded on past performance or other non-cost evaluation factors. Nor would a vendor's being downgraded on these factors necessarily preclude it from winning the contract, depending upon the other factors evaluated, the weight assigned to various factors, and the proposals of competing vendors. Similarly, agencies must consider certain factors related to capacity to perform when determining whether prospective contractors are affirmatively responsible prior to the award of a contract. These factors include whether the prospective vendor has a "satisfactory performance record," and has the necessary organization, experience, accounting and operational controls, and technical skills to perform the contract. The performance and experience of predecessor firms and key employees may be taken into consideration when making such determinations. However, agencies are not required to consider this information; and, even if agencies do consider it, they generally cannot repeatedly find a vendor to be nonresponsible based on the same performance issues. Instead, they must formally exclude the vendor, as discussed below. In part because of the President's constitutional authority to appoint and remove certain federal officials, the President has some influence over the decisions made by employees of executive branch agencies. However, the FAR would appear to prohibit contracting officers or other officials involved in federal procurements from "favoring" contractors based on the contractors' political ties, as some have suggested happened with certain HealthCare.gov vendors. In particular, Subpart 3.1 of the FAR requires that "Government business ... be conducted in a manner above reproach and, except as authorized by statute or regulation, with complete impartiality and with preferential treatment for none." This provision specifically bars conflicts of interestâor the appearance of conflicts of interestâin relationships between the government and a contractor. The Court of Appeals for the Federal Circuit has held that "[f]or even an appearance of a conflict of interest to exist, a government official must at least appear to have some stake in the outcome of government action influenced by that individual." Thus, if a government official involved in the selection of a vendor hadâor appeared to haveâa stake in the choice of this vendor, then a conflict of interest that violated Subpart 3.1 could potentially exist. Moreover, because the FAR provision prohibits favorable treatment more generally, if there were indications that an official involved in vendor selection had granted preferential treatment to a vendor, a violation of this FAR provision could potentially have occurred. In addition, as previously noted, other provisions of federal procurement law effectively limit the degree to which "favored" contractors may be given preferential treatment by generally requiring that contracts be awarded via "full and open competition through the use of competitive procedures," and that all vendors holding a multiple-award ID/IQ contract be given a "fair opportunity to be considered" for orders valued in excess of $3,000. Federal law restricts "foreign" participation in federal procurement in several ways, none of which appears to have been implicated in the case of HealthCare.gov. The primary restrictions on foreign participation arguably pertain to the place where supplies or construction materials are manufactured. For example, in procurements subject to the Buy American Act (BAA) of 1933, as amended, federal agencies are generally required to purchase "domestic end products" for "public use." Acquisitions of servicesâwhich are generally what CMS procured in implementing HealthCare.govâare not subject to the BAA or similar domestic content restrictions. Nor does the BAA restrict purchases from foreign persons, per se , provided that these persons supply domestic end products and construction materials. Though other restrictions preclude agencies from contracting with certain vendors because they have foreign parents (as several HealthCare.gov contractors do), or because the vendors are otherwise seen as "foreign," these restrictions apply only in arguably narrow circumstances which do not appear to have been implicated in the case of HealthCare.gov. Such circumstances may exist when national security interests are involved, or when domestic capabilities to perform specific functions are at issue. However, CMS is not among the agencies subject to these national security-related restrictions, and domestic capabilities to provide IT supplies and services are not among those capabilities specifically protected. In yet other cases, government contractors are barred from employing persons who are not U.S. citizens, nationals, or lawful permanent residents (LPRs) to perform certain work under federal contracts. At least one HealthCare.gov contractor was previously found ineligible for certain work because it proposed to use foreign nationals temporarily admitted to the United States pursuant to H1-B visas to perform certain work. However, CMS does not appear to have been required by the FAR or Department of Health and Human Services to have included such a restriction on the use of foreign nationals in its solicitations or contracts for HealthCare.gov. According to news reports, CMS plans to replace CGI Federal by awarding Accenture a one-year contract to oversee HealthCare.gov. CMS apparently awarded the contract, which has a value of about $90 million, on a sole-source basis "[b]ecause of time constraints." CICA generally requires that executive agencies enter into contracts after "full and open competition through the use of competitive procedures" unless certain circumstances exist that would permit agencies to use noncompetitive procedures. Such circumstances may exist when: (1) the property or services needed by the executive agency are available from only one responsible source and no other type of property or services will satisfy the [agency's] needs; (2) the executive agency's need for the property or services is of such an unusual and compelling urgency that the Federal Government would be seriously injured unless the executive agency is permitted to limit the number of sources from which it solicits bids or proposals; ... (7) the head of the executive agency ... (A) determines that it is necessary in the public interest to use procedures other than competitive procedures in the particular procurement concerned; and (B) notifies Congress in writing of that determination not less than 30 days before the award of the contract. Additional statutory and regulatory requirements may apply when an agency relies on these exceptions. For example, CICA states that when an agency relies on exception (2), it must limit the period of such a contract to one year in ordinary circumstances, but in any event no longer than the period of time needed "to meet the unusual and compelling requirements of the work to be performed under the contract." CICA also requires that when agencies rely on this exception, the contracting officer must solicit offers "from as many potential sources as is practicable under the circumstances." In the past, the Comptroller General has determined that time constraints may justify a sole-source award under exception (2) if the contractor receiving the award is the only one capable of performing the work within these constraints. Although the exception that CMS relied upon in awarding the contract to Accenture has not been publicly noted, this information may come to light if CMS submits a justification and approval (J&A) for the award. Contracts awarded using noncompetitive procedures based on exceptions (1) or (2) must be supported by a certified written justification that, depending on the value of the acquisition, may require the approval of a government official other than the contracting officer. Agencies must generally make J&A documents available to the public within 14 days after award of the contract, or within 30 days if the agency relies on exception (2). When reviewing whether a justification supports the use of noncompetitive procedures, the Comptroller General considers whether it provides a "reasonable basis" for the agency to make a sole-source award. As a rule, copies of the federal contracts are not publicly available. However, individual Members of Congress and their staff (as well as the general public) can request copies from the contracting agency either informally, or pursuant to the Freedom of Information Act (FOIA). The FAR makes clear that the FOIA generally applies in the context of government procurement. In some cases, requests could potentially be denied, in whole or in part, based upon one of FOIA's exemptions, such as those for certain kinds of investigatory records compiled for law enforcement purposes, or documents properly classified as secret in the interest of national defense or foreign policy. However, obtaining a copy of the contract does not necessarily suffice for determining who may be at fault for specific problems. The language of the contract could, for example, potentially be ambiguous or subject to conflicting interpretations by the parties. Alternatively, the parties could have waived certain requirements by expressly relinquishing particular rights, or by engaging in conduct that warrants an inference that the right has been relinquished. There could also be legal justifications for any failures to perform as apparently required by the terms of the contract. Federal statutes and regulations currently require that standard terms be incorporated into executive agency solicitations and contracts which obligate the vendor to report certain information that may be indicative of performance problems, including (1) exclusions from government contracting; (2) convictions or findings of liability for certain offenses, or indictments or charges with such offenses by a government entity; (3) "significant overpayments" under the vendor's contract; and (4) violations of the civil False Claims Act or certain federal criminal laws occurring in connection with the award, performance, or close-out of a federal contract. Individual contracts could potentially also be drafted so as to require reporting of specific performance issues, and contractors sometimes voluntarily disclose issues so as to present this information to the procuring agency in the best possible light or obtain any favorable treatment provided to those who voluntarily disclose. However, the standard required disclosures do not necessarily encompass run-of-the-mill performance issues but, rather, those that would give rise to exclusion, or criminal or civil liability. Moreover, even when information is disclosed, there are sometimes limits on how the government may use it. For example, prospective vendors' disclosures regarding their exclusions and certain criminal or civil liability make up, in part, the Federal Awardee Performance Integrity Information System (FAPIIS). FAPIIS also includes any nonresponsibility determinations, terminations for default, and past performance information from the past five years ; and contracting officers are required to consult FAPIIS when determining whether prospective vendors are responsible. However, contracting officers are restricted in their ability to consider certain past performance information that is more than three years old, and have discretion as to what weight, if any, to give to the various information provided in FAPIIS. Media sources have reported that a number of changes were made to HealthCare.gov shortly before, as well as after, its problematic rollout. In some cases, such as when vendors corrected errors in lines of code, these changes arguably served to bring the product into conformity with pre-existing contractual requirements. In other cases, however, the contractor was tasked with doing things that were not provided for in the initial contract, such as designing the website so that users must create accounts before viewing plans, instead of anonymously browsing. The latter sorts of changesâapparently altering the terms of the contractâare possible, in part, because parties to a contract generally may agree to change the contract's terms after the contract has been formed. Changes that are agreed to by both parties are called bilateral modifications, and are the preferred method of altering the terms of government contracts. However, many government contracts also include so-called Changes Clauses which permit contracting agencies to unilaterally "make changes within the general scope of th[e] contract" to specified terms of the contract (e.g., contract specifications; method or manner of performance). Some versions of the Changes Clause even provide that the contractor must continue to perform if the changes constitute a breach of the contract by exceeding the contract's scope. Any changes in the contract terms could potentially result in adjustments of the contract price or the time allotted for performance. The government may be entitled to a reduction in price if the change deletes work from the contract. Conversely, if the change adds work to the contract, the contractor may be entitled to an increase in price. When performance of a contract does not proceed as anticipated, the parties frequently disagree over who was responsible, as CMS and its contractors have done in the case of HealthCare.gov. Assuming that they feel a need to resolve these disagreements and cannot do so through informal means, CMS and its vendors may ultimately bring claims âor written demands or assertions seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to a contractâunder the Contract Disputes Act (CDA) of 1978, as amended. The CDA calls for claims by or against a contractor to be submitted to the contracting officer for a decision. The contracting officer then has a certain period of time (60 days in the case of claims of $100,000 or less; or any longer period established by the contracting officer, in the case of claims over $100,000) within which to issue a written decision approving or denying the claim. Failure to issue a decision within the requisite time period is generally deemed to be a denial. Following the contracting officer's decision, the contractor may (1) appeal the decision to an agency board of contract appeals within 90 days of receipt of the decision, or (2) bring an action directly on the claim in the U.S. Court of Federal Claims (COFC) within 12 months of receipt of the decision. Decisions of the board or COFC, in turn, may be appealed to the U.S. Court of Appeals for the Federal Circuit and, ultimately, the Supreme Court could grant certiorari. This disputes process can take some time, not just because of all these layers of review, but also because the CDA generally provides that claims may be brought within six years of their accrual. In one notable case, the dispute process under the CDA took over 20 yearsâand ended with the Supreme Court leaving the parties in their respective pre-litigation positions. However, that case, General Dynamics Corporation v. United States , 563 U.S.â(2011), raised questions of state secrets that are unlikely to be implicated in any litigation over HealthCare.gov. It remains to be seen whether and how much of the money that CMS spent on HealthCare.gov the government might be able to recover in light of the website's problematic rollout, or on other grounds. The possibility of any monetary recovery depends, in large part, upon the terms of the contracts, including any amendments thereto (see supra " How can I get copies of the contracts? "). To the degree that the contractor performed materially as required in the contract, the government's grounds for recovery could be limited. In other words, the contractor is generally not liable if the government misunderstood or misstated its own requirements. On the other hand, if a contractor did not perform materially as required in its contract, and there is no legal justification for its failure to do so, then the government could potentially be entitled to certain costs or damages either pursuant to express terms of the contract, or under the common law of contracts. For example, certain government contracts include terms obligating the vendor to pay the government liquidated damages âor damages of a contractually prescribed amountâif the vendor fails to perform within the time period specified in the contract. Other contracts include terms entitling the government to equitable reductions in price if the performance tendered by the contractor does not meet contractual specifications, or if the contractor does not timely replace rejected supplies. However, even if the contract does not include such terms, the common law of contracts generally permits parties to recover damages based on the difference between the value of the performance contracted for and that tendered, or on other grounds. Recovery on non-contractual grounds, such as under the civil False Claims Act (FCA), is also possible, if a vendor knowingly made or presented false, fictitious, or fraudulent claims for payment to the government. However, inaccurate statements that were not made in the context of claims for payment (such as contractors' statements prior to the rollout that work on HealthCare.gov was on track ) generally would not give rise to liability under the FCA. CMS is able to end its contractual relationship with CGI Federal in 2014 because the contract's term expires in February, and CMS has chosen not to exercise the option to extend it. An option is a "unilateral right in a contract by which, for a specified time, the Government may elect to purchase additional supplies or services called for by the contract, or may elect to extend the term of the contract." Because the decision to exercise an option rests solely with the government, the contractor is not entitled to recover lost profits if the government decides not to exercise an option. This is true regardless of the circumstances surrounding the government's non-exercise of the option (e.g., the government previously gave notice of its intent to exercise the option). Executive branch procurement contracts also provide the government with the right to terminate the contract for the government's convenience, or for the contractor's default. The government could potentially have to pay the vendor certain costs if it exercises either of these rights. Conversely, the vendor could potentially be liable for certain costs if the government exercises its right to terminate the contract for default. However, neither termination for convenience nor termination for default are at issue in the case of CGI Federal's contract with CMS to work on HealthCare.gov. Some commentators have suggested that making federal procurements of information technology (IT) more like private sector procurements of IT, in terms of consideration of risk and use of modular contracting methods, could help prevent situations like HealthCare.gov. Currently, Part 39 of the FAR directs agencies to "analyze risks, benefits, and costs" before entering into a contract for IT. Risks associated with schedules, cost, technical feasibility, dependencies between new projects and other projects or systems, and program management, among others, are specifically recognized; and agencies are instructed to apply appropriate techniques to manage and mitigate such risks. Suggested techniques include modular contracting, among other things. Part 39 also designates contracting and program officials as "jointly responsible" for managing and controlling risk when selecting projects and during program implementation. Part 39 also reiterates the requirement, initially found in the Clinger-Cohen Act of 1996, that executive agencies, "to the maximum extent practicable," use modular contractingâthat is, use one or more contracts to acquire information technology systems in successive, interoperable incrementsâfor the acquisition of "major system of information technology." In addition, Part 39 (1) indicates that agencies may use modular contracting to acquire non-major systems of IT; (2) suggests how acquisitions of IT systems may be divided into smaller increments; (3) requires contracting officers to choose "appropriate" contracting techniques that facilitate the acquisition of subsequent increments; and (4) encourages contract award, "to the maximum extent practicable," within 180 days after the solicitation's issuance in order to avoid obsolescence. There would seem to be some opportunities to expand upon the current framework, since the risk management techniques addressed in Part 39 are generally encouraged, not required. Similarly, modular contracting is only required, "to the maximum extent practicable," with "major systems" of IT. It is not required with major systems when its use is deemed not to be practicable by the procuring agency, or when acquiring non-major systems. ( Major systems are "combinations of elements," whose cost exceeds certain monetary thresholds or which are designated as such by agency heads, that "will function together to produce the capabilities required to fulfill a mission need.") However, given that consideration of risk and modular contracting is currently, at a minimum, encouraged, it is unclear that merely requiring these things, in and of itself, would necessarily suffice to ensure that agencies effectively deploy any required techniques. An agency that erred significantly in any required risk assessment could potentially still end up with the same difficulties that CMS experienced with HealthCare.gov. Some commentators have suggested that problems like those experienced with HealthCare.gov could potentially be avoided if federal agencies made greater use of performance based acquisition (PBA), an approach to acquisition structured around the results to be achieved, rather than the manner in which work is performed. PBA has been widely recognized as having certain benefits (e.g., lessening performance risk, removing the need for detailed specifications or process descriptions), and a statute enacted in 2000 established a "preference" for the use of performance-based contracts and orders in the acquisition of services by executive agencies. The Services Acquisition Reform Act (SARA) of 2003, as amended, expanded on this preference by granting agencies temporary authority to treat performance-based contracts and orders for services as if they were contracts for commercial items, provided certain conditions were met. Subpart 37.6 of the FAR provides further guidance about how agencies are to develop performance work statements, performance standards, and quality assurance surveillance plans. Among other things, the FAR prescribes that, in developing performance work statements, agencies must, "to the maximum extent practicable," (1) describe the work in terms of the desired results, rather than how the work is to be accomplished or the number of hours; and (2) enable assessment of work performance against measurable performance standards, among other things. The FAR similarly requires that performance standards be measurable and structured to permit assessment of the contractor's performance, and that quality assurance surveillance plans meet the requirements of Subpart 46.4 of the FAR. However, despite general agreement on the potential benefits of PBA, and statutes and regulations promoting PBA, agencies have made arguably little use of it, and the key question seems to be how agencies can be brought to make greater use of PBA. Further, even with PBA, an agency that failed to adequately describe its desired results to its vendorsâor that kept changing its desired results over timeâcould potentially still be at risk of performance failures. Some have suggested that the problems with HeathCare.gov arose, at least in part, because CMS drew upon the standard pool of government vendors and did not work with innovative start-ups or entities widely known for their commercial IT products. Further, according to these commentators, executive agencies, like CMS, are limited in their ability to work with commercial firms because federal contracting processes are too "dated" and "inflexible," and/or agencies impose too many government-specific terms upon vendors as conditions of their contracts. The Federal Acquisition Streamlining Act (FASA) of 1994 established a "preference" for the acquisition of "commercial items" by requiring, among other things, that executive agencies define their requirements, "to the maximum extent practicable," "so that commercial items ... may be procured," or "to the extent that commercial items suitable to meet the executive agency's needs are not available, nondevelopmental items other than commercial items may be procured." The Federal Acquisition Reform Act (FARA) of 1996 and the Service Acquisition Reform Act (SARA) of 2003 subsequently expanded on this preference, including by exempting acquisitions of commercial items from a number of standard requirements and contract terms. However, the application of these authorities has proved controversial, with some suggesting that agencies have relied upon the authorities to their own detriment (e.g., by paying higher prices because they did not obtain certified cost or pricing data from the vendor), and, particularly since 2003, Congress has specifically extended certain requirements to commercial vendors. Other commentators, however, have objected to what they perceive as the "erosion" of the commercial item authorities. Facilitating increased dealings with commercial vendors in the context of IT procurement could potentially be complicated insofar as it implicates this broader debate. Further, current law focuses primarily upon the acquisition of commercial items, not the use of commercial vendors, per se . There may be cases where facilitating the acquisition of commercial items also promotes use of commercial vendors; however, there may be other cases where this is not so. Some commentators have suggested that CMS's decision to rely, in part, on an ID/IQ contract awarded in 2007 in implementing HealthCare.gov contributed to the problematic rollout because only vendors who held that contract could be considered, and other vendorsâincluding new and potentially innovative onesâwere excluded. As previously noted, ID/IQ contracts generally permit the government to issue orders for whatever quantities of supplies or services it needs, whenever during the term of the contract it needs them; and there is a preference that such contracts be awarded to multiple vendors, each of whom must generally be given a "fair opportunity to be considered" for orders. Congress expressly authorized executive agencies to use ID/IQ contracts in 1994, when it enacted the Federal Acquisition Streamlining Act (FASA). Among other things, FASA requires that solicitations for ID/IQ contracts "include ... a statement of work, specifications, or other description that reasonably describes the general scope, nature, complexity, and purposes of the services or property to be procured under the contract." This requirement was imposed to address concerns that, by giving solicitations for ID/IQ contracts broad scopes, agencies could use the resulting contracts "routinely to obtain a wide range of [supplies and services] without meaningful competition," and the FAR subsequently imposed similar requirements upon ID/IQ contracts themselves. However, despite this requirement, commentators have expressed concern about ID/IQ contracts with arguably broad scopes, or apparently tenuous relationships between the work required under the contract and that contemplated by particular orders, including in the case of HealthCare.gov. In addition, the overall guidance on the "appropriate use" of ID/IQ contractsâwhich the National Defense Authorization Act for FY2000 required to be developed âprovides only that agencies "should use" ID/IQ contracts "when a recurring need is anticipated." Some have wondered about requiring IT vendors to post performance bonds, as some states did when contracting for IT in the 1990s. Bonds rely upon third-partiesâknown as suretiesâto ensure that the government still receives performance, or is appropriately compensated, if the initial vendor fails to perform. A federal statute, the Miller Act of 1935, as amended, generally requires that construction contractors post performance bonds on federal contracts. However, the Miller Act does not apply to non-construction contractors, and the FAR directs that "[g]enerally, agencies shall not require performance ... bonds for other than construction contracts." Pursuant to the FAR, such bonds may be required only for non-construction contracts exceeding the simplified acquisition threshold (generally $150,000) "when necessary to protect the Government's interest," such as when (1) government property or funds are to be provided to the contractor for use in performing the contract or as partial compensation; (2) the government desires assurance that a successor in interest to a contractor is financially capable; (3) substantial progress payments are made before delivery of end items starts; or (4) contracts are for the dismantling, demolition, or removal of improvements. Requiring performance bonds could potentially help ensure uninterrupted performance under IT contracts because the surety generally must arrange for completion of the contract, or compensate the government, if the contractor fails to fulfill its obligations. Such a requirement could also reduce the possibility that a contractor performing work for the government will default because of insolvency, since sureties generally issue bonds only to contractors who are in good financial standing. However, neither interruption of performance nor default due to insolvency appears to have been directly at issue in the case of HealthCare.gov, and requiring performance bonds could limit the number of vendors willing and able to compete for federal contracts, thereby increasing costs. Express warranties were also used by state governments during the 1990s when procuring IT, and some have wondered about the possibility of requiring similar warranties of performance in federal IT contracts in the wake of HealthCare.gov. Currently, per the FAR, the "use of warranties"âor promises or affirmations given by a vendor regarding the nature, usefulness, or condition of the supplies, or the performance of services, furnished under the contractâ"is not mandatory" in federal contracts. However, the FAR authorizes agencies to use warranties in specific acquisitions when such use is "appropriate" and approved in accordance with agency procedures. Whether a warranty is seen as appropriate depends upon various factors, including (1) the nature and use of the supplies and services (e.g., their complexity and function, the potential harm to the government if the item is defective); (2) the costs arising from the contractor's charge for accepting the deferred liability created by the warranty, and the government's cost in administering and enforcing the warranty; (3) the government's ability to enforce the warranty; (4) trade practice; and (5) whether the contractor's charge for the assumption of added liability may be offset by reducing the government's quality assurance requirements. The FAR also encourages reliance on commercial warranties for the repair and replacement of commercial items where "appropriate and in the Government's best interest." Requiring express warranties as to certain IT systems may seem appealing, particularly in light of the apparent performance failures of certain components of HealthCare.gov. However, as the FAR itself suggests, the use of an express warranty typically increases contract costs, as vendors "charge for accepting the deferred liability created by the warranty." Thus, across-the-board requirements for specific express warranties for IT could potentially result in the government incurring costs that are not commensurate with the benefits received from the warranty, particularly if the government's ability to enforce the warranty is limited. In addition, it is important to note that the government's ability to recover costs or damages for a vendor's unjustified failure to deliver supplies or services that materially satisfy contractual requirements is generally not contingent upon the presence of an express warranty. Some commentators have suggested that improved recording and consideration of information about vendors' performance under federal contracts could help agencies avoid dealings with vendors who have experienced performance problems in the past and, so the thinking goes, may be more likely to experience such problems in the future. Currently, under the FAR, executive agencies (1) are generally required to evaluate vendors' performance on contracts and orders valued in excess of the simplified acquisition threshold (generally $150,000) at least annually and at the time when work on a contract or order is completed; and (2) must consider past performance or some other "non-cost evaluation factor" when selecting vendors in negotiated procurements. The FAR also prescribes certain aspects of the vendor's performance that must, "at a minimum," be included in performance evaluations, and defines the five adjectival ratingsâfrom "exceptional" through "unsatisfactory"âthat agencies are to use in describing performance. Aspects of performance to be addressed include the quality of the product or service; cost control; schedule and timeliness; management or business relations; subcontracting with small businesses; and other applicable factors (e.g., late payment of subcontractors). The FAR's requirements as to consideration of past performance in source selection, in contrast, are arguably more limited, with agencies generally having discretion in defining what constitutes past performance for purposes of the procurement; determining what performances qualify as recent and relevant; and establishing the weight to be given to past performance and other factors, such as cost or price. Contracting officers are also generally free to draw their own inferences regarding contractors' past performance from the sources they consult, so long as the conclusions are reasonable. This framework could potentially be modified in an attempt to further standardize agency evaluations of contractors' past performance, or to require that agency evaluations be considered in specific ways in source selection. However, agency evaluation and consideration of vendor's past performance were not designed to remove all risk from the procurement process. Rather, they were intended to permit agencies to make more informed decisions about whether potential performance risks may be offset by other factors (e.g., lower price). In addition, certain amendments to the current requirements could conceivably decrease the number of potential vendorsâand, thus, increase costsâunless there were mechanisms whereby agencies could differentiate between vendors with different types and degrees of performance problems, and vendors could demonstrate that they have overcome prior performance problems. Some have suggested that performance problems, such as those experienced by CGI Federal's predecessor firm, American Management Systems, should be given greater consideration not only in source-selection decisions, but also in determinations as to responsibility and exclusion. As previously noted, executive agencies are generally prohibited from entering a contract with a prospective vendor who has not been found to be affirmatively responsible based on criteria that include whether the vendor has a "satisfactory performance record." The FAR further provides that vendors that are, or recently have been, "seriously deficient in contract performance"âas evidenced by delinquent performance, delivery of nonconforming items, poor management or technical judgment, or failure to correct production problems, among other things âgenerally "shall be presumed to be nonresponsible." Past failure to apply sufficient tenacity and perseverance to perform acceptably is also said to be "strong evidence of nonresponsibility," and failure to meet the quality requirements of the contract is described as a "significant factor" in determining satisfactory performance. Responsibility determinations are, however, intended to address only the risks of nonperformance on specific contracts, not to exclude "poor performers" from all dealings with federal agencies. A separate process, involving debarment, is used for purposes of exclusion, and agencies could potentially be found to have impermissibly engaged in de facto debarment if they were to intentionally or effectively use the responsibility determination process to preclude a vendor from any dealings with the government. Subpart 9.4 of the FAR, in turn, expressly authorizes an agency to debar a contractor after finding, by a preponderance of the evidence, a "violation of the terms of a Government contract or subcontract so serious as to justify debarment." Such violations can include willful failure to perform in accordance with the contract's terms; or a history of failure to perform, or unsatisfactory performance of, one or more contracts. Contractors must generally be given notice and an opportunity for a hearing prior to being debarred, particularly when the debarment is based upon agency findings, rather than convictions or civil judgments. Moreover, any debarment under the FARâincluding for serious violations of the terms of a government contractâis discretionary, not mandatory. It is to be imposed "only in the public interest for the Government's protection and not for purposes of punishment." Executive agencies, in general, have recently been criticized by some Members of Congress and the public for their limited use of their discretionary authority to debar, particularly on performance-related grounds. However, some agencies reportedly have established procedures whereby vendors whose contracts are terminated for default âthat is, for failure to perform as required by the contractâare automatically referred to the appropriate officials for potential debarment. All agencies could be required to do this. However, particularly given the frequent disputes between vendors and agencies over who was, in fact, responsible for performance problems, such a requirement could potentially increase the amount of litigation, as vendors seek to have terminations for default be found to be improper and converted into terminations for convenience. Also, a vendor that experiences significant performance failures on only one contract, due to exceptional circumstances, may pose no performance risks to other agencies. It has been widely noted that CMS essentially served as the lead system integrator (LSI) for HealthCare.gov, managing the assembly of component systems developed and tested by various vendors into a single system; and some have questioned whether CMS had the in-house capabilities to effectively perform this role. Nothing in current law either required CMS to serve as the LSI, or prohibited it from doing so. Congress enacted legislation in 2006 and 2008 that imposed certain limits on the use of LSIs by the Department of Defense (DOD), partly due to concern that agencies' use of LSIs may give vendors "discretion to make program decisions." However, these restrictions only apply to DOD, and then only in acquisitions of "major systems." The restrictions do not apply to civilian agencies, like CMS, or even to DOD procurements that do not involve major systems. Congressional and public concern about the use of LSIs by DOD could, however, potentially have influenced CMS's decision not to use an LSI with HealthCare.gov. Earlier debates over the use of lead system integrators centered, in part, upon whether such entities may perform functions that are inherently governmental (i.e., functions that, as a matter of federal law and policy, must be performed by government employees and cannot be contracted out), or closely associated with inherently governmental functions. Further, guidance issued by the Obama Administration in 2011 regarding functions closely associated with inherently governmental functions requires that agencies, among other things, (1) give special consideration to having federal employees perform the work; (2) have the resources to give "special management attention" to the contractor's performance; and (3) take steps to "limit or guide" contractors' exercise of discretion. Use of an LSI here could potentially have helped clarify responsibility when HealthCare.gov failed to perform as required after its rollout, and would have meant that CMS only had to oversee the performance of one vendor, as opposed to more than 50. However, any agency deficiencies in contract administration arguably remain as salient when there is one contractorâtasked with assembling the work of other vendorsâas they are when there are multiple contractors. | The widely reported problems with the rollout of the HealthCare.gov websiteâthe federal online health insurance portal called for by the Patient Protection and Affordable Care Act (ACA) ( P.L. 111-148 , as amended)âhave prompted interest in the role that contractors played in developing this site. The Centers for Medicare and Medicaid Services (CMS) relied upon the services of over 50 vendors to build the site, which was reportedly largely unusable when it first became available to the public on October 1, 2013, and has been the subject of ongoing work since then. Given HealthCare.gov's problematic debut, questions have arisen about how CMS selected vendors to work on HealthCare.gov, and the terms of the vendors' contractual relationships with the government. For example, some have wondered how CMS could assign work to specific vendors without engaging in "full and open competition through the use of competitive procedures"; whether there are any restrictions on agencies' dealings with vendors that have foreign parent corporations, as some HealthCare.gov vendors do; and whether political input plays a role in the source-selection process. There have also been questions about how to obtain copies of particular contracts; vendor obligations to report performance problems to the government; modifications to existing contracts; how parties to a government contract resolve disputes; and whether the government can get its money back. Most recently, questions have been raised about potential amendments to federal procurement law that could, some commentators suggest, prevent issues of the sort experienced with HealthCare.gov. HeathCare.gov's early difficulties are generally seen to have increased interest in the Federal Information Technology Acquisition Reform Act (FITARA) ( H.R. 1232 ), which would, among other things, increase the authority of the top agency chief information officers. FITARA passed the House, as part of the National Defense Authorization Act (NDAA) for FY2014, prior to HealthCare.gov's rollout, but was not included in the NDAA as enacted ( P.L. 113-66 ). Other measures have been introduced specifically in response to the rollout of HealthCare.gov (e.g., H.R. 3373 , S. 1843 ). Yet other potential reforms have been suggested, but are not reflected in proposed legislation. Topics of such proposed reforms include consideration of risk and use of modular contracting methods when acquiring information technology (IT); performance bonds and express warranties; and use of lead system integrators (i.e., contractors responsible for assembling a system from components developed and/or tested by other vendors). The questions in this report are those that happen to have been frequently asked of the Congressional Research Service by congressional staffers. The inclusion of a particular question, or the exclusion of another question, should not be taken to indicate that particular factors didâor did notâcontribute to HealthCare.gov's problematic debut. In addition, answers to these questions must often be provided in general terms, in part, because specific language in the parties' contracts may be subject to multiple interpretations and has not been construed by any court. In addition, the parties' conduct in performing the contractâthe details of which are generally still emergingâcan affect their rights. For example, the government could potentially be found to have waived certain rights that the contract's plain language would appear to grant to it by engaging in conduct that warrants an inference that it has relinquished the right. The authors of this report rely upon third-party investigations of the facts and circumstances surrounding HealthCare.gov, and additional information may emerge regarding topics discussed herein. There is also a video, CRS WVB00013, Contractors and HealthCare.gov: Background in Brief , by [author name scrubbed] and [author name scrubbed], that addresses certain of these questions. |
U.S. relations with the People's Republic of China (PRC) remained remarkably smooth during the 110 th Congress, as they were throughout most of the George W. Bush Administration. The two governments continued to have regular and robust high-level visits and exchanges of working level officials. Washington and Beijing also continued to develop military-to-military relations, cooperated on anti-terror initiatives, and worked together on a multilateral effort to restrain and eliminate North Korea's nuclear weapons activities. U.S. companies continued to invest heavily in China, and the Chinese central government overtook Japan to become the largest holder of U.S. Treasuries used to finance the federal budget deficit, holding about $600 billion in Treasuries by the end of 2008. Despite these growing connections, thorny problems continued to be factors in the relationship, including difficulties over China's intentions toward, and U.S. commitments, to democratic Taiwan, various disputes over China's failure to protect U.S. intellectual property rights, the alleged economic advantage China gains from managing its exchange rate, and growing concerns about the quality and safety of some exported Chinese products. In addition, some U.S. policymakers expressed growing concern about the significant long-term implications that China's accelerating rise in the world had for U.S. global power and influence. Some U.S. lawmakers suggested that U.S. policies should be reassessed in light of the PRC's continued strong economic growth and more assertive international posture. As the U.S. financial system deteriorated during the 110 th Congress, it became clear that the PRC was positioned to play a crucial role in any policy designed to address the problems. In order to mitigate the renminbi's appreciation against the dollar, China's central bank was forced to make heavy purchases of U.S. dollars. As a result, China by the 110 th Congress had amassed a huge level of foreign exchange reserves, totaling $1.9 trillion as of December 2008, and the Chinese central government had become an ever more important purchaser of U.S. Treasuries and other U.S. debt. Some U.S. policymakers expressed concern that this posed an economic risk to the United States should China's foreign exchange purchase patterns change, and a political risk should China use this position to seek advantages on other diplomatic issues. The financial crisis unfolding in the United States in 2008 and the Bush Administration's (and the incoming Obama Administration's) proposed financial rescue programs each required a substantial level of new U.S. government borrowing, with China positioned to be a major purchaser of this new U.S. government debt. In addition, the scope of the financial crisis suggested that global economic decision-making in the future would be moving beyond the confines of the developed "G-7" countries, where China does not participate, and into the broader arena of the "G-20" countries, where China does participate, making Beijing a more important potential player in the global economic decision-making process. The G20 countries met in Washington DC on November 15, 2008, in an attempt to address the financial crisis, and scheduled another G20 meeting in London on April 2, 2009. Beginning in March and April 2007, reports began to surface about tainted and unsafe food and consumer products in China, and concerns about product safety continued to plague U.S.-China relations throughout the rest of the 110 th Congress. An investigation by the U.S. Food and Drug Administration (FDA) early in 2007 linked tainted exports of pet food with wheat gluten from China to reports of pet deaths from kidney failure in the United States. The Canadian company that had imported the product, Menu Foods, initiated a massive recall of its products on March 16, 2007, and the recall effort later expanded to more brands of pet foods and other pet food manufacturers. On April 3, 2007, the FDA began halting imports of wheat gluten from a PRC company, the Xuzhou Anying Biologic Technology Development Co. Ltd., saying it had tested positive for the tainted wheat gluten. Although the PRC government initially denied its pet food products were tainted, it later reversed that position, admitting on April 26, 2007, that PRC companies had exported melamine-laced wheat gluten to the United States. The pet food contamination was the beginning of a series of well publicized recalls of PRC imported products including fish, tires, toothpaste, and toys. Two of these—Menu Foods pet food recall and Mattel's voluntary recall of over 18 million toys, announced on August 14, 2007—were reported on most widely. But by August 17, 2007, the U.S. Consumer Product Safety Commission (CPSC) had issued nearly 150 recall notices in 2007 for Chinese-manufactured products, including electric throws, ceramic heaters, folding recliner chairs, children's jewelry, kayak paddle floats, baby cribs, candles, oil-filled electric heaters, boom boxes, bicycles, clothing, gas lighters, remote controls, lamps, curling irons, and hair dryers. In September 2008, concerns began to mount about infant formula and milk powder in China tainted with melamine, an industrial chemical that appears to make products more protein-rich. Amid a widening scandal and an extensive public outcry after thousands of babies sickened and some died, the PRC government took increasingly assertive measures to close down suspect producers and make arrests. On October 9, 2008, Beijing announced it was setting its first standards on melamine in milk, imposing a limit of 1 milligram per kilogram in infant formula and 2.5 milligrams per kilogram in liquid milk. On October 14, 2008, the PRC government ordered a recall of all milk products produced before September 14, 2008. Members of the 110 th Congress addressed the safety of products from China in several ways. These included: Legislation targeted on the Chinese government to condemn poor product safety ( H.Res. 925 ), which died in the House Foreign Affairs Committee); Legislation targeted on the U.S. government and on U.S. consumers, such as a request for the resignation of the Chairwoman of the Consumer Product Safety Commission ( H.Res. 803 ); a bill urging Americans to buy American-made products ( H.Res. 831 ); and legislation directing the Consumer Product Safety Commission to increase safety standards for infants and toddler products ( H.R. 1698 ), all of which died in the House Energy and Commerce Committee. Bilateral efforts on the quality of Chinese exports to the United States had been underway for several years by the 110 th Congress. In 2004, the CPSC and China's General Administration of Quality Supervision, Inspection, and Quarantine (AQSIQ) signed a memorandum of understanding (MOU) to cooperate on increasing the safety of specific consumer products, including clothing, toys, cigarette and multipurpose lighters, home appliances, hazardous chemical consumer products, and bicycle helmets. The two agencies held a Consumer Product Safety Summit (CPSS) in Beijing in 2005, and a second CPSS meeting in Washington D.C. on September 11, 2007. The United States, China, and the European Union launched a "Joint U.S.-EU-China Initiative on Consumer Product Safety Compliance" in Beijing from September 19-24, 2008, followed by a "High-Level Consumer Product Safety Trilateral Meeting" in Brussels in November 2008. Concerns about Chinese products also led the U.S. Food and Drug Administration (FDA) to open an office in Beijing on November 18, 2008, to increase inspections of PRC food and medicine. From August 8-24, 2008, China hosted the 2008 Summer Olympic Games. The opening ceremony and most of the athletic events were held in Beijing, but six other PRC cities co-hosted Olympic competitions as well, including Qingdao (sailing); Shanghai, Tianjin, Shenyang, and Qinhuangdao (soccer), and Hong Kong (equestrian events). Beijing reportedly spent $43 billion, more than any other Olympic host city, to prepare for the games. A number of controversies surfaced in the run-up to the 2008 Games. Multiple interest groups opposed to various PRC behaviors saw China's hosting of the games as an excellent opportunity to put pressure on leaders in Beijing to reform PRC policies. These groups included: Tibetan activists pushing either for Tibetan independence or for more enlightened Chinese policies in Tibet, actions which may have led to the March 2008 protests in Tibet and China's crackdown there; activists for Darfur seeking to pressure China to withdraw its support for the Sudanese government (Steven Spielberg resigned in February 2008 as artistic advisor for the Beijing Olympics over this issue); and a number of groups, such as Reporters without Borders and Human Rights Watch, arguing that China had not kept its promises to the International Olympic Committee to provide journalistic freedom to reporters and a cleaner environment for the athletes during the games. Members of the 110 th supported some of these initiatives. Among the measures Members introduced were: Legislation calling on the PRC to use its leverage with Sudan to stop the violence in Darfur and to comply with U.N. directives. ( H.Res. 422 and S.Res. 203 , both of which passed their respective bodies.) The measures stated that the spirit of the Olympics is incompatible with acts supporting genocide. Legislation expressing the sense of the House that the President boycott the summer 2008 Olympic Games in Beijing because of PRC activities in Sudan. ( H.Res. 628 , which died in the House Foreign Affairs Committee.) Legislation expressing the sense of the House that the United States boycott the summer 2008 Olympic Games in Beijing unless the PRC stops human rights abuses against its own citizens and stops supporting human rights abuses by the governments of Sudan, Burma, and North Korea. ( H.Res. 608 , which died in the House Foreign Affairs Committee.) Legislation urging the President to boycott the opening ceremonies of the 2008 Olympic Games unless the PRC took steps to stop the genocide in Darfur and allowed full deployment of the U.N.-African Union mission there. ( H.Res. 1093 , which died in the House Foreign Affairs Committee.) Legislation calling on the PRC to end its human rights abuses, stop persecuting Tibetans and Uighurs, and end support for the governments of Burma and Sudan to honor the spirit of the Olympic Games. ( H.Res. 1370 , which the House passed under suspension.) Despite these and other issues, periodic calls for a boycott of either the Beijing Olympics opening ceremony or the entire summer games did not lead countries to pull their teams from the competitions nor world leaders to snub the opening ceremony. President Bush, in fact, became the first sitting U.S. President ever to attend an overseas Olympic Games ceremony. PRC leaders placed a high priority on security at the games. Among other steps, China fielded specially trained anti-terrorist teams (Snow Leopard and Blue Sword Commando Units); stepped up surveillance and searches around Olympic venues and in more than a dozen airports around China, including in Tibet and Xinjiang; and deployed anti-aircraft missiles around the National Stadium (dubbed "the Bird's Nest") holding the opening ceremony. Chinese officials also designated three public parks close to Olympic venues in Beijing—Zizhuyuan Park, Ritan Park, and Shijie Park—where public protests ostensibly could be held. By the end of the Games, the Government reportedly had approved none of the 77 applications submitted to hold public protests in the parks. Tibet remained a difficult issue in U.S.-China relations and a matter of debate among U.S. policymakers during the 110 th Congress. Controversy continued over Tibet's current political status as part of China, the role of the Dalai Lama and his Tibetan government-in-exile, and the impact of Chinese control on Tibetan culture and religious traditions. The U.S. government recognizes Tibet as part of China and has always done so, although some dispute the historical consistency of this U.S. position. But the Dalai Lama, Tibet's exiled spiritual leader, has long had strong supporters in the U.S. Congress who have continued to pressure the White House to protect Tibetan culture and give Tibet greater status in U.S. law. It was largely because of this congressional pressure that in 1997, U.S. officials created the position of Special Coordinator for Tibetan issues. Paula Dobriansky, Under Secretary of State for Global Affairs, who served as the Special Coordinator in the Bush Administration and through the 110 th Congress, was the highest-ranking U.S. official to that point to have held this position. Late in 2006, the 109 th Congress passed legislation to award the Dalai Lama a Congressional Gold Medal in recognition of his international status and accomplishments. The decision was denounced by Beijing as a move that "seriously interferes with China's internal affairs and damages U.S.-China relations." With President Bush in attendance, a move that further raised the profile of the event, the Dalai Lama was awarded the medal during the 110 th Congress in a ceremony on October 17, 2007 in the Capitol Rotunda. In his speech at the ceremony, the Dalai Lama said "... let me take this opportunity to restate categorically that I am not seeking independence. I am seeking a meaningful autonomy for the Tibetan people within the People's Republic of China." In a written appeal directly to the Chinese people on March 28, 2008, the Dalai Lama reiterated that he had "no desire to seek Tibet's separation [from China]" ... but that he sought to "ensure the survival of the Tibetan people's distinctive culture, language, and identity." The PRC has considered this approach of the Dalai Lama to be a "sidetrack to independence." On March 10, 2008, a series of demonstrations began in Lhasa and elsewhere in Tibetan regions of China to mark the 49 th anniversary of an unsuccessful Tibetan uprising against Chinese rule in 1959. Although reports differed on the details, the 2008 demonstrations appeared to begin peacefully with a small group demonstrating in the Barkhor Plaza in front of the Jokhang Temple in Lhasa. According to one report, the protestors at this event were arrested, and Buddhist monks from the Drepung, Sera, and Ganden monasteries around Lhasa then began protesting the arrests. These demonstrations also were contained by security forces. Both the protests and the response of the PRC authorities escalated in the ensuing days, spreading out from the Tibetan Autonomous Region (TAR) and into parts of Sichuan, Gansu, and Qinghai Provinces populated by Tibetans. By the afternoon of March 14, 2008, in the absence of an apparent response by PRC security forces, mobs of angry people were burning and looting businesses and other establishments in downtown Lhasa. Although official Chinese reports later stated that large caches of weapons had been found in Lhasa's monasteries, a special report shown on China's official state television, China Central Television (CCTV) showed no weapons being used by protesters other than fists, rocks, and the occasional knife. The CCTV report began its account of the protests with the violence on March 14, 2008, when rioters began rampaging in Lhasa; the television account made no mention of any peaceful protests or arrests in the preceding days. Reports differed on the numbers and identities of those killed during the initial demonstrations. By March 31, 2008, official PRC sources reportedly claimed that 18 had died, while the Tibetan government-in-exile reportedly claimed 140 had died. Based on numerous and sometimes sketchy reports, the dead included both Tibetans and ethnic Han Chinese merchants, some of the former reportedly having been shot by police, and some of the latter reportedly having died in their establishments in fires set by the mob. According to news reports, on March 16, 2008, the TAR government declared a "people's war" in Tibet—a term from revolutionary Maoism—ostensibly to eradicate support for the Dalai Lama and stamp out the aspirations of some Tibetans for independence. The demonstrations resulted in a greatly enhanced presence of PRC security forces in Tibetan areas. By some reports, security forces beginning in late March 2008 conducted house-to-house searches for those that may have been involved in the demonstrations. According to one report, Burma turned over to China two Tibetan political activists who were said to have fled into Burma from China's Yunnan Province after demonstrations there. Although Beijing sealed off Tibet to tourists and foreign reporters (with the exception of a few selected groups of journalists), sketchy reports continued to suggest that isolated demonstrations in Tibetan areas of China recurred during the enhanced security presence. March is one of the two months (the other being October) that are especially—and for many Tibetans, unhappily—symbolic months of Chinese rule. March 10 marks the anniversary of the Tibetan National Uprising in 1959, and October 7 marks the anniversary of the PRC invasion of Tibet in 1950. Outside China, Tibetan groups proceeded with other commemorations of the 1959 Tibetan National Uprising. As he has for many years on the anniversary date, the Dalai Lama gave a speech in 2008 in which he expressed fear for the welfare of the Tibetan people and criticized the Chinese government for "unimaginable and gross violations of human rights, denial of religious freedom, and the politicization of religious issues." He used the occasion of the speech also to reiterate his support for Beijing's hosting of the August 2008 Olympic Games, and to urge Tibetans to work "peacefully and within the law" to ensure their legitimate rights as citizens of the PRC. On the same date, other Tibetan exiles began a protest march into Tibet from Dharamsala, India, reportedly to increase pressure on Beijing to improve the situation in Tibet. Tibetan supporters, among other groups, also took part in disruptions of Beijing's ambitious Olympic Torch Relay in the months preceding the Games, particularly in Paris and London. A new Tibetan activist grouping appeared to begin on January 4, 2008, when five Tibetan organizations outside China launched the Tibetan People's Uprising Movement (TPUM) to engage in "direct action to end China's illegal and brutal occupation of [Tibet]." The organization announced that it was seeking to take advantage of two approaching historic moments: the Beijing Olympics in August 2008 and the coming 50 th anniversary of the 1959 Tibetan uprising. Among the group's stated demands were: the Dalai Lama's return to Tibet as its sole leader; the end of China's "colonial occupation" of Tibet; release of all Tibetan political prisoners and restoration of religious and human rights to Tibetans; and cancellation of the 2008 Summer Olympics in Beijing. Controversy also was generated by reports of differing media coverage of the March 2008 demonstrations in Tibet, with PRC officials charging that western media coverage was biased. On March 21, 2008, a PRC web log, with disturbingly inflammatory language, was established purporting to show this media bias. The site reproduced videos shot by observers in Lhasa showing the violence of the riots; discussed news photos cropped in ways some said were misleading; and cited errors in news stories, captions, and photos in which police in Nepal and India, roughing up Tibetan demonstrators, appeared with written descriptions of PRC police actions in Lhasa. Tibetan supporters countered that PRC accounts made no mention of the days of peaceful demonstrations preceding the riots, and that Chinese press reports focused on reportage of the Han Chinese victims to the riots. During the March 2008 demonstrations, official PRC reports routinely referred to diverse Tibetan organizations outside Tibet as the "Dalai clique," suggesting that all these groups were controlled and directed by the Dalai Lama and thereby represented his views and effectively were acting on his behalf. The PRC alleged that the agenda of some of these groups proved that the Dalai Lama has never renounced his dream of an independent Tibet. The PRC's Ministry of Public Security (MPS) asserted that it "had gathered sufficient evidence" showing that the March 2008 unrest in Lhasa and elsewhere "was organized, premeditated, masterminded and instigated by the Dalai clique and its 'Tibet independence' forces." According to a PRC official, "The [Lhasa] incident has once more exposed the separatist essence and the hypocrisy and deceitfulness of the alleged "peace" and "nonviolence" of the Dalai clique." Two decades earlier, the PRC had used similar language to refer to the widespread demonstrations in Tibet from 1987-1989: "We have conclusive evidence to show that the Lhasa riot early this month was instigated and engineered by the Dalai Separatist clique." Other PRC references to the Dalai Lama in 2008 were more venomous. On March 18, 2008, the Communist Party Secretary of Tibet called the Dalai Lama "a jackal and wolf clothed in [a monk's robes], and a vicious devil who is a beast in human form." For years there has been growing speculation about what happens upon the death and (according to Buddhist tradition) the subsequent reincarnation of the current Dalai Lama (the 14 th ), who turned 73 in 2008. In 2007, Beijing took steps designed to assure its future control over the selection process. On August 3, 2007, the State Administration for Religious Affairs (SARA) issued a set of regulations, effective September 1, 2007, requiring prior government approval for all Tibetan Buddhist reincarnations through the submission of a "reincarnation application." In a statement accompanying the regulations, SARA called the step "... an important move to institutionalize management on reincarnation of living Buddhas." The Dalai Lama's Special Envoy, Lodi Gyaltsen Gyari, described the new regulations as a blow against "the heart of Tibetan religious identity." The regulations also required that reincarnation applications come from "legally registered venues" for Tibetan Buddhism—a provision seen as an attempt to illegalize the reincarnation of the current, 14 th Dalai Lama, who has declared he will not be reborn in China if circumstances in Tibet remain unchanged. In the aftermath of the adoption of the 2007 reincarnation law, the Dalai Lama also said that he was thinking of alternative ways of choosing his successor, including selecting a candidate before his own death. A Chinese Foreign Ministry spokesman responded to these comments by saying that such a move would "violate religious rituals and historical conventions of Tibetan Buddhism." The new reincarnation law inserted the PRC government directly into what for centuries has been one of the principal mystical and religious aspects of Tibetan Buddhism. One of the responsibilities of the U.S. Special Coordinator for Tibet is to encourage negotiations and other contacts between the PRC government and the Dalai Lama's government-in-exile. Under the Tibetan Policy Act of 2002 (Section 613 of P.L. 107-228 ), the Coordinator is to issue an annual report on her office's activities and on the status of any Sino-Tibetan negotiations. A report submitted by Under Secretary Dobriansky, dated June 2007, found grounds for limited optimism on Sino-Tibetan contacts, but raised questions about whether the momentum could be sustained. In addition to this report, the Under Secretary's office is responsible for submitting the annual State Department Country Reports on Human Rights Practices, mandated by Sections 116(d) and 502(B)(b) of the Foreign Assistance Act of 1961. The section on China specifically includes separate accounts for Tibet, Hong Kong, and Macau. Two such reports were issued during the 110 th Congress: on March 6, 2007 and on March 11, 2008. Both judged the PRC government's human rights record in Tibet to remain very poor, and the 2008 report found that PRC repression in Tibet had increased over the previous year. Until the March 2008 crackdown, grounds for optimism in Sino-Tibetan talks had been raised slightly by a set of recurring interactions between the PRC government and delegations from the Tibetan community led by the Dalai Lama's special envoy in the United States, Lodi Gyaltsen Gyari. In these negotiations, the Dalai Lama's special envoy acknowledged differences but also had favorable reactions to the talks, saying "Our Chinese counterparts made clear their interest in continuing the present process and their firm belief that the obstacles can be overcome through more discussions and engagements." Progress appeared to stall in 2008, however, with the 8 th round of Sino-Tibetan negotiations (held in October 2008) resulting in no developments. The stalemate led the Dalai Lama to call an unusual meeting of Tibetan exiles in Dharamsala. The group began meeting on November 17, 2008, reportedly to explore new strategies for the Tibetan movement with respect to China. The earthquake in Sichuan Province on May 12, 2008, measured at a magnitude of 7.9, is estimated to have killed more than 69,000 people, with hundreds of thousands more injured and 5 million estimated to be homeless. The quake zone was in a mountainous area that is home to over 15 million people (the entire province has over 81 million people) and some of China's most scenic areas. The quake zone occurred along the Longmenshan Fault and included the Wolong National Nature Reserve, China's primary breeding center for the giant panda. After initial reluctance, the PRC government allowed extraordinarily broad journalistic coverage of the quake zone and for the first time asked for and accepted foreign assistance. The tragedy brought world sympathy to China and a positive assessment of the government's swift and unusually open response, muting criticism of the government's crackdown in Tibet in March 2008. Many children died in collapsed schools, a special hardship in a country that enforces a "one-child" policy. Some speculated that public reaction to the quake may force the government to conduct widespread investigations of shoddy school construction practices and may increase pressure on Beijing to reassess the country's population control policies. Both the House and Senate in the 110 th Congress adopted resolutions expressing condolences and support for the quake victims ( H.Res. 1195 and S.Res. 569 ); the Senate measure in addition called for U.S. support for humanitarian aid. Since the quake knocked out communications and damaged roads into the quake zone, officials could only estimate initial casualty figures—a number they put at 10,000 on May 12, 2008. This figure rapidly escalated as rescue workers and journalists reached the area. According to official estimates as of August 2008, the quake killed 69,222 people, injured 374,638, and left 18,176 missing. In addition to the dead and injured, about 5 million were left homeless and about 15 million were estimated to have been displaced. Some of these lost their homes outright due to quake activity, either in the main earthquake of May 12, 2008, or in the thousands of following aftershocks. Others were evacuated multiple times due to warnings of landslides, further quakes, or potential flooding from 35 so-called "quake lakes" that developed after the quake—rivers blocked by debris and massive landslides that became lakes behind the blockages. Officials also were concerned about 69 reservoirs left in danger of collapse, with an additional 310 judged to be "highly dangerous." According to China's official news agency, there were 1,044 villages in the quake zone, many with substantial damage. In addition, Chinese sources cited 14,207 business and industrial enterprises in the quake zone, estimating that direct property damage to these was 67 billion yuan ($9.6 billion), with an additional 15 billion yuan ($2.2 billion) in damage to transportation infrastructure. Relatively little of these losses were covered by insurance. Other risk assessment groups gave different estimates ranging from $10 billion to $20 billion. In the weeks after the quake, China began accepting foreign assistance. According to USAID, the U.S. Government provided $4.9 million in FY2008 humanitarian funding, including $2.7 million provided by USAID and $2.2 million provided by the U.S. Department of Defense. Private American assistance supplemented U.S. Government assistance in the aftermath of the quake, including donations from the National Zoo, the San Diego Zoo, the American Red Cross, and others. The Philadelphia Orchestra, in Beijing to perform a concert on June 2, 2008, turned the occasion into a charitable event to raise funds for Sichuan earthquake relief. The PRC Embassy in Washington DC hosted a reception on August 12, 2008, entitled "Sichuan Earthquake: Relief, Recovery, and Reconstruction" in appreciation of U.S. public and private aid. One point of contention in the earthquake zone was how badly some elementary and middle schools seemed to fare. The earthquake occurred in the middle of the school day, so schools were filled with students, making the buildings' collapse especially lethal. Some news coverage featured photos of collapsed schools standing between two other lightly damaged buildings. Grieving parents and family members pointed out that government buildings seemed to hold up well, and asserted that the schools had shoddy construction because of official corruption and use of cheap materials. According to others, school design may have been a contributing factor, with large classrooms (accommodating 70 or 80 students) having insufficient wall support given their size. Unregulated work, outdated building codes, and lack of enforcement of existing codes also were cited. The loss of children was a special hardship in a country that enforces a "one-child" policy. Some speculated that public reaction to the quake may force the government to reassess the country's population control policies. Local population officials in Sichuan Province announced on May 27, 2008 that parents who lost an only child in the earthquake could apply for legal permission to have another. On June 6, 2008, Xinhua announced that medical teams in Sichuan would offer reverse sterilization surgery for women who had lost their only child in the quake. Although Chinese authorities were praised worldwide for their rapid response to the earthquake and their unprecedented willingness to permit widespread press coverage, they were more vulnerable on the question of school collapses. In the weeks after the quake, parents and others in the quake zone called increasingly for government investigations into the school collapses and for harsh punishment in cases where official malfeasance may have contributed to the tragedy. Some parent groups organized to bolster their strength and place increasing pressure on the government. In the beginning, there was widespread media coverage of parents' concerns, with local and central government authorities promising investigations and stern punishment for anyone found liable. But Chinese authorities adopted a tougher stance over time, issuing new directives prohibiting the news media from raising questions about school construction. On June 4, 2008, police in Dujiangyan surrounded a group of parents protesting school construction practices and prevented them from filing a lawsuit with the courts over the collapse of a middle school. With the departure of Defense Secretary Donald Rumsfeld in December 2006, the 110 th Congress saw important changes in the senior levels of U.S. military leadership, with attending consequences for the U.S. position in the Pacific and toward China. In addition to Defense Secretary Robert Gates (sworn in on December 18, 2006), other new U.S. senior defense officials appointed during the 110 th included: Admiral Timothy Keating (Commander, U.S. Pacific Command beginning March 26, 2007); Admiral Mike Mullen (Chairman of the Joint Chiefs of Staff beginning October 1, 2007); and Admiral Gary Roughead (Chief of Naval Operations beginning September 29, 2007). Each of these military officers had gone on record as pledging to make closer U.S. relations with China's military a top priority. Nevertheless, U.S. officials in the executive branch and in the 110 th Congress continued to voice private and public concerns about China's expanding military budget and issues potentially involving U.S. national security. U.S. security concerns included the ultimate focus of China's military build-up; lack of PRC military transparency; recurring instances of apparent PRC attempts to gain U.S. military secrets; evidence of improving PRC military and technological prowess; and PRC military and technological assistance to rogue states and other bad actors. Issues involving allegations of PRC espionage in the United States continued to concern the 110 th Congress. On March 27, 2007, Mr. Chi Mak, a Chinese-born U.S. engineer arrested in 2005, went on trial in federal court in Los Angeles for allegedly providing China with sensitive high-tech Navy weapons technology that he had helped develop while working for his employer, Power Paragon. According to the allegations, the technology included sensitive details about the Navy's Aegis-class battleship technology; quiet drive technology for new generations of warships; electro-magnetic artillery; and missile detection and nuclear defense. The defense maintained that the material was not classified but was in the public domain. According to a U.S. counterintelligence official, Mak had secured a job with a U.S. defense contractor twenty years earlier as part of a long-time, systematic PRC plan to "steal secrets." On May 11, 2007, Chi Mak was found guilty of conspiracy to violate export regulations and for failing to register as a Chinese agent. Mak was sentenced to 24 ½ years in federal prison on March 24, 2008. The Pentagon released two congressionally mandated reports on China's Military Power during the 110 th Congress: one in May 2007, and one in March 2008. In the latest of these, the Pentagon concluded that China was greatly improving its military, including the number and capabilities of its nuclear forces. U.S. military planners and other American military specialists maintained that PRC improvements appeared largely focused on a Taiwan contingency and on strategies to "deny access" to the military forces of a third party—most probably the United States—in the event of a conflict over Taiwan. The report maintained that this build-up posed a long-term threat to Taiwan and ultimately to the U.S. military presence in Asia. In March 2007, after Beijing announced that its military budget would increase during the year by nearly 18%, U.S. officials called China's military build-up a continuing "source of concern and interest" for the world, and urged PRC leaders to address these concerns by adopting greater transparency in military matters. On January 11, 2007, the PRC carried out its first successful anti-satellite (ASAT) test by destroying one of its moribund orbiting weather satellites with a ballistic missile fired from the ground. Previously, only the United States and the Soviet Union had conducted successful ASAT tests. Both countries reportedly halted these more than 20 years ago because of resulting space debris that could endanger other orbiting satellites. U.S. officials reportedly received no advance notice from Beijing, nor did Chinese officials publicly confirm the ASAT test until January 24, 2007, 13 days after the event and almost a week after the U.S. Government had publicly revealed the PRC test on January 18, 2007. The January PRC ASAT test and the lack of advance notification to U.S. officials by Beijing raised a number of concerns for U.S. policy. Chief among these were questions about the new potential vulnerability of U.S. satellites—crucial for both U.S. military operations and a wide range of civilian communications applications—and the credibility of PRC assertions that it is committed to the peaceful use of space. In addition, officials from the United States and other countries criticized China for either ignoring or failing to realize the extent of the test's contributions to the growing problem of space debris. China's ASAT test helped illustrate the country's ambitious and growing space program. In the 21 st century, China had become only the third country, after Russia and the United States, to send manned flights into space—the first on October 15, 2003 (Shenzhou 5), with a single astronaut orbiting the earth; the second on October 11, 2005 (Shenzhou 6), orbiting two astronauts; and the third with three astronauts (Shenzhou 7) on September 25, 2008 after the 2008 Olympic Games. This latter mission included a space walk and the reported release of a small "companion" satellite into orbit, a move reportedly with potential military implications. Meanwhile, completed the first stage of its three-stage lunar program on October 24, 2007, launching its first unmanned lunar probe, the Chang'e 1 orbiter, aboard a Long March 3A rocket. Among other accomplishments, the PRC in September 2008 also launched two new environment and disaster monitoring satellites from its Taiyuan Satellite Launch Center in Shanxi Province. U.S.-China military relations, which once had been suspended following the 1989 Tiananmen Square crackdown, continued to improve during the 110 th Congress. On November 4, 2007, Secretary of Defense Robert Gates arrived in Beijing for a three-day visit, his first official visit to China as Secretary. He met with his counterpart, Defense Secretary Cao Gangchuan, with Central Military Commission Vice-Chairmen Guo Boxiong and Xu Caihou, and with Vice Foreign Minister Dai Bingguo. Both sides announced they had reached agreement on setting up an official military hotline; strengthening dialogue and exchanges, particularly between young and middle-aged military officers; and holding exercises on humanitarian rescue and disaster relief. The Secretary also reportedly raised the issue of China's January 2007 anti-satellite (ASAT) weapon test as well as the need for greater PRC transparency about its military intentions and the modernization of its military forces. PRC concerns reportedly centered on Taiwan. In addition to the 2007 visit by Secretary Gates, other senior-level military contacts during the 110 th Congress included: Chairman of the Joint Chiefs, General Peter Pace (to China in March 2007); Commander of U.S. forces in the Pacific (PACOM) Admiral Timothy Keating (to China in May 2007 and again in January 2008); and Chairman of the Joint Chiefs-nominee, Admiral Michael Mullen (to China in August 2007). In addition, U.S. and PRC military officials held the ninth round of the Defense Consultative Talks (DCT) from December 3 – 4, 2007. According to an official DoD news release, the DCT resulted in the two sides agreeing "to increase military-to-military ties" and to seek a "proposed dialogue on nuclear policy, strategy and programs"—a move that would require congressional action, as U.S.-China talks on nuclear operations are banned under P.L. 106-65 , the National Defense Authorization Act of 1999. Finally, the U.S. military provided assistance to China in the aftermath of the Sichuan earthquake in May 2008. For a brief period beginning on November 20, 2007, the PRC government denied the requests of a series of U.S. military ships and aircraft to visit or take refuge in the port of Hong Kong—a series of decisions revealed piecemeal over the course of a week or so. While this was not the first time China had denied Hong Kong port-visits to U.S. military vessels, the sequencing, rapidity, and lack of explanation offered concerned U.S. military officials. The first denial was to two U.S. minesweepers, the Patriot and the Guardian, that reportedly requested refuge in Hong Kong harbor on November 20 from a storm at sea. U.S. Navy officials described Beijing's refusal to offer safe harbor to ships in trouble at sea as the more troubling refusal. Admiral Timothy Keating said of it: "That is behavior that we do not consider consonant with a nation who advocates a peaceful rise and harmonious relations." The November 20 denial was followed on November 21 by the denial of a port visit to the Kitty Hawk aircraft carrier strike group for a Thanksgiving reunion with family, many of whom reportedly had flown to Hong Kong from the United States for the holiday reunion. This denial just as unexpectedly was reversed the following day but, according to the U.S. Navy, only after the Kitty Hawk had left Hong Kong waters to return to its home port in Japan. At the same time, Beijing also denied the request for a New Year's holiday port visit by a U.S. Navy frigate, the Reuben James. Navy officials later also said that the PRC had denied landing rights to a C-17 U.S. Air Force cargo plane scheduled to make its quarterly re-supply run to the U.S. consulate in Hong Kong. The port visit denials appeared to catch U.S. military officials by surprise and produced mixed and confusing responses from PRC officials. To many, the sudden tensions were especially troubling given the greatly improved atmosphere in U.S.-China military relations since the departure late in 2006 of Secretary of Defense Donald Rumsfeld, who was seen to be tough on China. Secretary of Defense Robert Gates had just visited China earlier in November 2007. Although the denials were troubling, they apparently were insufficient to derail the U.S.-PRC Defense Consultative Talks (DCT), which proceeded on schedule at the Pentagon on December 3-4, 2007. Unraveling the sequences of events surrounding the port-access denials suggested that multiple factors may have been in play. China's first public reference to any U.S. ship visits to Hong Kong came after the Kitty Hawk had been turned away. On November 22, 2007, with no explanation of why Beijing the previous day had denied the request, a Foreign Ministry spokesman announced that China now had decided to allow the Kitty Hawk visit "out of humanitarian considerations." A White House spokesperson later told reporters that China's Foreign Minister, Yang Jiechi, had assured President Bush at a White House meeting that the Kitty Hawk incident was a "misunderstanding." A U.S. Government analysis suggested that "a lack of coordination between the PLA and other government agencies may have been a factor in China's contradictory behavior." Several days later, a PRC Foreign Ministry spokesman denied there had been a misunderstanding, saying the U.S. bore responsibility for sending the Kitty Hawk back to Japan. On November 28, 2007, a Pentagon official reportedly called in China's defense attache in Washington DC to protest the denial of safe refuge to the two minesweepers. The following day, a PRC Foreign Ministry spokesman, speaking about the Kitty Hawk only, said that China had received no U.S. protest. Spokespersons for the White House and the State Department as late as November 29 said they were awaiting clarification from Beijing about the reasoning behind the decision. Admiral Keating called the Chinese decisions "perplexing." According to the U.S. Navy Office of Legislative Affairs, the Kitty Hawk had requested a Hong Kong port visit on October 23, 2007 in a phone call to the PRC Ministry of Foreign Affairs (MFA), following it up on October 24, 2007 by a diplomatic note faxed to the MFA. Having had no response by November 21, the U.S. consulate in Hong Kong called the MFA at 4:30 pm to ask about the request's status; one hour later, according to the U.S. Navy, the MFA informed the consulate the request had been denied. Over 20 hours later on November 22, MFA called the U.S. consulate to reverse the denial. By then, according to the U.S. Navy, the Kitty Hawk already was on its way to Japan. On December 3, 2007, the PRC Embassy in Washington, DC provided the following statement concerning the Kitty Hawk decision: In mid November just before Thanksgiving, the Chinese side was informed that the officers and men on board USS Kitty Hawk and its accompanying ships urgently requested to dock at Hong Kong for family reunion. Out of humanitarian considerations, the Chinese side agreed to allow USS Kitty Hawk and its fleet access to Hong Kong harbor for the purpose of resting. As for why the US naval ships did not go to Hong Kong afterwards, it was the US business. The Chinese position on the port call at Hong Kong by USS Kitty Hawk carrier group is impeccable. The US side is completely clear about the entire process of the matter. One possible explanation is that the PRC may have denied the ship visits to signal opposition to U.S. arms sales to Taiwan. The original denial of safe refuge to the two minesweepers on November 20 coincided with publication of a U.S. announcement of a proposed arms sale to Taiwan for upgrade and refurbishment of PATRIOT Advanced Capability-3 (PAC-3) Guided Missiles. Beijing repeatedly objects to such arms sales as a violation of Sino-U.S. communiques on Taiwan, and the denial of U.S. ship visits to Hong Kong could have been intended as a signal. Some find symbolic justification for this reasoning in the route that the U.S. carrier strike group took back to Japan—through the sensitive area of the Taiwan Strait between Taiwan and the PRC, ostensibly because of weather conditions. (The PRC conveyed "grave concern" to the United States over the ship transit.) But symbolic protests usually are advertised as such, and PRC spokespersons made no mention of any difficulties in U.S.-China relations in the days immediately surrounding the denials. PRC spokespersons brought up the matter of difficulties in U.S.-China relations only later, on November 29—mentioning U.S. arms sales to Taiwan and the congressional gold medal awarded to the Dalai Lama—without linking the ship denials with these events. A second explanation involved unannounced, large-scale military exercises reportedly being held by China's East and South China Sea fleets from November 16-23, 2007, possibly involving new stealth technologies. According to news accounts, the exercises were conducted east of Taiwan and north of the Philippines, and involved the PRC's Nanjing and Guangzhou military regions—circumstances judged by some to be exercises for a possible use of military force against Taiwan. Media in Hong Kong reported that the maneuvers included sudden and unexpected air restrictions in southern China that caused significant delays for airline passengers in the region. One account reported that the Kitty Hawk may have been in the region to monitor the PRC exercises. According to another, the PRC ships conducting the exercises may have had a "chance encounter" with the Kitty Hawk carrier strike group. If so, it would not have been the first such encounter; it was the Kitty Hawk and its carrier strike group that a PRC submarine surfaced close to in November 2006, apparently having evaded the strike force's surveillance systems. Economic and trade issues remained an extremely complicated set of issues in the U.S.-China relationship. During the 110 th Congress, the PRC was the second-largest U.S. trading partner, with total U.S.-China trade in 2007 at $387 billion. Issues the 110 th considered in U.S.-China economic relations included the substantial and growing U.S. trade deficit with China (which climbed to $256 billion in 2007 and was projected to hit $267 billion in 2008), repeated PRC inabilities to protect U.S. intellectual property rights, and the PRC's continuing restrictive trade practices, such as its exchange rate policies. The end of the 110 th Congress also saw the end of the World Trade Organization (WTO) clothing and textile safeguards mechanism available to other WTO members against Chinese clothing and textile products. The safeguards mechanism ended on December 31, 2008. (Issues involving allegations about tainted or faulty PRC exports to the United States and about the global financial crisis are dealt with elsewhere in this report.) During the 110 th Congress, on September 29, 2007, the PRC established its chief sovereign wealth fund, the China Investment Corporation (CIC), with $200 billion in initial capital. According to PRC officials, the purpose of the fund was to manage and invest the country's huge pool of foreign exchange reserves more profitably. U.S. observers and Members of Congress raised concerns that the fund's establishment signaled that PRC officials were interested in changing their strategy of investing in U.S. Treasurys and other government securities, and that such a change could inflict more damage on the already weakened U.S. economy and financial markets. The CIC's establishment also raised concerns that it would provide the PRC with a significant new "soft power" tool, raising China's global geopolitical clout and influence accordingly. The U.S. Treasury Department released four congressionally mandated, semi-annual reports on international exchange rates during the 110 th Congress: in June and December 2007, and in May and December 2008. In general, all of these reports concluded that China's economy was out of balance—overly dependent on exports and with weak consumer spending at home. The Treasury reports prompted renewed calls and legislation in the 110 th Congress for firmer U.S. action to mitigate the effects of China's currency restrictions. The U.S. concern about the PRC's decision to keep the value of its currency low had been building for several years. Until 2005, the PRC pegged its currency, the renminbi (RMB), to the U.S. dollar at a rate of 8.3 RMB to the dollar—a valuation that many U.S. policymakers concluded kept the PRC's currency artificially undervalued, making PRC exports artificially cheap and making it harder for U.S. producers to compete. U.S. critics of the PRC's currency peg urged Beijing either to raise the RMB's value or to make it freely convertible subject to market forces. On July 1, 2005, the PRC changed this valuation method, instead announcing it would follow a "managed float" policy for the RMB using a basket of multiple other currencies. By the end of 2008, the RMB had appreciated by about 20% against the dollar, but this was not sufficient to assuage ongoing U.S. congressional concerns. In the 110 th Congress, multiple measures were introduced addressing currency exchange rate issues. These measures, none of which was enacted, included: The Fair Currency Act of 2007: To provide that artificial exchange rates by any country are countervailable export subsidies. ( H.R. 782 ; S. 796 ) The Non-Market Economy Trade Remedy Act of 2007: To extend the applicability of U.S. countervailing duty laws to non-market as well as to market economies. ( H.R. 1229 ) The Currency Exchange Rate Oversight Reform Act of 2007: To provide for identification and corrective action against "misaligned currencies" that adversely affect U.S. interests. ( S. 1607 ) The Currency Reform and Financial Markets Access Act of 2007: To require the U.S. Treasury Secretary to analyze the exchange rate policies of foreign countries on an annual basis. ( S. 1677 ) Reflecting legislation that had been introduced and considered by the House Ways and Means Committee the previous month ( H.R. 1229 ), on March 20, 2007, the U.S. Department of Commerce announced a preliminary decision to apply countervailing duties (an anti-subsidy remedy) to two PRC companies exporting "coated free sheet" (glossy) paper to the United States. The announcement broke with a 23-year U.S. policy, adopted in 1984, which held that "subsidies" within the context of U.S. countervailing duty laws cannot be found in non-market economies such as China. Citing a 177% increase in imports of PRC glossy paper products from 2005-2006, Secretary of Commerce Carlos M. Gutierrez said that the PRC economy had evolved significantly in the last two decades and that U.S. tools to address unfair competition needed to evolve in response. The move signaled a new U.S. willingness to be assertive in challenging PRC trade policies and suggested that other American industries affected by the PRC's exports, such as textile, steel, and plastics, may seek similar remedies. Beijing's sharp criticism of the U.S. move hinted at potential future trade retaliation and possible negative implications for the ongoing U.S.-China "Strategic Economic Dialogue," which was chaired by Treasury Secretary Henry Paulson under the Bush Administration. One of the most important issues in U.S.-China bilateral trade during the 110 th Congress was China's inability to live up to its World Trade Organization (WTO) commitments to protect intellectual property rights (IPR). According to the International Intellectually Property Rights Alliance (IIPA), IPR piracy in China cost U.S. firms $3.5 billion in lost sales in 2007. U.S. officials during the 110 th Congress routinely urged Beijing to crack down on IPR piracy, and a series of U.S. officials visiting China stressed that China needed to do better at IPR protection. In addition, the United States filed two IPR cases against China in the WTO in 2007 which remained outstanding at the end of the 110 th Congress: a case charging that China had failed to enforce IPR laws; and a case that China had failed to provide sufficient market access to IPR-related products. The United States maintains dozens of bilateral dialogues with China at various levels and across multiple agencies. The substance of and form that these dialogues will take in the Obama Administration was yet to be determined as of the date of this report. In the months before the 110 th Congress, during the first of his trips to China as Treasury Secretary, Henry Paulson announced on September 20, 2006 that he would chair a new senior-level mechanism for bilateral dialogue agreed to by Presidents Bush and Hu, the U.S.-China Strategic Economic Dialogue (SED). The SED, Secretary Paulson announced, would be held twice annually so that Cabinet-level officials in both governments could hold regular talks on key issues. According to a background paper from the SED, the purpose of the SED would be to advance U.S.-China economic relations and encourage China's continued economic transition to that of a responsible global player. The more regularized bilateral engagement that continued to characterize U.S.-China relations during the 110 th Congress suggested U.S. recognition of the PRC's growing development and international involvement—what has been called "China's rise"—and the growing political clout accompanying it. The Strategic Economic Dialogue held its second through fifth rounds during the 110 th Congress: in Washington on May 22-23, 2007; in Beijing on December 11-13, 2007; in Annapolis on June 16-18, 2008; and in Beijing on December 4-5, 2008. U.S. Treasury Secretary Henry ("Hank") Paulson was the U.S. host for all of these rounds. For the PRC, Vice Premier Wu Yi hosted the second and third rounds and Vice Premier Wang Qishan hosted the fourth and fifth rounds. The SED process during the 110 th resulted in multiple bilateral agreements and understandings, and tended to build on and expand past progress at future meetings. Some achievements included: Increasing market access for the United States in China, including for U.S. products and the financial services industry; cooperating on development of new clean coal technology; and strengthening cooperation on intellectual property rights (May 2007) Increasing cooperation on product safety, including drugs, food, chemicals, and consumer products; commitments on further financial reforms; and discussions on energy and environmental cooperation; progress on a bilateral investment treaty; and promoting transparency in administrative rule-making (December 2007) Agreement on a Ten-Year Energy and Environment Cooperation Framework, including establishment of a steering committee to guide cooperation (June 2008) Discussion of strategies to manage macroeconomic risk and address the global financial crisis (December 2008) The Senior Dialogue (under the State Department), another relatively new bilateral dialogue in the U.S.-China process, held its fourth through the sixth rounds during the 110 th Congress: in Washington in June 2007; in Guiyang in January 2008; and in Washington D.C.in December 2008. For all three, the chief counterparts were U.S. Deputy Secretary of State John Negroponte and PRC State Councilor Dai Bingguo. The Senior Dialogue was first suggested by PRC President Hu Jintao in 2004 during a meeting with President Bush. Deputy Secretary of State Robert Zoellick and PRC Vice Foreign Minister Dai Bingguo presided over its initial round in Beijing in August 2005. The topics of discussion centered around various foreign policy problems, such as Taiwan, the bombing in Mumbai in 2008, the ongoing humanitarian crisis in Zimbabwe, and Iran. As in previous congresses, Taiwan remained potentially the most sensitive and certainly the most complex bilateral policy issue that U.S. policymakers faced in the 110 th Congress. U.S. policymakers continued strongly to support Taiwan's democracy, but at times were troubled by the confrontational rhetoric and actions that Taiwan's democracy produced. Until May 2008, China watchers had been especially concerned with potential cross-strait conflict because of Taiwan's unpredictable political environment, where the balance of political power had teetered precipitously between two contending political party coalitions of nearly equal strength. One of these was a coalition led by the Democratic Progressive Party (DPP), which controlled the presidency for eight years and which was identified closely with advocates of Taiwan independence. This DPP position and the confrontational rhetoric and actions of Taiwan's democratically elected president, DPP member Chen Shui-bian, had complicated U.S. policy throughout much of the George W. Bush Administration. Fears of cross-strait contention were eased during the 110 th Congress on March 22, 2008, when, in a large turnout, voters in Taiwan elected Ma Ying-jeou of the opposition Nationalist Party (the KMT) as president. Ma out-polled rival DPP candidate Frank Hsieh by a 2.2 million vote margin of 58% to 42%. Coming on the heels of the KMT's sweeping victory in legislative elections in January 2008, the presidential election result appeared to be a further repudiation of President Chen Shui-bian's record of governance and recently revealed corruption. President Ma, who began his tenure on May 20, 2008, moved quickly to implement improvements in cross-strait relations, expanding on foundations laid by the previous Chen administration. Official talks between China and Taiwan reopened in Beijing on June 11-12, 2008, resulting in groundbreaking new agreements to allow regular weekend direct charter flights, to open permanent offices in each other's territories, and to boost PRC tourism to Taiwan, among other actions. Members of the 110 th Congress acting in support of Taiwan's interests generally sought to improve Taiwan's international standing, ease diplomatic restrictions on Taiwan officials, and support Taiwan's democratic development. General legislation in the 110 th included: H.R. 1390 : legislation requiring Senate confirmation for the position of U.S. director of the American Institute in Taiwan, or AIT. (The bill did not pass.) H.Con.Res. 73 : a measure expressing the sense of Congress that the United States should resume diplomatic relations with Taiwan. (The measure died in the House Foreign Affairs Committee.) S.Con.Res. 48 and H.Con.Res. 136 : measures calling for lifting of restrictions on U.S. visits by senior Taiwan officials. ( S.Con.Res. 48 died in the Senate Foreign Relations Committee; H.Con.Res. 136 passed the House by voice vote on July 30, 2007). H.Con.Res. 137 : a measure expressing the sense of Congress that the United States should initiate negotiations on a free trade agreement with Taiwan. (The measure died in the House Ways and Means Committee.) H.Con.Res. 170 : a measure urging the International Olympic Committee to allow Taiwan to participate in the 2008 Olympics in Beijing under a name of its own choosing. (The measure died in the House Foreign Affairs Committee.) On October 3, 2008, the U.S. government notified Congress of its intention to sell a package of defense articles and services, worth as much as $6.4 billion, to Taiwan. The announcement marked the end of a period where no arms sales were made—what some suggested was a U.S. arms sales "freeze" to Taiwan prior to the 2008 Olympic Games (as Admiral Timothy Keating appeared to confirm in a briefing on July 16, 2008). Many U.S. policymakers in recent years had grown frustrated with Taiwan's falling military expenditures and its perceived decline in defense readiness. Political disagreements in Taiwan also kept the government from purchasing much of the weaponry President Bush had approved for sale in 2001. Until 2007, these disagreements stalled a special arms acquisition budget that the government had submitted repeatedly to Taiwan's legislature—originally for $18 billion, then slashed to $15 billion and finally to $6.3 billion—in an effort to attract legislative support. Other U.S. officials also appeared frustrated with delays over the special arms budget and raised questions about future U.S. defense commitments to Taiwan if the delays continued. Concerns about Taiwan's defense spending eased throughout 2007. On June 15, 2007, Taiwan's legislature passed an annual defense budget which included funds for portions of the 2001 U.S. weapons package, including funds for P3-C anti-submarine warfare aircraft. The Bush Administration notified Congress on September 12, 2007 of the proposed sale to Taiwan of 12 excess P3-C planes; on November 20, 2007, the Federal Register published the announcement of another proposed arms sale to Taiwan for upgrade and refurbishment of PATRIOT Advanced Capability-3 (PAC-3) Guided Missiles. In December 2007, the Taiwan legislature passed a 2008 defense budget of $10.5 billion, which officials said was a 12% increase over the 2007 budget. The new budget included an allocation for three sets of U.S. Patriot III missiles originally approved for sale by President Bush in 2001, as well as $61.5 million for a feasibility study for the purchase of U.S.-made diesel submarines. Members of the 110 th Congress remained engaged in the question of Taiwan's security and U.S. arms sales. Measures introduced included: H.Res. 676 : A resolution that the United States continue to sell defense articles and services to Taiwan "based solely" on Taiwan's defense needs. (The House passed the measure by voice vote on October 2, 2007.) H.R. 3912 /S. 1565 : The Naval Vessel Transfer Act of 2007. Among other actions, the bill would have transferred to TECRO (the Taiwan office in the United States) the OSPREY class minehunter coastal ships ORIOLE (MHC-55) and FALCON (MHC-59). (Neither bill was considered by its full respective body.) H.R. 5916 : The Security Assistance and Arms Export Control Reform Act of 2008. The bill found that Taiwan's security would benefit from more intensive U.S.-EU dialogue on continuing the arms embargo against China. (The House passed the bill by voice vote on May 15, 2008, but it was never considered by the full Senate.) H.R. 6646 : The bill would have required the U.S. Government to provide detailed briefings to Congress on discussions with Taiwan about potential arms sales. (The House passed the bill by voice vote on September 23, 2008, but it was never considered by the full Senate.) The new Ma Administration also proved to be more moderate and flexible than its predecessor concerning Taiwan's annual United Nations (U.N.) bid, a bid that remained objectionable to Beijing. On August 14, 2008, Taiwan under the new Ma government submitted a proposal to the U.N. Secretariat via 17 countries with which it maintains diplomatic relationships, asking the U.N. to allow Taiwan to have "meaningful participation" in U.N. special organizations. In spite of the new milder tone to Taiwan's bid, the PRC raised objections on August 18, 2008, saying that Taiwan was not qualified to participate in U.N. activities. Because of these objections, on September 19, 2008, a U.N. subcommittee decided not to include Taiwan's request for "meaningful participation" in U.N. activities on the agenda for the 63 rd General Assembly. Prior to the bid in 2008, Taiwan had been unsuccessful in 15 previous attempts to gain either membership or non-member status in the U.N., particularly in the World Health Organization (WHO), a U.N. affiliate. Taiwan's efforts under the DPP Administration of President Chen had included an application both for full U.N. membership as well as for use of either the name "Republic of China" or "Taiwan." As in past Congresses, there was support in the 110 th for Taiwan's U.N. membership. Resolutions introduced in support of Taiwan's U.N. bid included H.Con.Res. 73 and H.Con.Res. 250 . The House did not take up either measure. U.S. government officials are on record as supporting Taiwan's membership in organizations "where statehood is not an issue," a qualification that seemingly would exclude the U.N. During the 110 th Congress, PRC-Taiwan talks resumed for the first time in a decade. In the two months between his election and his inauguration on May 20, 2008, President Ma Ying-jeou spoke of his intentions to begin normalizing cross-strait ties in a "cross-strait common market," to establish direct air links with the PRC, and to ease other restrictions on cross-strait contacts. He sought to ease tensions with China by pledging adherence to a "three no's" approach: no unification, no independence, and no use of force—a pledge he repeated in his inaugural address. He called for a "diplomatic truce" with China and pledged to stop using "dollar diplomacy" to win foreign country recognition. After his inauguration, Ma moved quickly to implement his new cross-strait approach. In an unprecedented move, Taiwan in mid-May worked jointly with the PRC in providing disaster relief after the Sichuan earthquake. By late May, Taiwan had accepted a PRC invitation to resume official talks in Beijing for the first time since October 1998. The chairman of the KMT, Wu Poh-hsiung, met with PRC President Hu Jintao on May 28, 2008, the highest-level encounter between the two sides since 1949. Official talks reopened on June 12-13, 2008, resulting in groundbreaking new agreements to allow weekend direct charter flights and boost PRC tourism to Taiwan. Taiwan also undertook several unilateral initiatives, including: June 26—Taiwan announced a number of financial liberalization measures, including: allowing conversion of the PRC yuan into Taiwan dollars; allowing Chinese companies on the Hong Kong stock exchange to have secondary listings on Taiwan's stock exchange; allowing PRC-backed mutual funds to invest in Taiwan's stock market; and allowing Taiwan brokerage houses to double their investments in PRC counterparts. June 30—Taiwan's Government Information Office announced that two major PRC media outlets would be allowed to station reporters in Taiwan effective immediately. July 8—Taiwan's Ministry of Economics announced it would ease investment restrictions with the PRC in three broad steps over the coming six months: raising the cap on Taiwan companies' investment in the PRC from 40% to 60%; lifting restrictions preventing Taiwan companies in certain sensitive sectors (such as advanced semiconductors) from investing in the PRC; and lifting restrictions preventing PRC companies from investing in Taiwan. Other Taiwan initiatives remained in the discussion stage. President Ma has suggested that Taiwan be more flexible on the names it uses in its international engagement efforts—suggesting, for instance, that Taiwan's negotiation of Free Trade Agreements (FTA's) would be less divisive if Taiwan used the same name it used when applying to the WTO—"separate customs territory of Taiwan, Penghu, Kinmen, and Matsu." And Taiwan's SEF chairman, Chiang Pin-kung, was reported as having said he wants to study and promote the creation of a cross-strait comprehensive economic cooperation agreement (CECA) with the PRC. In spite of this progress, controversies continued to arise, such as an initial tussle, later smoothed over, about the name that the PRC would use to refer to Taiwan during the 2008 Olympic Games. Taiwan's Ministry of National Defense also said that acquiring submarines—a move directed at the PRC—remained a top priority for Taiwan. Supporters of President Ma's new policies were critical that the June 2008 official talks did not go far enough in some instances. Opponents of the new policies, on the other hand, criticized them as proceeding too rapidly, and said that the PRC negotiators at the June 2008 talks were more experienced than their Taiwan counterparts. China's robust international engagement since 2000 became a subject of increasing interest in the 110 th Congress and prompted growing debate over the PRC's motivations and objectives in its foreign policy. The fact that much of China's international engagement expanded while the United States was preoccupied with its military involvement in Iraq and Afghanistan also caused a growing degree of American introspection. Part of the debate included an increasing focus on the implications that China's growing international engagement could have for its "soft power" projection around the world, and consequently what this would mean for U.S. economic and strategic interests. Some fundamental objectives appeared to be motivating Beijing's foreign policy outreach during the 110 th Congress. These included an imperative to promote and enhance China's economic development, particularly its voracious need for energy resources and raw materials to sustain its double-digit annual growth; an effort to separate the island of Taiwan, over which the PRC claims sovereignty, from its 23 remaining official relationships; and a desire to increase China's international stature and compete more successfully with U.S. supremacy. To achieve these ends, China during the 110 th Congress continued to craft multiple bilateral agreements and partnerships; work to resolve outstanding boundary disputes with other countries; join and become more active in existing multilateral organizations; and to seek to create new multilateral institutions that tended to exclude the United States. Beijing resolved a decades-long boundary dispute with Russia. In pursuit of some of these interests in China's growing foreign engagements, the Senate Foreign Relations Committee requested the Congressional Research Service to prepare a study, "China's Foreign Policy and 'Soft Power' in South America, Asia, and Africa." China's economic development and need for greater energy resources also had a rapidly increasing impact on environmental issues during the 110 th Congress, both within China and for its regional and global neighbors. China's continued heavy dependence on coal made it second only to the United States as the largest contributor to global carbon-dioxide (CO2) emissions by the beginning of the 110 th Congress, and Reuters reported on June 20, 2007, that China had surpassed the United States in CO2 emissions. PRC leaders in 2007-2008 continued to recognize that this trend is not sustainable and continued to expand on past efforts to address environmental quality, including adoption of further environmental laws and regulations and mandatory conversion of many government vehicles to non-polluting liquefied petroleum and natural gas. Despite this, Beijing's continued emphasis on economic development during the 110 th Congress adversely affected efforts to address China's extensive and worsening pollution problems. The United States and China engage in energy and environment-related dialogue through the Strategic Economic Dialogue, whose four rounds of meetings during the 110 th are discussed elsewhere in this report. Although China continued its rapid economic advances and its expanded international influence in 2007-2008, its internal political and institutional development did not keep comparable pace. Increasing social and economic inequities led to growing strains in China's political and societal fabric during the 110 th Congress. These strains were evident between the central government in Beijing and the provincial and municipal governments in the interior; between the socialist left and the increasingly capitalist right; between those arguing for economic growth at all costs and those advocating more sustainable and equitable development; and between the few newly wealthy who have thrived under economic liberalism and the many desperately poor who have not. Leaders in Beijing were seen to be deeply concerned about the political and social implications of these internal strains, with increased debate on and maneuvering around these issues evident in 2007-2008. In mid-October 2007, the Chinese Communist Party held its 17 th Party Congress—an important Party conclave held every five years to set the policy direction and make leadership decisions for the coming five years. General Secretary Hu Jintao reported that the Party would continue to emphasize its overall goal of economic investment and export-oriented reform, although it would place more importance on encouraging domestic consumption. The Party Congress re-emphasized the current leadership's priority to strive for slightly slower and more balanced growth. The key catch-phrase in Party Secretary Hu's report was to adhere to the "Scientific Development Concept"—a concept designed to focus on improvements in people's livelihood, employment, health, national education, renewable energy resources, and environmental quality. The Party also chose its new leaders for the coming five years. As expected, Party Secretary Hu Jintao was reaffirmed to his leadership role, and he along with five other senior leaders remained on the nine-member Politburo Standing Committee (PSC), the Party's most authoritative and important entity. Of the four new PSC members, two—Xi Jinping and Li Keqiang—have been tipped as frontrunners to be Hu Jintao's successor as Party Secretary at the 18 th Party Congress in 2012. The two are the only PSC members to have been born in the 1950s, making them the first of the "fifth generation" of China's potential leadership to rise to this level. If accepted retirement practices hold true (at age 68), only these two will be young enough to remain in the Politburo of the 18 th Party Congress. The far-reaching economic changes the PRC continued to undergo in 2007-2008 led to increasing disgruntlement among many social groups and to increasing pressure on the central government in Beijing and on provincial and local governments. Many problems during the 110 th Congress were regularly recurring—such as protests by farmers whose land had been confiscated, often with little or no compensation, or the protests of workers whose factories closed without having paid back wages. There were also more unique circumstances, such as the 2008 Sichuan earthquake, which provided an opportunity for public dissatisfaction with the PRC government focused on the issue of corruption and shoddy construction that led to more destruction and death than might have occurred with sturdier buildings; or the growing scandals involving tainted food and other consumer products. Amidst various social upheavals, there also was growing evidence that citizens of the PRC were becoming more assertive about their rights. In mid-May 2007, news accounts reported violent public protests in Guangxi Province (Bobai County) over the "savage implementation" of family planning policies by local authorities, including the retroactive imposition of extraordinarily heavy fines and the confiscation or destruction of household goods and food. The "one-child" policy was also mentioned in connection with the Sichuan earthquake of May 12, 2008, where the widespread destruction of schools meant that many parents lost their only child. Social pressure also increased on the government over the unfolding product safety scandals that began in 2007. In response to domestic and international criticism, PRC officials announced the suspension of licenses of factories and companies accused of violating product safety standards. In July 2007, the PRC executed the former head of the State Food and Drug Administration, Zheng Xiaoyu, for accepting bribes to approve sub-standard drugs. In early September 2008, reports began surfacing all over China of dangerously high levels of melamine in domestically produced milk and milk powder, which sickened close to 300,000 infants and children and killed some others. In October 2008, news accounts reported that some PRC families whose babies had been injured by milk laced with melamine had filed suit against one of the companies involved, Sanlu. The same month, Beijing announced the recall of all milk products produced before September 14, 2008, and set the first standards for permissible amounts of melamine in milk (1 milligram per kilogram of infant formula and 2.5 milligrams per kilogram of liquid milk). In late 2008, a series of rolling taxi strikes swept over parts of China, with drivers angry about new licensing fees and growing competition from unlicensed taxis. Although the PRC government was forced to respond positively to some of this social pressure, it responded more harshly in other cases. For instance, PRC police arrested an activist, Huang Qi, who had advised parents who lost children in the Sichuan earthquake, charging him with "illegally possessing state secrets." The government also maintained and increased its repressive crackdown against Tibetans in the wake of the March 2008 protests in Tibet—in June 2008 effectively disbarring two attorneys, Jiang Tianyong and Teng Biao, who had offered to defend some of the Tibetans charged in the March demonstrations. Authorities also maintained a harsh crackdown against Muslim Uighur "separatists"—those in favor of independence from China—in the Xinjiang-Uighur Autonomous Region in western China. In early January 2007, PRC officials claimed that the East Turkestan Islamic Movement (ETIM), on the U.S. list of terrorist groups, was the target of a Chinese raid on a suspected terrorism camp in Xinjiang. No details were given, although PRC officials reportedly said that 18 were killed and 17 arrested. In 2008, Uighur groups claimed credit for a series of deadly attacks in China leading up to the Olympic Games, including a May bus bombing in Shanghai which killed three, bombings at a police station in Wenzhou and a plastics factory in Guangzhou on July 17, and bombings of buses in Yunnan on July 21. Although control of the press continued to be an important focus for Beijing, press freedom in China remained higher during the 110 th Congress than it had been in the past. Moreover, the explosive growth of the Internet, cell phones, and text messaging in China has helped make these electronic sources a more dominant source of information for many PRC citizens. Beijing has increasingly viewed these new information sources as potential threats to the central government's ability to control information flows, and in 2005 imposed new rules designed to further limit the type of electronic news and opinion pieces available to the Web-savvy in China. Among other things, the regulations prohibited major search engines from posting their own independent commentary on news stories, stipulating that only opinion pieces provided by state-controlled media may be posted; required Internet service providers to record the content, times, and Internet addresses of news information that is published and to provide this information to authorities upon inquiry; and in vague terms prohibited certain kinds of content from being posted, such as content that "undermines state policy" or "disseminates rumors [and] disturbs social order." The regulations are backed by penalties, including fines, termination of Internet access, and possible imprisonment. Some Members of the 110 th Congress took action in a number of cases where U.S. companies appeared to have complied with Beijing's attempts to restrict and police the Internet. In November 2007, House Foreign Affairs Committee Members grilled Jerry Yang and Michael Callahan, executives with Yahoo, about the company's decision to reveal to the Chinese government the name of a journalist who was an e-mail account-holder; the journalist, Shi Tao, subsequently was sentenced to prison for ten years for subversive activities. In another example, on May 20, 2008, the Senate Judiciary Committee's Human Rights Subcommittee held hearings to review the actions of a U.S. company, Cisco, which reportedly had played a role in helping the PRC construct an Internet monitoring system. Judging from data in the 2007-2008 time frame, it may be that Internet and technology usage in China is growing fast enough eventually to outstrip the government's control mechanisms. The state-owned China Internet Network Information Center reported in January 2008 that the number of Internet users alone in China had expanded 53% in 2007 over the previous year, reaching 210 million users by year-end. The Bush Administration generally favored selective, intense pressure on individual human rights cases and on rule of law issues rather than the broader approach adopted by previous American administrations. There was little sign that the U.S. position on human rights has had much effect on PRC policies during the 110 th . There was growing evidence, however, that PRC policies were being forced to respond to increasing domestic social demands for greater accountability, transparency, and responsiveness in government, particularly in cases of official corruption and malfeasance. (Issues of social stability are dealt with elsewhere in this report.) The PRC continued to crack down on unauthorized religious groups in 2007-2008 and to restrict the freedoms of ethnic communities that sought greater religious autonomy. Apart from crackdowns on Tibetans and Muslims, much of this repression focused on what PRC officials classified as illegal religious "cults" such as the Falun Gong and the Three Grades of Servants Church. The U.S. Department of State released congressionally mandated reports on International Religious Freedom in both years of the 110 th Congress. In the China section of its last submission, released September 19, 2008, the Department judged China's record on religious freedom to remain poor and substantially the same as during previous years. The State Administration for Religious Affairs, SARA, (formerly known as the Religious Affairs Bureau, or RAB) continued to require churches to register with the government. Churches that are unregistered, so-called house churches, continued to be technically illegal and often repressed by the government. As in the past, however, treatment of unregistered churches varied widely from locality to locality, with some local officials highly repressive and others surprisingly tolerant. Communist Party officials continued to stress that religious belief is incompatible with Party membership. Because of allegations of coercion in PRC family planning programs, direct and indirect U.S. funding for family planning practices in China remained prohibited during the 110 th Congress in provisions of several U.S. laws. These restrictions included U.S. funding for international and multilateral family planning programs, such as the U.N. Population Fund (UNFPA), that have programs in China. (Section 660(c) of the House-passed version of H.R. 2764 , the FY2008 State, Foreign Operations, and Related Programs Appropriations Bill for FY2008 Department, prohibited funds for a UNFPA country program in China and required a report on the UNFPA China program from the Secretary of State. The House passed the measure on June 21, 2007.) While the PRC has maintained its restrictive and at times coercive "one-child" program for several decades, there have been indications that the government may be re-thinking this policy. Early in 2004, China's new leadership appointed a task force to study the country's demographic trends and their implications for economic development. In October 2004, reports surfaced that Beijing was considering at least one proposal to eventually scrap the one-child policy because of low PRC birth rates and the economic implications this had for supporting China's huge aging population. On January 6, 2005, the director of China's National Population and Family Planning Commission stated that the government intended to modify criminal law to make it illegal to selectively identify and abort female fetuses. There also was growing evidence during the 110 th Congress that citizens of the PRC have become more assertive about their reproductive rights. In mid-May 2007, news accounts reported violent public protests in Guangxi Province (Bobai County) over the "savage implementation" of family planning policies by local authorities, including the retroactive imposition of extraordinarily heavy fines and the confiscation or destruction of household goods and food. The "one-child" policy also was mentioned in connection with the Sichuan earthquake of May 12, 2008, where the widespread destruction of schools meant that many parents lost their only child. In early December 2008, 303 Chinese intellectuals signed and released a manifesto calling for the institution of broad political reforms, the establishment of real democratic freedoms, and the end of one-party rule in China. Dubbed "Charter 08," (reminiscent of a similar Czechoslovakian manifesto, "Charter 77"), the document's release was linked to a number of important anniversaries, including the 60 th anniversary of the Universal Declaration of Human Rights; the thirtieth anniversary of the appearance of the "Democracy Wall" in Beijing; and the tenth anniversary of China's signing of the International Covenant on Civil and Political Rights. In a translation of the forward to the document, the authors stated: ...The Chinese people, who have endured human rights disasters and uncountable struggles..., now include many who see clearly that freedom, equality, and human rights are universal values of humankind and that democracy and constitutional government are the fundamental framework for protecting these values. By departing from these values, the Chinese government's approach to "modernization" has proven disastrous. It has stripped people of their rights, destroyed their dignity, and corrupted normal human intercourse. So we ask: Where is China headed in the twenty-first century? Will it continue with "modernization" under authoritarian rule, or will it embrace universal human values, join the mainstream of civilized nations, and build a democratic system? There can be no avoiding these questions. Although PRC police immediately began to interrogate, at times detain, and search the homes of the signatories, Charter 08 continued to attract hundreds of additional supporters who were willing to risk official consequences by signing it as 2008 closed. Its continued circulation and expanding list of signers was a further testament to the growing public pressure being placed on the PRC government for more responsive and representative government. Introduced as H.R. 6 on January 12, 2007, P.L. 110-140 became the vehicle for omnibus energy legislation, including provisions concerning China contained in H.R. 3221 , introduced by Representative Pelosi. The final Act includes language that authorizes the Secretary of Commerce to take efforts to promote U.S. clean energy technology exports to India, China, and other countries that may benefit. (The legislative journey to the public law has a convoluted history, containing selected provisions from 14 bills, including H.R. 3221 , and three resolutions. The President signed the omnibus measure into law on December 19, 2007.) Introduced as H.R. 2764 by Representative Lowey. The final public law ( P.L. 110-161 ) included provisions requiring U.S. representatives at international financial institutions to support projects in Tibet if they do not provide incentives for non-Tibetan immigration into Tibet; and provided $5 million in ESF funds to NGOs supporting cultural traditions, sustainable development, and environmental protection in Tibet. Section 733 of the enacted bill prohibited a rule allowing poultry products to be imported from China. The final bill also required 15-day prior notification to both Appropriations Committees before processing licenses for the export to China of satellites of U.S. origin; and provided $15 million in democracy assistance funds for China, Hong Kong, and Taiwan, providing that monies for Taiwan be matched by non-U.S. government sources; and $150,000 for the U.S. Senate-China Interparliamentary Group, to remain available until September 2009. The final bill also prohibited funds for a United Nations Population Fund (UNFPA) program in China (Section 660(c)). After a complex series of procedural floor motions in December 2007, the bill was sent to the President, who signed it on December 26, 2007. Introduced as H.R. 4986 , Section 1263 of P.L. 110-181 adds a reporting requirement to the Annual Report on Military Power of the People's Republic of China (authorized in P.L. 106-65 ). The new reporting requirement is to include information on China's asymmetric and cyber-warfare capabilities. The bill was signed on January 28, 2008. H.Con.Res. 73 (Tancredo) Expressing the sense of Congress that the United States should resume diplomatic relations with Taiwan. Introduced on February 16, 2007. Referred to the House Foreign Affairs Committee. H.Con.Res. 136 (Chabot) Expressing the sense of Congress that the United States lift restrictions on high-level visits by officials from Taiwan and allow direct high-level dialogue between officials from both governments. Introduced on May 1, 2007. Referred to the House Foreign Affairs Committee, which held mark-up on June 26, 2007. The House passed the measure by voice vote on July 30, 2007, and the measure was referred to the Senate Foreign Relations Committee on August 3, 2007. H.Con.Res. 137 ( Berkley ) Expressing the sense of Congress that the United States should initiate immediate negotiations to enter into a free trade agreement with Taiwan. Introduced on May 1, 2007. Referred to the House Ways and Means Committee's Trade Subcommittee on May 15, 2007. H.Res. 552 ( Marshall ) Calling on the PRC to remove barriers on U.S. financial services firms doing business in China. Introduced July 17, 2007, and referred to the House Financial Services Committee. The House passed the measure on the suspension calendar on September 5, 2007, by a vote of 401-4. H.R. 782 (Ryan) The Fair Currency Act of 2007. (Related Senate bill S. 796 .) The bill amends Title VII of the Tariff Act of 1930 to provide that artificial exchange rates by any country are countervailable export subsidies. The bill requires the U.S. Treasury Secretary annually to analyze foreign countries' exchange rate policies and embark on negotiations with those countries whose currencies are judged to be in "fundamental misalignment." Introduced January 31, 2007. Referred to House Ways and Means Committee and in addition to the House Committees on Financial Services; Foreign Affairs; and Armed Services. H.R. 1229 (Davis, A., English) The Non-Market Economy Trade Remedy Act of 2007. The bill amends long-standing U.S. law by extending the applicability of countervailing duty measures also to nonmarket economy countries in addition to market economy countries. The bill also notes that "special difficulties" may exist in calculating benefit amounts in China and authorizes U.S. authorities to use "terms and conditions prevailing outside of China" in such instances. Introduced on February 28, 2007. Referred to the House Ways and Means Committee (February 28) and to the Trade Subcommittee (March 7), which held hearings on March 15, 2007. H.R. 1390 (Tancredo, Rohrabacher) A bill to require Senate confirmation of individuals appointed to serve as the Director of the American Institute in Taiwan. Introduced March 7, 2007. Referred to the House Foreign Affairs Committee. 12/05/08 —The fifth U.S.-China Strategic Economic Dialogue meeting wound up in China. The governments agreed to deepen cooperation on financial services, energy and the environment, trade and investment, and food safety. 11/19/08 —Several hundred taxi drivers reportedly went on strike in Chongqing, China, in protest over plans to add more cabs. Also, the U.S. FDA opened an office in Beijing to increase inspections of Chinese food and medicine. 11/17/08 —Reports said that 2,000 people rioted in Gansu province over the city government's plans to move its offices to a nearby county. The protesters reportedly feared that the move would lower property values and raise unemployment. 11/17/08 —In a London Times interview, PRC Major General Quan Lihua hinted that the PRC was interested in acquiring an aircraft carrier. 11/17/08 —A conference of Tibetan exiles, called by the Dalai Lama, began meeting in Dharamsala reportedly to explore new strategies for the Tibetan movement with respect to China. News accounts said the Dalai Lama was not in attendance. 10/31/08 —The 8 th round of negotiations between representatives of the Dalai Lama and China began in Beijing. 10/29/08 —Presidential candidate Barack Obama, in a letter to the National Council of Textile Organizations, vowed to "use all diplomatic means" to stop China from gaining unfair trade advantages because of its currency peg. 10/29/08 —Nine PRC families with babies suffering kidney problems, allegedly because of milk tainted with melamine, filed suit against China's Shijiazhuang-based Sanlu milk company. 10/29/08 —China issued a major policy on climate change, acknowledging its own contributions and suggesting a kind of global climate tax to address climate change. 10/14/08 —The Chinese government, led by ASQIQ (the General Administration of Quality Supervision, Inspection and Quarantine) ordered a recall of all milk products produced before September 14, 2008. 10/13/08 —The nine largest banks in the U.S. acquiesced in the largest U.S. government ever intervention plan into private industry, agreeing to sell preferred shares of stock in their banks to the government. The banks included JPMorgan, Bank of America, Morgan Stanley, Citigroup, and Wells Fargo. 10/12/08 —The Third Plenum of the 17 th Central Committee closed. Ostensibly, the Plenum enacted a bold reform program for agriculture, including the ability to lease, buy, or sell land use contracts. Few details were available at the close of the plenum. 10/09/08 —The PRC announced new limits on melamine 1 milligram per kilogram of infant formula and 2.5 milligrams per kilogram of liquid milk. Beijing did not reveal if there had previously been a limit or what that limit may have been. 10/08/08 —A federal judge ordered that 17 Uighurs held at Guantanamo Bay be released by the end of the week. The men had been held since 2002. 10/07/08 —The PRC announced it was cancelling meetings between U.S. and PRC military officials and planned exchanges on disaster relief and humanitarian assistance, as a result of the U.S. announcement on arms sales to Taiwan. 10/03/08 —The Defense Security Cooperation Agency (DSCA) notified Congress of the possible Foreign Military Sale to Taiwan of six different types of defense articles and equipment, consistent with the policies of P.L. 96-8 , which could total a maximum of approximately $6.4 billion. 10/03/08 —Defense Security Cooperation Agency (DSCA) notified Congress of the possible Foreign Military Sale to Taiwan of six different types of defense articles and equipment, consistent with the policies of P.L. 96-8 , which could total a maximum of approximately $6.4 billion. These included: upgrades of four E-2T Aircraft to the HAWKEYE 2000 configuration (est. maximum of $250 million); 30 AH-64D Block III APACHE Longbow Attack helicopters (est. maximum of $2.532 billion); $30 PATRIOT Advanced Capability (PAC-3) missiles (est. maximum of $3.1 billion); 32 UGM-84L Sub-Launched HARPOON Block II missiles and 2 UTM-84L HARPOON Block II Exercise missiles (est. maximum of $200 million); follow-on spare parts in support of F-5E/F, C-130H, F-16A/B, and Indigenous Defense Fighter IDF aircraft (est. maximum of $334 million); 182 JAVELIN guided missile rounds and 20 JAVELIN command launch units (est. maximum of $47 million) 09/09/08 —The New York Times reported that local governments in Xinjiang had imposed restrictions on religious practices during the Muslim month of Ramadan. 09/08/08 —Taiwan announced that it would cancel the live-fire exercise portion of its annual five-day military exercises, in deference to warming ties between Taiwan and the PRC. 09/08/08 —Taiwan's Foreign Ministry announced it would seek closer participation in the 16-member Pacific Islands Forum (PIF). Taiwan has taken part every year in the PIF since joining in 1993, but because of PRC objections has been restricted to dialoguing only with its 6 diplomatic South Pacific partners (Nauru, Palau, Tuvalu, the Marshall Islands, Kiribati, and Solomon Islands). The other PIF partners are: Australia, Cook Islands, Fiji, New Zealand, Tonga, Vanuatu, the Federated States of Micronesia, Niue, Papua New Guinea, and Samoa. 09/06/08 —The PRC launched two new environment and disaster monitoring satellites from its Taiyuan Satellite Launch Center in Shanxi Province. According to reports, the satellites began transmitting data within 24 hours. 09/04/08 —The chair of an official committee assessing the damage from the May 12 Sichuan earthquake (Ma Zhongjin) said that shoddy construction may have contributed to the collapse of some schools. 09/03/08 —The Coca-Cola company announced it was making a bid for China's Huiyuan Juice Company. 09/03/08 —According to a KMT announcement citing "Taipei newspapers," former President Chen Shui-bian admitted to having made up a secret diplomatic project, the "South Route Project," ostensibly in order to cover up "secret diplomacy" with the United States and Japan. 09/01/08 —According to an article in the LA Times , 8 Chinese firms filed lawsuits in recent weeks against the General Administration of Quality Supervision, Inspection, and Quarantine (AQSIQ), accusing it of colluding to give contracts to a business in which it has a financial stake. 08/29/08 —According to the W ashington Post , China signed a $3 billion oil contract with Iraq to develop the Ahdab oil field in Wasit province, south of Baghdad. It is the first foreign commercial contract since the invasion of 2003. 08/24/08 —U.S. Secretary of Labor Elaine Chao, in Beijing on an official visit, met with President Hu Jintao. 08/20/08 —Former Party Secretary Hua Guofeng (serving after Mao Zedong) died at age 87. 08/14/08 —Taiwan submitted a proposal to the UN Secretariat via St. Vincent and the Solomon Islands (2 of Taiwan's diplomatic relationships), asking the UN to consider permitting Taiwan to have "meaningful participation" in the organization. The resolution reportedly was titled "The Need to Examine the Fundamental Rights of the 23 Million People of the Republic of China (Taiwan) to Participate Meaningfully in the Activities of the U.N. Specialized Agencies." 08/07/08 —President Bush left Thailand for Beijing to attend the opening ceremony of the 2008 Olympic Games. The President's Asia trip began August 4 and included the Republic of Korea, Thailand, and the PRC. 08/08/08 — Opening ceremony for the 2008 Summer Olympic Games in Beijing. The games concluded on August 24. 08/07/08 —In a speech in Bangkok, President Bush tempered largely positive and optimistic references to China and its economic progress with continuing concerns about religious freedom and human rights there. 08/04/08 —In response to a question about an attack in Kashgar on a PRC police station (killing 16), a State Department spokesman (Gallegos) said that the United States "strongly condemn[s] actions of violence such as the August 4 attack in Kashgar." 07/29/08 —The Doha Round of trade talks broke up in Geneva without reaching agreement, reportedly due to last-minute obstacles raised by China and India. 07/29/08 —According to Xinhua , China's newly established National Energy Administration began operation. 07/24/08 —According to a NYTimes article, Chinese local officials in the Sichuan quake zone were pressuring parents who lost children in the quake. The officials reportedly offered cash and promises of pensions if the parents signed a contract absolving the government of blame for any shoddy construction in collapsed schools. 07/21/08 —Two buses exploded in Kunming, capital of Yunnan Province. Chinese officials initially concluded the explosions were not related to the Olympic Games. 07/21/08 —Some PLA troops reportedly were starting to pull out of the Sichuan after a little over two months of duty in the quake zone. 07/21/08 —China and Russia signed the final agreement demarcating their 2,700 mile border. 07/20/08 —China reportedly warned Exxon to pull out of an oil exploration deal with Vietnam because it infringed on Chinese sovereignty rights in the South China Sea. 07/19/08 —PRC police arrested Huang Qi, a human rights activist advising parents whose children had been killed in collapsed schools during the Sichuan earthquake. He was charged with "illegally possessing state secrets." 07/18/08 —The WTO ruled that China was in violation of WTO trade rules by imposing punitive "buy local" tariffs on foreign automakers. 07/17/08 —Taiwan's cabinet announced it would revise regulations limiting investment by Taiwan companies in China, and that new measures would be put into place August 1. 07/16/08 —Taiwan President Ma Ying-jeou said Taiwan's negotiation of FTA's would be less divisive if it used the name it used when applying to the WTO—"separate customs territory of Taiwan, Penghu, Kinmen, and Matsu." 07/16/08 —Admiral Timothy Keating, in a briefing at the Heritage Foundation, was seen to agree that U.S. arms sales to Taiwan had been frozen, perhaps until the Olympic Games had concluded. 07/15/08 —A PRC Foreign Ministry spokesman expressed "grave concern and misgivings" over the U.N. indictment of Sudan's president. 07/14/08 —The BBC program Panorama TV aired a program alleging that China was selling military equipment to Sudan and training Sudanese fighter pilots who fly Chinese A5 Fantan fighter jets in Darfur. If true, this would be a violation of the U.N. arms embargo. 07/11/08 —China and Russia vetoed a U.N. Security Council resolution to imposed sanctions on Zimbabwe. The measure would have condemned the election violence; tightened travel ban and assets freeze on Mugabe and senior leaders; and supported mediation. 07/03/08 —China's State Administration of Foreign Exchange (SAFE) announced it intended to combat "hot money" flows by linking its electronic monitoring system to those of the Ministry of Commerce and General Administration of Customs. 06/26/08 —Taiwan announced a number of financial liberalization measures: it would begin allowing conversion of the PRC yuan into Taiwan dollars; Chinese companies on the Hong Kong stock exchange will be allowed secondary listings on Taiwans stock exchange; PRC-backed mutual funds will be allowed to invest in Taiwans stock market; and Taiwan brokerage houses will be allowed to double their investments in PRC counterparts. 06/29/08 —Secretary of State Condoleezza Rice visited the PRC, going to Chengdu and Beijing, and meeting with Foreign Minister Yang Jiechi. The visit was at the end of a trip to Germany, Japan, South Korea, and China. 06/18/08 —A fourth round of the Strategic Economic Dialogue concluded in Annapolis, Maryland. The two sides agreed to begin negotiations on a bilateral investment protection accord and signed a 10-year energy and environment cooperation framework. 06/12/08 —The first cross-strait meetings in a decade began between China and Taiwan in Beijing at the Diaoyutai State Guest House, conducted by SEF and ARATS. In an unprecedented development, the two sides reportedly agreed to set up permanent offices in each others territory. 06/03/08 —Chinese authorities in effect disbarred two attorneys, Jiang Tianyong and Teng Biao, by failure to renew their annual licenses. The two, who had offered to defend Tibetan activists charged in the March 2008 crackdown, were said to be too willing to take on sensitive cases. 06/03/08 —Police surrounded 100 parents protesting shoddy school construction in Dujiangyan, taking some into custody and preventing the group from filing a lawsuit on the school construction issue. 06/03/08 —The PRC in effect disbarred two attorneys, Jiang Tianyong and Teng Biao, by refusing to renew their annual licenses. The two had offered to defend Tibetan activists charged in the March 2008 crackdown. 06/03/08 —Police surrounded 100 parents protesting shoddy school construction in Dujiangyan, taking some into custody and preventing the group from filing a lawsuit on the school construction issue. 06/02/08 —The Philadelphia Orchestra turned its concert in Beijing into a benefit for victims of the Sichuan earthquake. 06/01/08 —At a regional security conference in Singapore, Secretary of Defense Robert Gates underscored U.S. security concerns about Chinas missile build-up opposite Taiwan. The previous day, the Deputy Chief of the General Staff, Lt. Gen. Ma Xiaotian, criticized the U.S. expansion of its military alliances and a missile defense system, and said that Chinas military expansion was purely for its own self-defense. 05/31/08 —A local Sichuan official, Lin Qiang (vice inspector of the provinces educational department), withdrew from Olympic torch relay participation, acknowledging that if we educational officials hadnt left loopholes for corruption, more schools may have remained standing during the Sichuan earthquake. 05/31/08 —The LATimes reported that the National Zoo, San Diego Zoo, and two other U.S. zoos with pandas had launched fund-raising drives to help the Wolong National Nature Reserve and its panda breeding center, damaged by the Sichuan quake. 05/30/0 8 —It was mutually agreed that Japan would not send humanitarian provisions to China for the earthquake relief using Japanese military planes. 05/29/08 —Chinas State Food and Drug Administration reportedly began acting in response to 6 deaths in the previous week from a blood-based drug, immunoglobulin. 05/29/08 —Taiwan and China agreed to resume talks on cross-strait issues, including visits by PRC citizens to Taiwan and regular direct charter flights. 05/20/08 —Ma Ying-jeou was inaugurated president in Taiwan. 0 3/22/08 —Ma Ying-jeou was elected president in Taiwan by a margin of 58% - 42% over his DPP rival, Frank Hsieh. 03/12/08 —A 7.9 magnitude earthquake hit Sichuan Province in central China. 03/10/08 —Monks in Lhasa launched a protest against Chinese rule on the 49 th anniversary of a violent 1959 anti-Chinese uprising. 01/28/08 —The Beijing city government admitted that 6 construction workers had died during the construction of Olympic venues in the city. The announcement came after the British Sunday Times reported the previous week that more than 10 workers had died. 01/26/08 —The W ashington Post reported on ongoing quiet protests—euphemistically called "taking a stroll" or "going shopping"—in Shanghai over the planned construction of a maglev (magnetic levitation) train through residential neighborhoods. 01/25/08 —Premier Wen Jiabao held the last of a series of 5 public meetings, the first being Jan. 21, to listen to public comments and suggestions concerning the latest government work report to be submitted to the NPC in March. 01/25/08 —Valery Loshchinin, Russias ambassador to the U.N., announced that next month Russia and China would submit a joint proposal for an international treaty to ban the deployment of space-based weapons. 01/19/08 — The Economist reported that Chinas inflation rate, 6.9%, is the highest in 11 years. 01/18/08 —According to the A sian Wall St. Journal , the state-owned China Internet Network Information Center said that Internet users in China expanded 53% by the end of 2007—up to 210 million users from 137 million at the end of 2006. 01/17/08 —The fifth U.S.-China Strategic Dialogue began in Beijing, jointly chaired by Negroponte and PRC Vice Foreign Minister Dai Bingguo. Negroponte reportedly reiterated the U.S. position on Taiwans U.N. referendum. For the first time, a PRC military official, General Ding Jingong, attended the dialogue. Ding is deputy head of the Foreign Affairs Office of the Ministry of Defense. 01/17/08 —Suggesting that PRC concerns about Taiwan are more highly wired now than in the past, PRC media reports cited every official meeting of Admiral Keating in Beijing as including PRC calls for the United States to cease weapons sales and military ties with Taiwan. 01/16/08 —China announced that new temporary regulations to control food prices, saying that large producers of some food products (including dairy, pork, mutton, and eggs) must obtain government approval before raising prices. 01/14/08 —In a joint statement with the PRC government, Malawi announced it was severing official relations with Taiwan and recognizing the PRC, leaving Taiwan with just 23 remaining official relationships. 01/13/08 —Indias Prime Minister Manmohan Singh began a three-day visit to Beijing the first by an Indian P.M. in almost five years. The same day, U.S. Admiral Timothy Keating, the top U.S. military commander in the Pacific, arrived in China for four days. Keating reportedly stressed to his hosts the need to be more open about its rapid military build-up. 01/12/08 —Taiwans legislative elections were held under its newly reorganized system: 428 candidates fighting for membership in the new 113-seat body. The KMT crushed the DPP, winning 81 seats to the DPPs 27. Five more seats were won by parties likely to support KMT positions. Two referenda questions were defeated: whether the KMT should be stripped of its assets (a DPP initiative); and whether the legislature should be authorized to investigate DPP corruption (a KMT initiative). 01/09/08 —EU Development Commissioner Louis Michel said that the EU plans a partnership with China over Africa. 01/09/08 —Premier Wen Jiabao announced that China over the short term would freeze energy prices, including oil, natural gas, and electricity, in an effort to halt growing inflation. 01/09/08 —The PRCs National Bureau of Statistics released a survey identifying health care and medical issues as the primary concern of most PRC citizens. 01/08/08 —According to a report in the N ew York Times, the head of the PRCs Commission of Science Technology and Industry for National Defense, Huang Qiang, announced that China would launch 15 rockets, 17 satellites, and its third manned space flight in 2008. 01/07/08 —According to the International Herald Tribune , Beijing plans to open a new commercial aviation route through the Taiwan Strait. Taiwan officials said they considered the move provocative and a threat to air safety. 01/07/08 —PRC officials in Hubei announced that 500 people have been expelled from the CCP for violating the one-child policy. 01/07/08 —China announced that land developers acquire from local governments will be subject to an idle land tax of 20% of the purchase price if it goes undeveloped for more than one year. The move, aimed at developers who hoard land, was an attempt to stimulate the supply of housing and curb rising property prices. 12/31/07 —According to a news report, Chinas Gezhouba Co., one of the PRCs largest engineering firms, announced it had won a $1.5 billion contract to build a hydroelectric dam, the Neelum-Jhelum, on Pakistans Neelum River. According to the report, China now has contracts to build at least 47 dams in 27 countries, including Sudan and Burma. 12/31/07 —North Korea missed this December 31 deadline (agreed to in the Six-Party Talks first in February 2007 and then in October 2007) to disable its Yongbyon nuclear facility and provide a full accounting of its nuclear activities. 12/29/07 —Beijings National Peoples Congress revealed its decision on Hong Kongs petition for democratization: essentially, the NPC said no direct elections for the Chief Executive until 2017, and no direct election of Legco until 2020 at the earliest. Also, Chen Deming was appointed Commerce Minister to replace Bo Xilai, elevated to the Politburo during the 17 th Party Congress. 12/27/07 —Japanese Prime Minister Yasuo Fukuda began a three-day visit to China. 12/19/07 —According to the A sian Wall St. Journal, Chinas National Development and Reform Commission announced it had filled its first strategic oil reserve, at 5.2 million barrels, in Zhenhai, Zhejiang Province. 12/19/07 —The U.S. Treasury Department released its semiannual report on currency and exchange rates, again not naming China as a currency manipulator. 12/18/07 —Chinas new National Bureau of Corruption prevention opened a website to gather complaints on official corruption. The response was large enough that the system reportedly crashed several times. 12/17/07 —The Japanese ship JS Kongo used an interceptor missile to destroy a mid-range ballistic missile in space. The target missile was fired from the U.S. Pacific Missile Range Facility on Kauai. 12/12/07 —According to the A sian Wall St. Journal, China Petroleum & Chemical Company (Sinopec) signed a $2 billion deal for investments in Irans Yadavaran oil field. 12/12/07 —Hong Kong Chief Executive Donald Tsang urged the PRC government to set a timetable for direct elections. 12/12/07 —The third meeting of the bi-annual U.S.-China Strategic Economic Dialogue (SED) began in Xianghe, China. The two sides signed a 10-year agreement to work together on clean technology and sustainable natural resources. 12/11/07 —The United States and China signed an agreement to strengthen regulation of drugs and medical devises China exports to the U.S. The agreement required Chinese companies making certain drugs (atorvastatin, or Lipitor; sildenafil, or Viagra; and gentamicin sulfate, antibiotic) to register with PRC regulators. The agreement also provided for American inspectors to be at PRC production plants. 12/10/07 —The non-profit Committee of 100 released the results of its survey, Hope and Fear: American and Chinese Attitudes Toward Each Other . The poll found that 32% of U.S. citizens think the US military should defend Taiwan against a PRC attack, while 49% of congressional staff thought so. 12/03/07 —The U.S.-PRC Defense Consultative Talks began at the Pentagon between undersecretary of defense for policy Eric S. Edelman and Lt. Gen. Ma Xiaotian, the PLA deputy chief of general staff for foreign affairs. While the Kitty Hawk incidents were expected to be discussed, the talks were expected to be on broader issues in U.S.-China defense relations. 12/03/07 —The Chinese Embassy in DC sent CRS the following statement on the Kitty Hawk incident: In mid November just before Thanksgiving, the Chinese side was informed that the officers and men on board USS Kitty Hawk and its accompanying ships urgently requested to dock at Hong Kong for family reunion. Out of humanitarian considerations, the Chinese side agreed to allow USS Kitty Hawk and its fleet access to Hong Kong harbor for the purpose of resting. As for why the US naval ships did not go to Hong Kong afterwards, it was the US business. The Chinese position on the port call at Hong Kong by USS Kitty Hawk carrier group is impeccable. The US side is completely clear about the entire process of the matter. 12/01/07 —A new policy went into effect in China allowing foreign investment (as minority stakeholders) in Chinas power-grid sector for the first time. 12/01/07 —The director-general of Britains MI-5, Jonathan Evans, warned British executives that they were under attack on the Internet from Chinese state organizations. 11/30/07 —According to news reports, China denied landing rights to a U.S. Air Force C-17 flight scheduled for a routine re-supply of the U.S. Consulate in Hong Kong. 11/30/07 —In response to questions about the Kitty Hawk incident, Dana Perino said that DOD will have details, in terms of how many ships or in terms of the incident. She said that the incident has not impaired U.S. ability to work with the Chinese. 11/30/07 —According to AP , a DOD spokesman on condition of anonymity had revealed that the PRC had denied a third Hong Kong port visit to a U.S. Navy frigate, the USS Reuben James. According to the report, the denial came on the same day (November 21) that the Kitty Hawk had been denied 11/30/07 —A PRC Foreign Ministry spokesman, Liu Jianchao, said that the sudden denial of port visit rights to the Kitty Hawk was not a misunderstanding, but was due to the U.S. proposal to sell PAC-3 anti-missile upgrades to Taiwan. 11/29/07 —According to news reports, Japans Maritime Self-Defense Force cancelled a planned tour of a high-tech Aegis ship, the Kirishima, by the crew of the Shenzhen, the first PLA military ship to visit Japan since WWII. Instead, the Chinese crew was given a tour of the Tokiwa, a supply ship, on 11/30. 11/29/07 —In a White House press briefing, Dana Perino said the White House was asking the Chinese government for clarification on conflicting explanations about the Kitty Hawk incident. 11/28/07 —The Chinese missile destroyer Shenzhen arrived in Tokyo Bay for the first PLA ship visit to Japan since WWII. 11/28/07 —According to the Financial Times and other news accounts, PRC Foreign Minister Yang Jiechi told President Bush that the Kitty Hawk incident was due to a misunderstanding. 11/28/07 —According to news accounts about the China-EU summit in Beijing, the EU was newly assertive about Chinas trade practices that have led to a growing trade deficit with China. 11/28/07 —According to a news account, labor unrest was increasing in southern China ahead of the implementation of a new labor law on January 1, 2008. 11/28/07 —The Pentagon issued a formal protest (described by a Pentagon spokesman as not a diplomatic protest note but part of U.S.-China military exchanges) to the PRC government over the recent denials of port visits to the Kitty Hawk and other U.S. ships on November 20 and 21. The protest was conveyed by the deputy assistance secretary of defense for East Asia, David Sedney, to Major General Zhao Ning, the PRC defense attache in Washington. According to the protest, The denial of the USS patriot and USS Guardian requests to refuel and avoid severe weather is contrary to commonly accepted international maritime safety protocols. Such cancellations run counter to our joint interest in positively developing our military-to-military relations. 11/28/07 —A PRC warship, the missile destroyer Shenzhen, visited Tokyo for the first port call to Japan by a PRC military vessel since World War II. 11/27/07 —Admiral Timothy Keating, in a video conference from Hawaii, said of the Kitty Hawk incident: This is perplexing. It's not helpful. It is not, in our view, conduct that is indicative of a country who understands its obligations of a responsible nation....it's hard to characterize it in anything but a[n] at least perplexing, if not troublesome, light. 11/27/07 —Taiwans Ministry of Justice Investigation Bureau (MJIB) announced an investigation into whether a Taiwan corporation (Yi Cheng) illegally had sold dual-use technology to North Korea. This is the third investigation announced into possible North Korea sales; Taiwan also is investigating 3 local companies for allegedly illegally exporting dual-use items to Iran. 11/27/07 —Taiwan lifted its objections to the appointment of a PRC judge, Zhang Yeujiao, at the WTOs top court. 11/27/07 —A U.S. government analysis suggested that a lack of coordination between the PLA and other government agencies may have been a factor in Chinas contradictory behavior [in cancelling port visits by the USS Kitty Hawk and other U.S. ships]. 11/26/07 —PRC Foreign Minister Yang Jiechi attended the international conference on Middle East issues in Annapolis, MD. 11/26/07 —PRC Foreign Minister Yang Jiechi met in the US with Secretary of State Rice. A Xinhua account of the meeting said that FM Yang told Rice that opposing and stopping Taiwans referendum on U.N. membership is in the common interests of China and the U.S. – reportedly the first time that PRC media directly have cited a Chinese official telling a U.S. official that the U.S. should halt Taiwans referendum bid. 11/25/07 —French President Nicolas Sarkozy began his first visit to China as President. PRC media reported the Hu-Sarkozy talks as comprehensive and in depth. Hus talks with Chirac in 2006 were reported as sincere, friendly and fruitful. OSC 11/22/07 —A report in Hong Kongs Zhongguo Tongxun She said the denial of port visit rights to the USS Kitty Hawk may be linked to military exercises in Eastern China. 11/21/07 —A planned port visit by the USS Kitty Hawk carrier battle group to Hong Kong for Thanksgiving was abruptly cancelled without explanation by the PRC government. An announcement to reverse the decision was made at a Foreign Ministry press conference on November 22, 2007 (the first PRC acknowledgment of the visits cancellation), but it was too late for the Kitty Hawk, which had by then bypassed Hong Kong and gone on to Japan. Family members of some of the Kitty Hawks sailors had flown to Hong Kong to spend the Thanksgiving holiday with their loved ones. 11/20/07 —Two US minesweepers, the USS Patriot and the USS Guardian, were denied access to the port of Hong Kong when they sought refuge there from an approaching storm. 11/20/07 —The Federal Register published a DOD notice of a proposed Letter of Offer for an arms sale to the Taipei Economic and Cultural Representative Office (Taiwan) for upgrade and refurbishment of PATRIOT Advanced Capability-3 (PAC-3) Guided Missiles. [Transmittal No. 08-10, pursuant to section 36(b)(1) of the Arms Export Control Act.] 11/06/07 —Both the White House and the FDA released separate plans to deal with the safety of imports and of the domestic food supply, respectively. 11/06/07 —Jerry Yang and Michael Callahan, executive with Yahoo, were grilled by the House Foreign Affairs Committee about Yahoos revealing to China the name of a Chinese journalist holding a Yahoo e-mail account. The journalist, Shi Tao, subsequently was sentenced to prison for ten years for subversive activities. 11/06/07 —Secretary of Defense Robert Gates, visiting in Beijing, told President Hu Jintao that the U.S. is categorically opposed to any moves by Taiwan towards independence. 11/06/07 —The White House clarified a series of Pentagon website statements over the previous weekend: that the U.S. wanted to see reunification done in a peaceful manner; that Taiwans planned U.N. referendum was an independence referendum (11/03); and that the U.S. was against independence for the island nation (11/04). DOD revised the articles and a Pentagon spokesman said that the references were inaccurate. 11/03/07 —According to a Taiwan Ministry of Economic Affairs poll, 82% of Taiwans overseas investment is in China; 16% in the U.S.; and less than 2% in all other countries. 11/02/07 —Premier Wen Jiabao began a five-day Eurasian tour that included arrived in Russia for a two-day official visit at the invitation of Russian Prime Minister Viktor Zubkov for the 12 th regular prime ministers talks. 11/04/07 —U.S. Secretary of Defense Robert Gates arrived in Beijing for a three-day visit, his first official visit to China as Secretary of Defense. He met with his counterpart, Defense Secretary Cao Cangchuan, with CMC Vice-Chairmen Guo Boxiong and Xu Caihou, and with Vice Foreign Minister Dai Bingguo. Both sides reached consensus on: setting up an official military hotline (Chinas first at the ministry level with any other power); continuing to strengthen dialogue and exchanges, particularly between young and middle-aged military officers; hold exercises on humanitarian rescue and disaster relief; and collaborate on military archives to search for U.S. personnel missing in China during the Korean War. Taiwan and Iran were also on the agenda. 10/24/07 —China launched its first unmanned lunar probe, the Change 1 orbiter, aboard a Long March 3A rocket in the first of a three-stage lunar program, to include landing a rover on the moon by 2012 and a manned lunar mission by 2020. 10/15/07 —The Communist Partys 17 th Party Congress began its week-long meeting in Beijing. The Congress resulted in the naming of a new 9-member Politburo with 4 new faces: Xi Jinping, Li Keqiang, He Guoqiang, and Zhou Yongkang. 09/27/07 —Chinas Foreign Minister, Yang Jiechi, met with National Security Advisor Stephen Hadley and with President Bush at the White House. Taiwan was discussed. 09/19/07 —For the 15 th consecutive years, a U.N. General Assembly Committee (the General Committee) rejected the recommendation that Taiwans formal application for U.N. membership be considered at this years meeting of (the 62 nd ) General Assembly. Reportedly, 24 of the 28 members of the General Committee voted against (although a later report held that a consensus had been reached.) 09/18/07 —At a news conference, the Chinese government sought to assure the public about an outbreak of H5N1 flu among ducks in Guangzhous Panyu district. It was the first H5N1 outbreak in China since May. 09/18/07 —Chinas special envoy to Darfur, Liu Guijin, said at a press conference that China would dispatch a 315-member detachment of engineers to Darfur and had informed the UN it would be willing to send military liaison officers to the region. 09/17/07 —The United Evening News reported that Taiwans military had been planning to deploy missiles on the island of Matsu but had suspended the plan due to U.S. pressure. The same day, China confirmed a report printed on April 28, 2007 by Asahi Shimbun that in late April/early May 2007, PLAN warships had sailed past Taiwans east coast on their way to sea exercises. 09/17/07 —The Financial Times reported that China had rejected shipments of U.S. and Canadian port because they contained the additive ractopamine, a banned substance in China. 09/16/07 —Chinas Taiwan Affairs Office said that Beijing had made necessary preparations to deal with serious conditions as a result of Taiwans UN membership bid. 09/15/07 — New York Times researcher Zhao Yan was released from prison after serving a 3-year sentence for accepting money from a source, a charge he denies. He was arrested originally for leaking state secrets when he was accused of being the source (also which he denies) for a story predicting (accurately) that Jiang Zemin would step down from the CMC. 09/12/07 —The Pentagon announced $2.2 billion in possible military sales to Taiwan, including 12 surplus Orion P3-C maritime patrol craft and 144 SM-2 Block 3A Standard anti-aircraft missiles, built by Raytheon. The potential deal includes help integrating Taiwans intelligence surveillance and reconnaissance network. The PRC Foreign Ministry strongly protested, urging the US to honor its commitments on Taiwan and cancel all weapons sales: The Chinese side reserves the right to adopt further measures. 09/12/07 —Japans Prime Minister Shinzo Abe announced he would step down, saying he lacked the support he needed to stay in office. 09/11/07 —The PRCs National Bureau of Statistics released a report saying inflation had reached an 11-year high in August, with prices rising 6.5%. 09/11/07 —Deputy Assistant Secretary of State Thomas J. Christensen, in a speech to the U.S.-Taiwan Business Council at the Defense Industry Conference (Sept. 9 - 11, 2007, Westin Annapolis Hotel, Annapolis, MD), offered blunt words of criticism for President Chen and his U.N. referendum efforts under the name Taiwan, saying they represented the consensus of the U.S. Government: ...we would reiterate that we do not support Taiwans membership in international organizations that require statehood and therefore would not support such a [U.N.] referendum...[the referendums supporters] do not take seriously Taiwans commitments to the United States and the international community, are willing to ignore the security interests of Taiwans most steadfast friend, and are ready to put at some risk the security interests of the Taiwan people for short-term political gain...we do not like having to express publicly our disagreement with the Chen Administration...[and] I can assure you that we would not have done so had we not exhausted every private opportunity through consistent, unmistakable, and authoritative messages over an extended period of time. The problem here is not misunderstanding or lack of communications: it is that we believe this initiative is not good for Taiwan or us and that we have found ourselves with no alternative but to express our views directly to the Taiwan people. 09/11/07 —Officials at Taiwans MOFA said that President Chens third letter to the United Nations requesting Taiwan membership also would be returned due to the same interpretation of U.N. General Assembly Resolution 2758. President Chen reportedly had stated in his letter that Taiwan was not part of China and so resolution 2758 did not apply. 09/10/07 —Taiwan Defense Minister Ko Cheng-heng said that Taiwan had an urgent and legitimate need to buy F-16s. Minister Ko made the statement while attending the Sixth U.S.-Taiwan Defense Industry Conference in the United States. 09/03/07 —President Bush left to attend the APEC leaders meeting in Sydney, Australia, the 7 th APEC meeting he attended as President. As part of this meeting, President Bush held a bilateral meeting with PRC President Hu Jintao on September 6, 2007. 08/31/07 —The DPP finalized a normal country resolution (NCR) which states that Taipei should apply for U.N. membership under the name Taiwan, should write a new constitution, and should hold a referendum at some point to underscore Taiwans independent statehood. 08/30/07 —In a White House Briefing on the Presidents impending trip to the APEC leaders meeting in Australia, Dennis Wilder, NSC Senior Director for Asian Affairs, said in response to a question: We are very supportive of Taiwan on many many fronts....However, membership in the United Nations requires statehood. Taiwan, or the Republic of China, is not at this point a state in the international community. The position of the United States government is that the ROC...is an issue undecided, and it has been left undecided, as you know, for many, many years. So we find the attempts by the DPP Party in Taiwan to call for a referendum of this subject a little bit perplexing as to why this would be useful, given the fact that Taiwan is not going to be able to join the United nations under current circumstances... Wilder also had critical comments for Beijing. 08/17/07 —The State Council Information Office published a White Paper on The Quality and Safety of Food in China . 08/17/07 —According to the Washington Post , China announced plans to cut back on the number of flights into Beijing airport due to a 19.6% increase in passenger traffic to date over a comparable period in 2006. 08/17/07 —U.S. Chairman of the Joint Chiefs, Navy Admiral Michael G. Mullen, arrived in Beijing for a visit that includes naval facilities along Chinas northeastern and eastern coasts and its Dalian naval academy. 08/16/07 —According to the N ew York Times , growing numbers of PRC companies were seeking to set up operations in the U.S. to cut out the U.S. middleman and increase profit margins. 08/15/07 —The Financial Times, Asia reported that despite WTO commitments, China had not sufficiently opened its domestic market to foreign insurers. 08/15/07 PRC Embassy officials in Washington held a rare news conference to defend the quality of Chinese imports. 08/15/07 —China announced a crackdown against false media reporting in the wake of numerous reports about product quality scandals. Speculation is that the crackdown precedes the upcoming 17 th Party Congress, expected in October. According to the LATimes , PRC censors earlier in the year also had listed 20 topics as off limits to reporters before the 17 th PC, including judicial corruptions, sex crimes, lifestyles of the rich, and extramarital affairs. 08/14/07 —Mattel announced that it was recalling 436,000 Chinese-made toy cars and 18.2 million other toys because of magnets that could become dislodged and harm children if swallowed. Among the companies cited in the recalls was Early Light Industrial, Co., a Hong Kong toy maker. 08/14/07 —China Shenhua Energy announced it might build a rail link to Mongolia to transport coal from a mine project it is planning to invest in there. 08/13/07 —According to the Washington Post , AES, an Arlington-based company, has announced it is expanding its wind-energy-generation business into China. 08/09/07 —PRC officials announced they had suspended the export licenses of Hansheng Wood Factory (producing goods for U.S. company RC2) and Lee Der Industrial (producing goods for Mattel), two southern China companies manufacturing toys alleged to have been coated with lead paint. 08/08/07 —According to the International Herald Tribune, McDonalds in China planned to raise wages by 12%, bringing its restaurant workers salaries to 56% above the minimum wage. The announcement came after PRC government officials criticisms of McDonalds labor practices. 08/07/07 —In the Democratic candidate debate before 15,000 labor union members, candidates mounted the first campaign broadsides against China citing bad food imports, defective toys, and currency manipulation. 08/06/07 —According to the United Daily News , Taiwan wanted to buy at least 6 Aegis-equipped U.S. destroyers for more than $4.6 billion. 08/03/07 —President Bush invited officials from key economic powers to a climate change summit to be held Sept. 27-28 in Washington. Invitees included the EU, France, Italy, Germany, Britain, Japan, China, Canada, India, Brazil, South Korea, Mexico, Russia, Australia, Indonesia, South Africa, and the U.N. 08/01/07 —The beginning of the two-day ASEAN Regional Forum (ARF) in Manila. U.S. Secretary of State Rice was absent her second absence at ARF meetings in 3 years sparking criticism from Asian media outlets. 08/01/07 —Speaking in Cuba on the 80 th anniversary of the founding of the PLA, attache Sun Yifan said that the PLA would pay any price to complete the reunification of Taiwan with China. 07/27/07 —An advance PLA troop flew to Russia to participate in Peace Mission 2007, a joint anti-terrorism drill to be held by the SCO. 07/27/07 —Taiwan President Chen Shui-bian sent a second letter (also rejected) to the U.N. asking it to reconsider Taiwans July 18 th letter to apply for membership under the name Taiwan. Chen said that the issue needed to be put before the 192-national General Assembly and the Security Council. 07/25/07 —The PRCs National Development and Reform Commission said its top priority for 2007 would be preventing overheating of the economy. 07/25/07 —The IMF released its 2007 projections, concluding that China had now surpassed the United States as the main engine of the worlds economic growth. 07/25/07 —In an address to CSIS, Admiral Timothy Keating, top U.S. military commander in the Pacific, told his audience that Taiwan President Chen Shui-bians independence-minded rhetoric isnt entirely helpful, and his statements for Taiwan independence could potentially increase Taiwan Strait tensions. 07/25/07 —The EUs product-safety chief stated she was prepared to ban Chinas access to EU markets unless the PRCs product safety standards were improved. 07/24/07 —Shanghais former Party boss, Chen Liangyu, was stripped of his membership in the NPC by Shanghais Municipal Council. The move is presumed to be a prelude to filing formal criminal charges. 07/24/07 —The PRC denounced President Chen as a schemer who was risking cross-strait stability with Taiwans U.N. bid. One official from the Central Committees and State Councils Taiwan Affairs Office said China had made necessary preparations to stop Taiwan independence activities; a Foreign Ministry spokesman said only that China highly appreciates the U.N. decision to reject the application. 07/24/07 —The FBI announced that it had concluded a joint effort with PRC authorities leading to the arrest of 25 people and seizure of more than $500 million in pirated software. 07/23/07 Air Force General Paul V. Hester, the U.S. Pacific Air Forces commander, began a five-day visit to China, the first by a senior U.S. military officer to meet primarily with PLAAF officials. His visit included the first visit by an American commander to Jining Air Base, as well as to Jianqiao Air Base. 07/23/07 —The United Nations Office of Legal Affairs rejected Taiwans application for U.N. membership on the grounds that it violated the U.N.s one China policy. 07/23/07 —A German official, Hesses Minister-President Koch, urged China to have a sincere dialogue with the Dalai Lama. 07/23/07 —According to the Washington Times, Beijing warned Pakistan to improve security for Chinese residents. 07/23/07 — The F inancial Times London reported that CNOOC had signed with the fragile government in Somalia to explore for oil there. 07/21/07 —President Hu Jintao began a two-day visit to flood areas near Chongqing. 07/21/07 —Taiwan President Chen Shui-bian said PRC diplomas would continue to be unrecognized in Taiwan and PRC nationals would not be permitted to attend Taiwan universities. 07/20/07 —Beijing announced it had pulled the business licenses of Xuzhou Anying Biologic Technology Development Co., Binzhou Futian Biology Technology Co., and Taixing Glycerin Factory, all accused of violating product safety standards. 07/20/07 —Taiwan announced that on July 19 it had submitted an application for U.N. membership, with the sponsorship of Swaziland and the Solomon Islands, under the name Taiwan. The letter of application reportedly was returned on the grounds that the UN pursued a one China policy and the PRC held the UN seat. 07/18/07 —Chinese media announced that China National petroleum Corporation (CNPC) had signed an agreement with Turkmenistans Turkmengas to produce gas and transport it via pipeline to China. A 07/17/07 —According to the A sian Wall St. Journal , China suspended an annual study (first released in 2006) estimating the costs to China of pollution and environmental degradation. The report cited the decision as the result of a months-long bureaucratic battle between the State Environmental Protection Administration and the State Administration of Statistics. This was the second environmental report China has squelched; in early July, it prevailed on the World Bank to eliminate sections of their environmental assessment on China. 07/17/07 —The Taipei Times reported that KMT sources said the United States had postponed approval of the sale of 66 F16 C/D fighters to Taiwan because of President Chens UN referendum. 07/16/07 —The Chinese government announced that only 6 low-level Party and government figures were being prosecuted for the brick kilns slave labor scandal in Shanxi Province, provoking widespread criticism that the scandal most certainly was wider and more insidious, justifying harsher and broader punishments. 07/15/07 —North Korea confirmed it had shut down its reactor at Yongbyon. 07/11/07 —According to the N ew York Times , the Chinese Communist Party added 2.6 million new members in 2006 (out of 19 million applicants), bringing the claimed total to 72.39 million. 07/11/07 —Beijing shut down the China Development Brief, an online newsletter tracking environmental and social issues for NGOs that had been operating for years in China. 07/10/07 —The PRCs Customs Bureau released trade figures showing that its trade surplus with the rest of the world jumped in June to a record $26.9 billion for the month almost double that of June 2006. 07/10/07 —China announced it had executed Zheng Xiaoyu, the former head of the State Food and Drug Administration, for accepting bribes to approve tainted or fraudulent drugs. 07/09/07 —Residents of Jiuxianqiao, a run-down area in the south of Beijing, voted on whether to accept a developers offer for compensation for tearing down their decrepit housing development. 07/08/07 —Three Chinese industrial workers were killed in Pakistan outside Peshawar. The PRC condemned the killings and urged the Pakistan government to find and bring to justice the offenders. The incident follows last months abduction of 6 Chinese women and a Chinese man by hardline Islamists in Islamabad. 07/07/07 —70 th anniversary of the Marco Polo Bridge incident, the beginning of the 2 nd Sino-Japanese War. 07/06/07 —Richard Lawless, departing senior pentagon official for Asia, raised concerns with Beijing over Chinese-made weapons being used in Iraq and Afghanistan. 07/05/07 —According to the Taipei Times , Rep. Tom Lantos said that it was impractical for Taiwan to pursue full membership in WHO and the UN. 07/03/07 —According to the W ashington Post , Chinas General Administration of Quality Supervision, Inspection, and Quarantine released a report saying that almost 1/5 of the consumer products in the domestic market that it had tested had failed quality tests in recent months. 07/29/07 —China passed a sweeping new labor law designed to enhance worker rights. The law was to be effective January 1, 2008. 06/28/07 —The US FDA issued an import alert requiring 5 types of farm-raised seafood from China to be tested for banned antibiotics before allowing entry. 06/22/07 —Radical Pakistanis connected with a religious court in Islamabads Red Mosque took 7 Chinese nationals hostage, accusing them of running a brothel. The government negotiated their release a day later. 06/21/07 —The A sian Wall St. Journal reported that the National Development & Reform Commission had overruled the weaker China State Environmental Protection Administration, saying the July 1 deadline for imposing tighter emission controls as infeasible. 06/20/07 — Reuters reported that China had overtaken the U.S. as the worlds top emitter of carbon gases. 06/20/07 —The U.S.-China Senior Dialogue began, hosted by Deputy Secretary John Negroponte at the State Department in Washington, with Dai Bingguo in the PRC interlocutor role. http://www.state.gov/s/d/2007/86909.htm 06/16/07 — The N ew York Times reported on a growing labor scandal in China—kidnapping of hundreds of children and many adults by factory owners, who then force them to work under harsh conditions, ill-clothed, unpaid, and with little food. 06/13/07 —In testimony before the House Armed Services Committee, Deputy Undersecretary of Defense Richard Lawless said that the United States plans to expand military exchanges with the PRC and establish a crisis hotline. 06/13/07 —The U.S. Treasury Department released a mandated, semi-annual report to Congress on international exchange rates, concluding that China did not meet the technical requirements for designation [as a currency manipulator] under U.S. law. 06/13/07 —President Bush attended the opening of the Victims of Communism Memorial in Washington D.C. China protested. 06/13/07 —The Japanese Embassy said that PRC Defense Minister Cao Gangchuan would visit Japan later in 2007 to build trust. It would be the first such visit in a decade. 06/13/07 —Rear Admiral Yang Yi, director of Chinas National Defense University, said China needed both defensive and offensive military capabilities. 06/12/07 —China and the EU held an annual meeting in Brussels, with China saying it could not do much to halt its increasing trade surplus with the EU. 06/09/07 —According to the HK Sunday Morning Post , news leaked out that on June 3 more than 10,000 residents of Chongqing had clashed with police after a pair of flower sellers had been beaten (one later died) by city inspectors. 06/06/07 —President Oscar Arias announced that Costa Rica had severed ties with Taiwan and established diplomatic relations with China. The move leaves Taiwan with relations with 24 countries. 06/04/07 —China released its first ever national policy on climate change. The plan rejected mandatory caps on carbon emissions in favor of a series of environmental goals to be met by 2010. (The plan was prepared by the National March 3, 2009 Development and Reform Commission.) 06/04/07 —The brother, sister-in-law, and nephew of Chinese-American engineer Chi Mak pled guilty to violating U.S. export-control laws. 05/31/07 —The PRC port city of Xiamen announced it was suspending plans to build a controversial chemical plant in the city after public anger over the plants location in an urban area. 05/31/07 —In the second case, according to a news account, the Commerce Department announced it was imposing additional preliminary duties as much as 99.7% on imports of glossy paper made in China. The first case involving tariffs on glossy paper was announced on March 30, 2007. LATimes , p. C-6 05/30/07 —President Bush named Bob Zoellick to replace Paul Wolfowitz as head of the World Bank. According to one news report, Zoellick suggested that the Bank re-think providing loans to countries like China that have ready access to other capital markets. 05/30/07 —Chinas State Council approved a measure requiring Chinas 158 state-owned-enterprises to begin paying dividends a portion of their profits to the government. The move ostensibly is an attempt to cool over-heated investment. 05/25/07 —In Beijing, China and Japan held their 8 th round of East China Sea talks. 05/23/07 —The start of two days of talks in Washington D.C. in the U.S.-China Strategic Economic Dialogue (SED) on the U.S.-China trade imbalance and Chinas currency valuation. 05/23/07 —The PRC provided Sudan with a new collection of humanitarian assistance materials for displaced people in Darfur. The batch was the second of four batches promised in 2005. Xinhua in English , 5/23/07. 05/23/07 —The PRC said it would launch an investigation into allegations of contaminated toothpaste imported from China into Panama. 05/21/07 —Steve Young, AIT Director in Taiwan, urged Taiwan to further open its economic ties with China as a way of helping to improve U.S.-Taiwan trade ties. He said also that the expiration of the Trade Promotion Authority in July 2007 means the U.S. is not in a position to consider new FTAs, including with Taiwan, at this time. 05/19/07 —News accounts reported violence resulting in fatalities during riots in Guangxi Province (Bobai County) over savage implementation of family planning policies by authorities there. 05/18/07 —According to the LATimes , China exported $2.5 billion in food ingredients to the United States and other countries in 2006, making China the worlds leading supplier of food ingredients, including flavorings, preservatives, and vitamins. These include: citric acid; sorbic acid; vanillin; xylitol; and folic acid. 05/17/07 —China was reported to be beginning a program to build over 90 supertankers to carry its oil imports. 05/17/07 —42 Members of the House, acting as the Bipartisan China Currency Action Coalition, sent a petition to USTR Susan Schwab asking that she take a WTO action against China for its currency manipulation. 05/16/07 —The African Development Bank began its annual meeting in Shanghai, its opening session addressed by Premier Wen Jiabao. It is only the second time that the AfDB has met outside Africa. 05/14/07 —China announced it had both built and launched into orbit a communications satellite for Nigeria the first time China had built and launched a commercial satellite for another government. The satellite, the NIGCOMSAT-1, was launched aboard a Long March 3B rocket. 05/14/07 —WHO rejected Taiwans bid for full membership, voting in the World Health Assembly (WHA) 148-17 to strike discussion of the issue at the 2007 annual meeting. The U.S. and Germany voted no, but urged that Taiwan be given opportunities for meaningful participation in the global health system, 05/10/07 —New U.S. Pacific forces commander Admiral Timothy J. Keating began his first 5-day visit to China as Pacific commander. He took command in his new post on March 26, 2007. He pledged to continue to improve U.S.-China military contacts and exchanges and to intensify joint exercises. 05/10/07 — The PRCs Minister of Work Safety, Li Yizhong, acknowledged in a news briefing that the government had not done enough to improve Chinas bleak work safety record. 05/09/07 —The United States and China signed an agreement to increase flights between the two countries—estimated by the U.S. to be worth an estimated $5 billion to the industry over 6 years. 05/09/07 —Sen. Richard Durbin and Rep. Rosa DeLauro announced they had secured agreement from PRC Ambassador Zhou Wenzhong to cooperate to improve food safety inspections between the two countries. 05/09/07 —108 members of the House, including HFAC Chairman Tom Lantos and Majority Leader Steny Hoyer, sent a letter to PRC President Hu Jintao requesting that China use its influence with Sudan to try and halt the genocide in Darfur, linking failure to act with a tarnishing of the PRC image at the 2008 Olympics in Beijing. 05/08/07 —According to the N ew York Times , Chinas quality supervision watchdog issued a statement saying that officials at two companies linked to melamine in pet food had been detained. On the same day, Chinas State Food and Drug Administration confirmed that the PRC company linked to 100 fatalities in Panama due to counterfeit medicine was not licensed as a pharmaceutical business. On its website, the PRC General Administration of Quality Supervision, Inspection, and Quarantine (GAQSIQ) proposed establishing a new Sino-U.S. mechanism of feed safety cooperation. 05/04/07 —China announced that on April 30 it had begun nationwide inspections of wheat gluten to determine any chemical contamination. 05/03/07 —St. Lucia reaffirmed that it was severing ties with China to normalize ties with Taiwan. 04/21/07 —Hong Kong University and the China Human Rights lawyers Concern Group cosponsored a conference in Hong Kong on the challenges facing rights protection lawyers in China. They include Article 306 of the PRC Criminal Law, which permits imprisonment of a criminal defense attorney for forging evidence or enticing the witness into giving false testimony; Article 45 of the Law on Lawyers, which permits revoking of a defense attorneys license to practice if he or she divulges state secrets or conceals important facts. 04/17/07 —China and Pakistan signed 13 agreements (and inked another 15 deals according to China Daily ?) during Pakistani Prime Minister Shaukat Aziz visit to Beijing. Premier Wen reportedly referred to Pakistan as Chinas all-weather friend. 04/17/07 — The N ew York Time reported on a China Daily report that pollution in the Yangtze River (the worlds third longest) is almost irreversible according to a report by the Nanjing Institute of Geography and Limnology, part of CASS. 04/16/07 —The U.S., Japan, and India held their first ever joint naval exercises off the coast of Japan. According to AFP , Taiwan also began a five-day computerized military exercise—part of the Han Kuang 23 maneuvers—simulating attacking a Chinese aircraft carrier. 04/16/07 —A day-long meeting of the U.S.-China Joint Economic Committee took place in Washington D.C. In a break with the past in which senior officials chaired the meeting on either side, the talks were led by assistant treasury secretary Clay Lowery and vice finance minister Li Yong. No new proposals were tabled on Chinas currency valuation. 04/14/07 —China successfully launched its fifth GPS navigation satellite, a Beidou (Compass) satellite system, from the Xichang Satellite Launch Center in Sichuan Province. 04/11/07 —Premier Wen Jiabao began a 3-day visit to Japan. On April 12, he addressed the Japanese Diet—the first Chinese leader to address the parliament in 22 years. The visit resulted in a Japan-China Joint Press Statement addressing bilateral cooperation. 04/11/07 —China successfully launched the Haiyang-1B (Ocean-1B) satellite, developed by the China Air Force Technolgy Research Institute, from the Taiyuan Satellite Launch Center in Shanxi Province. 04/10/07 —The Council on Foreign Relations released a special report, U.S.-China Relations: An Affirmative Agenda, a Responsible Course , from a task force headed by Dennis C. Blair and Carla Hills. 04/02/07 —PRC Defense Minister Cao Gangchuan, in an eight-day visit to Sudan that began April 1, 2007, offered to expand Chinas military cooperation with Sudan. (We) are willing to further develop military cooperation between our two countries in all areas. 04/02/07 —The U.S. FDA blocked wheat gluten imports from Xuzhou Anying Biologic Technology Development in Wangdien, China, as a result of recent pet food deaths in the U.S. 04/02/07 —The deadline by which PRC citizens earning more than 120,000 yuan ($15,500), for the first time, were required to file a personal income-tax return. Of the estimated 6-7 million eligible, the government reported that only 1.6 million had filed. 03/30/07 —The Bush Administration announced it would impose duties on two PRC factories (10.9% and 20.35%) it says are unfairly subsidizing exports of coated (glossy) paper. The duties mark a significant departure of long U.S. practice not to impose such duties on imports from non-market economies. 03/29/07 —Notables were cited in the Wall St. Journal (Mia Farrow among them) as urging that the 2008 Beijing Olympic Games be used to pressure China to end its assistance to Darfur. 03/29/07 —Marine Corps. General James Cartwright told the Senate Armed Services Committees strategic forces subcommittee that China is developing an impressive array of space weapons and is moving toward putting nuclear weapons in space. 03/28/07 —Six migrant workers died in a tunnel collapse for a new subway being built in Beijing for the 2008 Olympics. According to press reports, rescue workers did not arrive for at least 8 hours because construction bosses sealed off the site and confiscated cell phones, forbidding workers to call for help. 03/28/07 —Beijing announced formation of a leading group of top officials charged with promoting Chinas service sector. 03/28/07 —China and Russia signed $4.3 billion in trade deals during President Hu Jintaos visit. 03/27/07 —A 16-year old boy died of avian flu in the PRCs Anhui Province, becoming the first known flu fatality in 2007 in China. Earlier, on February 27, 2007, a 44-year-old farmer in Fujian Province was confirmed to have been sickened with the disease, as was a 37-year-old farmer in Anhui Province on Jan. 10, 2007. 03/27/07 —A Chinese-born U.S. engineer, Chi Mak, went on trial in Los Angeles for allegedly providing sensitive high-tech Navy weapons technology to China. These allegedly included details of the Navys SPY-1 phased array radar (central to the Aegis battle management system), and the Navys Quiet Electric Drive technology for next-generation warships. 03/25/07 —Hong Kongs Chief Executive, Donald Tsang, was re-elected to another 5-year term by an 800-member Election Committee in Hong Kong. For the first time, there was a challenger Alan Leong, who obtained 123 votes. 03/22/07 —Chairman of the Joint Chiefs, Marine General Peter Pace, arrived in Beijing for a four-day official tour of China. 03/20/07 —French Defense Minister Michele Alliot-Marie, in Beijing, said the EU arms embargo against China should be lifted. 03/20/07 —AIT Director Steve Young, speaking at a dinner to AmCham at which President Chen and other top officials were present, urged the legislature to pass the arms procurement package, saying that the U.S. was becoming increasingly frustrated with Taiwans divisive political partisanship. He also called for expanded Taiwan-China links. 03/19/07 —China announced a new round of holiday charter flights with Taiwan through April 8 (coinciding with the grave sweeping festival). 03/19/07 —Li Changchun, member of the PRCs Politburo Standing Committee, stopped in Lisbon, Portugal on his way to a Latin America tour that will take him to Mexico, Venezuela, Suriname, Peru, and the South Pacific island of Samoa. 03/19/07 —According to the Financial Times, London , the US has withdrawn its opposition to China joining the Inter-American Development Bank (IADB). 03/19/07 —National Taiwan University professor Chen Ming-tong proposed a draft constitution advocating a second republic for Taiwan. 03/19/07 —The 6 th round of Six-Party Talks opened in Beijing in the Fangfei Garden of the Diaoyutai State Guesthouse. 03/19/07 —Press accounts reported that Pakistans Foreign Minister, Khurshid Kasuri, began a two-day visit to Beijing the first high-level visit between the two since President Hu Jintaos visit to Islamabad in November 2006. Organization of Asia-Pacific News Agencies , OANA. 03/18/07 —The PRC announced that it had decided to provide seed money for an R & D program to build large passenger jets. 03/18/07 —Taiwan announced that Joseph Wu, head of the Mainland Affairs Council and a DPP member, would replace David Lee (re-assigned to Canada) as head of TECRO in the US. He will be the first DPP official to hold that office. 03/13/07 —Intel Corp. received government approval to build a $2.5 billion microchip plant in Dalian, PRC, according to Chinas National Development and Reform Commission. According to the governments announcement, the venture appears to be a sophisticated wafer-fabrication plan. 03/12/07 —China announced its trade surplus for February 2007 was $23.76 billion—up 52% from a year earlier and nearly tied with the record set in October 2006. 03/12/07 —According to a government Space Science Development Plan recently released, China announced plans to launch its first astronomy satellite in 2010 and to participate in joint space projects with Russia and France. AP , 3/12/07. 03/11/07 —Halliburton announced it was moving its corporate headquarters out of the U.S. and to Dubai, in the United Arab Emirates. LATIMEs , March 12, 2007. P. C1 03/11/07 — The LATimes reported that CNNs interview with HK Chief Executive Donald Tsang on Talk Asia was partially blacked out during a discussion of universal suffrage in Hong Kong. 03/11/07 —Australian Prime Minister John Howard left for Japan to sign an Australia-Japan security cooperation agreement. He said the agreement would not threaten China. 03/09/07 —The Asian Wall St. Journal (Asia) reported that the weeks issue of Caijing, an influential business and finance magazine in China, was pulled from shelves. Speculation is that one or two articles—on Chinas impending property rights law, and on the bankruptcy of a government-controlled brokerage firm—were the cause. 03/09/07 —The deadline for DPP presidential hopefuls to register their candidacy. Four did so: VP Annette Lu; Premier Su Tseng-chang; former Premier Frank Hsieh; and DPP Chairman Yu Shyi-kun. 03/08/07 —In his nomination hearing (for top U.S. military commander in the Pacific) before the Senate Armed Services Committee, Admiral Timothy Keating said he would seek a robust engagement with Chinas navy. 03/08/07 —After issuance of the State Departments annual global human rights report, China issued its own annual report (a regular annual occurrence since 2000) criticizing U.S. human rights and questioning the U.S. defense of democratic principles. 03/08/07 —Taiwan held exercises with its special airborne force unit in an event that included use of U.S. equipment, including: a US-made CH47SD transport helicopter; US-made AH-1W Supercobra attack helicopters, and OH-58D Kiowa Warrior scout helicopters. (AFP) 03/08/07 —U.S. Treasury Secretary Henry Paulson gave a speech at the Shanghai Futures Exchange saying reform of Chinas financial markets could help it achieve more balanced and stable growth. 03/08/07 —The NPC passed a new Enterprise Income Tax Law to unify the disparate tax rates between foreign and domestic companies, effective January 1, 2008. 03/07/07 —U.S. Defense Secretary Robert Gates said I do not see China, at this point, as a strategic adversary of the United States. Its a partner in some respects, its a competitor in other respects... Reuters , 3/9/07 03/07/07 —U.S. Treasury Secretary Henry Paulson arrived in Beijing for his third official visit in his 7-month tenure as Secretary. His visit purportedly was to discuss with his counterpart, Vice Premier Wu Yi, the second meeting (upcoming in May) of the U.S.-China strategic economic dialogue in the U.S. The Secretary reportedly urged China to open its markets more quickly. Wu Yi met him at the airport. 03/07/07 —The U.S.S. Ronald Reagan made its second port call to Hong Kong (the first was June 2006). 03/06/07 —The State Department released its annual Country Reports on Human Rights report. 03/06/07 —China confirmed the appointment of Lou Jiwei (a senior Finance Minister) as deputy secretary-general of the State Council charged with overseeing development of a new agency that will actively manage Chinas forex reserves. 03/06/07 —Taiwans VP Annette Lu officially announced her candidacy for president in 2008. 03/06/07 —Joel Brenner, head of the Office of the National Counterintelligence Executive, said that Chinas spy agencies, followed by Cubas, Russias, and Irans, were the most aggressive in targeting sensitive U.S. information. 03/05/07 —Chinas annual NPC session began, with Premier Wen Jiabao giving his work report and conceding that China was failing on its energy and pollution goals. Two key economic bills are expected to be considered: one giving private property significant new and detailed protections, and one requiring foreign and domestic companies to pay the same tax rates. According to the LATimes , the NPC also will consider closing Chinas reducation through labor prisons. LATimes , p. A1. 03/05/07 —Two days of U.S.-North Korea talks began in New York on ending the DPRKs nuclear weapons program and establishing full U.S.-DPRK diplomatic relations. 03/05/07 —State Department spokesman Sean McCormack criticized President Chens previous days four wants assertions, saying: As is well established, the United States does not support independence for Taiwan. President Bush has repeatedly underscored his opposition to unilateral changes to the status quo by either Taipei or Beijing because these threaten regional peace and stability, U.S. national interest and Taiwan's own welfare. President Chen has repeatedly pledged that he would not alter the guarantees in his 2000 inaugural address not to declare independence, change the national title, push for inclusion of sovereignty themes in the constitution, or promote a referendum to change the status quo in regards to the questions of independence and unification. President Chen has also reaffirmed his 2004 inaugural pledge to exclude sovereignty themes from the process of constitutional reform, which would focus exclusively on good governance and Taiwan's economic competitiveness. President Chen's fulfillment of his commitments is a test of leadership, dependability and statesmanship and of his ability to protect Taiwan's interests, its relations with others, and to maintain peace and stability in the Strait. Rhetoric that could raise doubts about these commitments is unhelpful." 03/04/07 —China announced it would be increasing defense spending by 17.8 percent in the coming year. 03/04/07 —Taiwans President Chen announced to a FAPA audience in Taipei the four wants of Taiwan: independence, a new constitution, more economic development, and an official name change to Taiwan. 03/03/07 —On his first official visit to Asia as Deputy Secretary of State, John Negroponte arrived in Beijing for 3 days of talks. He met with Foreign Minister Li Zhaoxing, State Councilor Tang Jiaxuan, and vice foreign ministers Dai Bingguo and Yang Jiechi. At the end of his trip, he addressed the 17.8% increase in Chinas military budget, saying the U.S. wanted China to clarify its plans and intentions for its military program. 03/02/07 —Chinas Wu Yi met in Beijing with Alan Holmer, new U.S. Special Envoy for Strategic Economic Dialogue. 03/02/07 — The NYTimes reported that Chinas National Bureau of Statistics put Chinas population in 2006 at 1,314,480,000, up 7 million from the previous year. 03/02/07 —According to the NYTimes , the U.S. Commerce Department is contemplating imposing duties on high-gloss paper (coated paper) from China due to illegal subsidies. (In 2 other moves, the U.S.G. said in February 2007 it would challenge PRC subsidies at the WTO [Susan Schwab, USTR] and seek WTO relief if China did not crack down on piracy and counterfeit goods.) 03/01/07 —According to an article in Agence France Presse, the U.S. DOD has notified Congress of plans to sell Taiwan $421 million in Advanced Medium Range Air-to-Air Missiles (218 AMRAAM) and Maverick missiles (235) as well as spare parts and maintenance equipment. 03/01/07 —Fujian Province officials confirmed a human case of avian flu in the province—a 44-year old woman who developed flu-like symptoms on February 18, 2007. 02/28/07 —According to Renmin Ribao , Chinas National Copyright Administration will increase exchanges with international copyright organizations in 2007. 02/28/07 —According to WStJ ( Asia ) , the PRC State Council in January approved a draft regulation, Government Release of Information, designed to increase government transparency. The proposed transparency regulations were not made public. 02/27/07 —A PRC Foreign Ministry spokesman, Qin Gang, dismissed VP Cheneys earlier criticism of Chinas military build-up, saying China was a global force for peace. 02/27/07 —In a People s Daily article attributed to PRC Premier Wen Jiabao, communist leaders warned that political liberalization and democratization are still a distant goal. The warning was thought to be a prelude to the March opening of the National Peoples Congress and to this Falls 17 th Party Congress. 02/27/07 —Chinese stocks fell 8.8 percent, their worst one-day fall in 10 years, setting off a round of losses in U.S. and global exchanges. 02/26/07 —Taiwans President Chen called Chiang Kai-shek a mass murderer for his role in the 228 Incident of 1947. He said the remains of Chiang and his son, Chiang Ching-kuo, would be removed from their respective mausoleums as soon as possible and the buildings renamed. 02/25/07 —Taiwan Premier Su Tseng-chang announced he would run for president in 2008 on the DPP ticket. 02/23/07 —In Australia, U.S. VP Dick Cheney warned China that its swift military build-up and January 11 satellite shoot-down belied its claim to being a peaceful power. The same day, U.S. DOD Secretary Robert Gates expressed concerns over Chinas military spending and lack of military transparency. 02/16/07 — Agence France Presse reported that PFP Chairman James Soong had won his libel suit against Taiwan President Chen Shui-bian. Chen had accused Soong of meeting secretly with a PRC official. 02/16/07 —State Department spokesman Sean McCormack said the United States does not support administrative moves in Taiwan to remove China from the names of state companies. 02/15/07 —House W&M Trade Subcommittee holds hearing on effect of subsidies in China market and their impact on competition for U.S.; and Chinas enforcement of intellectual property rights. (At later date TBA, hearing on impact of U.S.-China trade on U.S. jobs, wages, prices, etc.) 02/13/07 —Taiwans High Court filed corruption charges against Ma Ying-jeou, KMT leader. 02/13/07 —Senate Select Committee on Intelligence holds closed hearing on China, "Intelligence Assessments." 02/13/07 —The Six-Party Talks agreement to halt North Koreas nuclear weapons program—the "Initial Actions for the Implementation of the Joint Statement"—was signed by representatives of the six parties. 02/12/07 —In an ongoing name rectification campaign for state-run companies, Taiwan stripped the name China from two of its most well-known companies: China Petroleum Corporation (now CPC Corp., Taiwan) and the post office, Chung-hwa Post (now Taiwan Post). The move follows the September 2006 renaming of the Chiang Kai-shek International Airport to Taiwan Taoyuan International Airport and other name changes. 02/09/07 —In a State Department daily press briefing, Sean McCormack responded to a question about Taiwans renaming of state enterprises this way: ...the primary interest of the United States remains the maintenance of peace and stability in the Taiwan Strait. The United States does not support Taiwan independence and opposes unilateral steps by either side that would change the status quo. As we have said many times before, we do not support administrative steps by Taiwan authorities that would appear to change Taiwan's status unilaterally or move towards independence. The United States does not, for instance, support changes in terminology for entities administered by Taiwan authorities. President Chen's fulfillment of his commitments will be a test of leadership, dependability and statesmanship, as well the ability to protect Taiwan's interests, its relations with others and to maintain peace and stability in the Taiwan Strait. 02/07/07 — AFP (English) reported that PRC president Hu Jintao told an audience in Pretoria, South Africa, that China wanted to help the country stand up to "rich bullies." 02/07/07 —A DPP spokesman, DPP Ethnic Affairs Director Yang Chang-chen, said that the DPP Central Standing Committee that day would debate a transitional justice bill designed to redress past human rights violations under KMT rule. 02/06/07 —According to the Financial Times USA , Beijing and the U.N. are working to establish a carbon trading exchange in Beijing to trade for carbon credits. 02/06/07 —The Financial Times, London reported that PRC authorities in Henan province have placed a prominent and elderly Chinese AIDS activist, Dr. Gao Yaojie, under house arrest. 02/05/07 —Taiwans Mainland Affairs Council said that China had unblocked access to two major Taiwan daily newspapers—the China Times, and the United Daily News, both of which lean toward KMT views. 02/02/07 —According to a State Department spokesman (Edgar Vasquez), the United States will need to evaluate future civil space cooperation with China in light of Chinas January 11, 2007 ASAT test. AFP , 2/2/07. (According to Vasquez, Hu-Bush summit meeting of April 2006 resulted in agreement to explore such cooperation; NASA Administrator Michael Griffin went to Beijing Sept. 2006 to initiate such dialogue. Nothing on DOS/NASA websites, no formal U.S. statement I can find.) 02/02/07 —The U.S. filed its second trade case against China with the WTO, alleging that the PRC uses tax and other policies to support export-driven industries. The action triggers a 60-day period of bilateral consultations for a resolution; failing that, a WTO hearing panel will take up the case. The first U.S. WTO trade case was filed in March 2006 on U.S. auto parts. 01/31/07 —A DPP panel passed a resolution in Taiwan calling for the removal of China from the names of official Taiwan state-run companies. 01/30/07 —President Hu Jintao left for his third trip to Africa in 3 years: he will visit South Africa, Sudan, Cameroon, Liberia, Zambia, Namibia, Mozambique, and Seychelles. 01/29/07 —According to LA Times , "at least" 4 H5N1 flu vaccines are in development using conventional methods: Sanofi Pasteur, GlaxoSmithKline, Novartis, and "Chinese scientists." (P. F3) 01/29/07 —Media sources in Taiwan reported that on Education Ministrys order, the title of Taiwans new history textbooks has been changed from "National History" to "China History." China Times . 01/24/07 — Reuters reported that Chinas economy grew by 10.7% in 2006. 01/24/07 — Agence France Presse reported on a new study on the U.S. surplus with China in services trade. The study was commissioned by the China Business Forum, part of the U.S.-China Business Council. 01/24/07 — China News Services reported that Hu Jintao had ordered an investigation into the killing of a journalist, Lan Chengzhang, who had been investigating conditions in an illegal coal mine in Shanxi Province. The mine owner said Mr. Lan had been attempting to blackmail him. 01/24/07 —According to the head of the PRCs National Population and Family Planning Commission, Zhang Weiqing, there were 118 boys born for every 100 girls in China in 2005, which he called a worsening gender imbalance. He also announced that authorities may reduce fines for poor families who have more than one child. 01/24/07 —According to press reports, the China Internet Network Information Center announced that 137 million Chinese people were now using the Internet. WStJ Asia , p. 30. 01/23/07 —Macao surpassed Las Vegas as the worlds biggest gambling center, according to figures released by industry analysts. NYT , 1/24/07, p. 4. 01/23/07 —A PRC Foreign Ministry spokesman, Liu Jianchao, confirmed that China had fired a missile to destroy one of its orbiting satellites. 01/23/07 —U.S. Assistant Secretary for Commerce Chris Padilla left for Beijing to discuss export controls. 01/22/07 —After an unusual bilateral meeting with his North Korean counterpart in Berlin the previous week, Asst. Sec. State Chris Hill told reporters he was cautiously optimistic that a new round of 6 Party Talks would be held shortly. 01/22/07 —China and Japan announced plans to have military port calls, with a PRC warship possibly visiting a Japanese port in August 2007. 01/21/07 —PRC news reports announced the deployment of 12 advanced Jian-10 fighter jets to Zhejiang Province opposite Taiwan. 01/19/07 — The Washington Post reported that 5 PRC telecommunications workers kidnapped by rebels in Nigeria had been released. 01/19/07 —The Vatican began two days of meetings on re-building relations with China, afterward issuing a cautious statement saying it wanted to pursue a respectful and constructive dialogue with China. 01/19/07 —The PRC announced it had detained 22 people in a bribery investigation, including officials from foreign companies such as McDonalds, McKinsey & Company, and Whirlpool. NYT , 1/20/07, p. 2. 01/18/07 —Bush Administration officials announced that China had tested its first anti-satellite weapon on January 11, reportedly noting that the U.S. had "expressed our concern regarding this action to the Chinese." The Bush White House in the past has resisted any global treaty banning such tests, reportedly because it needs "freedom of action" in space. NYT , 1/19/07, p. 1. Other sources reported U.S. officials saying such a treaty was unnecessary because there is no arms race in space. Financial Times , 1/20/07, p. 5. The United States, Canada, Australia, the UK, and Japan reportedly protested the action, but reportedly had received no explanation yet from the PRC. LATimes , 1/20/07, p. A10. 01/18/07 —The EUs external relations commissioner, Benita Ferrero-Waldner, during a speech in Beijing called for lifting the EU arms embargo against China and broadening existing Sino-EU cooperation. 01/18/07 —According to the W all St. Journal Asia , China announced that a new profits tax will take effect on February 1, 2007, on real-estate developer profits. 01/17/07 —According to the Wash. Times , Army Lt. General Michael Mapes for the first time relayed DOD concerns (on Jan. 11) to the Senate Intelligence Committee that Russia and China have secret space-based weapons development programs. P. A06 (Annual Threat Assessment hearing, January 11, 2007). 01/17/07 —Chinas State Council reportedly granted approval in principle to draft regulations designed to boost government transparency. But press reports said that State Council officials declined to offer any further details on the rules for greater openness or on when such details might be made available. 01/16/07 —Assist. Sec. State for EAP, Chris Hill, began an unusual two days of substantive talks in Berlin with North Korean diplomats. 01/16/07 —China announced a new 8-point regulation permitting state auditors to audit the Peoples Liberation Army. 01/15/07 —At the EAS summit in Cebu, Philippines, China and Japan agreed that Premier Wen Jiabao would visit Japan in April 2007. 01/15/07 —PRC Minister of Commerce Bo Xilai was reported as saying that reducing Chinas trade surplus would be a top priority for 2007. 01/15/07 —According to the Financial Times , China recently announced a 4% cut in the retail price of gasoline and jet fuel. According to the report, the State Council approved in principle a fuel tax about 4 years ago to aid energy conservation, and the Ministry of Finance printed coupons to implement the plan, but the National Reform and Development Commission has opposed implementing the tax for fear of its hardship on consumers. 01/15/07 The W ashington Time s ' Bill Gertz reported that Chinas military is delaying the planned U.S. visit of Gen. Zhiyuan, commander of Chinas nuclear forces, to meet with his counterpart, Marine Corps. General James E. Cartwright, at SAC headquarters. The proposed visit reportedly was raised by President Bush with President Hu Jintao in April 2005. 01/14/07 China and ASEAN signed a new trade agreement on services, considered a major step toward eventual completion of a Sino-ASEAN free trade agreement. The China-ASEAN signing of an agreement in 2005 to lower trade barriers increased two-way trade volume to more than $160 billion in 2006, up 23% from 2005. NYT , 1/15/07, p. 2 Also at the summit, the countries agreed the region should explore expanded use of hydropower, nuclear power, and biofuels. 01/12/07 —China and Russia vetoed a U.N. Security Council resolution, sponsored by the U.S., criticizing Burmas human rights record. 9 of the 15 members UNSC members voted for the resolution. 01/12/07 —The U.S. special envoy to Sudan, Andrew S. Natsios, was reported as saying that China had been helping to push Sudan to resolve the Darfur conflict. 01/12/07 —A Chinese court upheld the conviction of blind activist Chen Guangcheng who had campaigned against officials in Linyi city from pursuing coercive family planning practices. He was sentenced to 4 years, 3 months in prison. 01/11/07 —China's currency rose to 7.8 to the U.S. dollar, its highest rate since its reevaluation to a basket of currencies in 2005. 01/11/07 —The Christian Science Monitor reported on the unveiling last week of a new PRC fighter, the "Jian-10." 01/11/07 —According to a report attributed to Aviation Week and Space magazine, the PRC conducted its first anti-satellite (ASAT) missile test by destroying one of its own aging weather satellites orbiting in space. The PRC gave no advance notice of the missile firing, and news of the satellite's destruction was not made public until a week later. 01/10/07 —WHO reported the recovery of Chinas first human avian flu case in 6 months—a 37-year-old man from Anhui Province. He became ill on December 10, 2006. 01/10/07 —On January 10, 2007, Chinas customs administration announced that Chinas global trade surplus for 2006 was $177.47 billion—up from $102 billion in 2005. 01/08/07 —Taiwan President Chen Shui-bian left Taiwan for Nicaragua to attend President Ortegas inauguration. The United States granted him transit stops in San Francisco on the front end and Los Angeles on the back end. Mexico did not allow his plane to overfly Mexican air space. | This report deals with U.S.-China relations during the 110th Congress (2007-2008) and with a number of key events involving China during the two-year period. These events included: China's anti-satellite weapon test (January 2007); the 17th Party Congress (October 2007); a crackdown against demonstrations in Tibet (March 2008); the election of a new, pro-engagement government in Taiwan (March 2008); the massive Sichuan earthquake (May 2008); and Beijing's hosting of the 2008 Olympics (August 2008). U.S.-China relations were remarkably smooth for much of the 110th, although there were signs that U.S. China policy had become subject to competing reassessments as the Bush Administration drew to a close in 2008. The White House continued to follow the policy of engagement it had unveiled in 2005 as a new framework for the relationship, one in which the United States was willing to work cooperatively with China while encouraging Beijing to become a "responsible stakeholder" in the global system. U.S. officials also continued to hold a series of regular senior dialogues the White House had established with Beijing, such as the U.S.-China Strategic Economic Dialogue. But other U.S. policymakers began to raise concerns on issues involving China and U.S.-China relations. They cited concerns about the impact of the PRC's strong economic growth and a more assertive PRC diplomacy in the international arena; failures in procedures to assure the quality of Chinese pharmaceuticals, food, and other products being imported into the United States; repeated PRC inabilities to protect U.S. intellectual property rights; and trade practices and policies in China that contributed to a growing U.S. trade deficit with China ($256 billion in 2007 and projected to hit $267 billion in 2008). With total U.S.-China trade in 2007 reaching $387 billion, China during the 110th Congress was the second-largest U.S. trading partner. Beijing also was positioned to play an important potential role in efforts to resolve the global financial crisis that developed late in 2008, with China's central bank a major purchaser of U.S. debt. China was the second largest holder of U.S. securities and the largest holder of U.S. Treasuries used to finance the federal budget deficit. Taiwan, over which China claims sovereignty, remained the most sensitive bilateral issue in the 110th Congress, exacerbated by the pro-independence Taiwan administration that held power in 2007 and early 2008. But a March 2008 leadership change in Taiwan presented an opportunity to begin to lay a new framework in Taiwan-PRC relations—one moving away from the more confrontational policies of the past. As a result, tn June 2008, the first PRC-Taiwan talks in a decade were held in Beijing. The political status of Tibet also re-emerged as an issue in the 110th when monks in Lhasa launched a protest against PRC rule on March 11, 2008. The protests, at times resulting in violent clashes with police, spread to several other cities in the Tibetan Autonomous Region and beyond. Beijing's assertive response added to a drive urging a boycott of the Summer Olympic Games being hosted by Beijing in August 2008. But Beijing hosted a largely successful Games, and President Bush attended the opening ceremony in August 2008. Other concerns about China appeared driven by security calculations, where U.S. officials question the motivations behind China's expanding military budget. One congressionally mandated report by the Defense Department concluded Beijing is greatly understating its military expenditures and is developing anti-satellite (ASAT) systems—a claim that gained more credence when the PRC used a ballistic missile to destroy one of its own orbiting satellites in January 2007. This report will not be updated. Current issues and actions in U.S.-China relations are covered in other CRS reports. |
This report provides an overview of the process for filling positions to which the President makes appointments with the advice and consent of the Senate (PAS positions). It also specifies, for the 110 th Congress (January 2007-January 2009), all nominations to full-time positions on 34 regulatory and other collegial boards and commissions that have such positions (e.g., the Consumer Product Safety Commission, the Federal Reserve Board, and the Election Assistance Commission). Profiles of each board and commission provide information on their organizational structures, membership as of the end of the 110 th Congress, and appointment activity during that Congress. The President and the Senate share the power to appoint the principal officers of the United States. The Constitution (Article II, Section 2, clause 2) empowers the President to nominate and, by and with the advice and consent of the Senate, to appoint the principal officers of the United States. Three distinct stages mark the appointment process: selection, clearance, and nomination by the President; consideration by the Senate; and appointment by the President. In this stage, the White House selects and clears a nominee before sending the formal nomination to the Senate. There are a number of steps in this stage of the process for most Senate-confirmed positions. First, with the assistance of, and preliminary vetting by, the White House Office of Presidential Personnel, the President selects a candidate for the position. Interested parties, including Members of Congress, often have input during this process. Most boards and commissions are required, by statute, to have a political balance among their members (i.e., no more than a simple majority may be from the same political party), so the President normally negotiates over nominations with leaders of the opposition party in Congress. These negotiations involve questions not only of patronage but of policy, especially when the board or commission is involved in areas that, at the time, may be particularly sensitive. This often results in a packaging process in which the President submits several nominations together for positions in a particular agency and the Senate then confirms them as a group. Sometimes, however, only one or two nominations are submitted when three or four positions may be available. When this occurs, a nomination may remain before the Senate for many months, until one or two additional nominations are submitted. Generally, all are then quickly confirmed. During the clearance process, the candidate prepares and submits several forms: the "Public Financial Disclosure Report" (Standard Form (SF) 278), the "Questionnaire for National Security Positions" (SF 86), and the White House "Personal Data Statement Questionnaire." The Office of the Counsel to the President oversees the clearance process, which often includes background investigations conducted by the Federal Bureau of Investigation (FBI), the Internal Revenue Service (IRS), the Office of Government Ethics (OGE), and an ethics official for the agency to which the candidate is to be appointed. If conflicts are found during the background check, OGE and the agency ethics officer may work with the candidate to mitigate the conflicts. Once the Office of the Counsel to the President has cleared the candidate, the nomination is ready to be submitted to the Senate. The selection and clearance stage is often the longest part of the appointment process. There can be lengthy delays, particularly if many candidates are being processed, as they are at the beginning of an Administration, or if conflicts need to be resolved. Candidates for higher-level positions are often accorded priority in this process. In an effort to reduce the elapsed time between a new President's inauguration and the appointment of his or her national security team, provisions added in 2004 to the Presidential Transition Act of 1963 encourage Presidents-elect to submit, for security clearance, potential nominees to high-level national security positions as soon as possible after the election. For positions located within a state (e.g., U.S. attorneys, U.S. marshals, and U.S. district judges), the President, by custom, normally nominates an individual recommended by the Senator or Senators (if they are from the same party as the President) from that state. If neither Senator is from the President's party, the President usually defers to the recommendations of party leaders from the state. Occasionally, the President solicits recommendations from Senators of the opposition party because of their positions in the Senate. Before making a nomination to a federal position at the state or national level, the President would consider how it will fare in the confirmation process. A nominee has no legal authority to assume the duties and responsibilities of the position; the authority comes with Senate confirmation and presidential appointment. A nominee who is hired by the agency as a consultant while awaiting confirmation may serve only in an advisory capacity. If circumstances permit and conditions are met, the President may give the nominee a recess appointment to the position (see below). Recess appointments may have political consequences, however, particularly if Senators perceive that an appointment is an effort to circumvent their constitutional role. Some Senate-confirmed positions, such as many of those in the executive departments, may also be temporarily filled under the Federal Vacancies Reform Act of 1998. Positions on most boards and commissions, however, are not covered by this act. In the confirmation or second stage, the Senate alone determines whether or not to confirm a nomination. The way the Senate acts on a nomination depends largely on the importance of the position involved, existing political circumstances, and policy implications. Generally, the Senate shows particular interest in the nominee's views and how they are likely to affect public policy. Two other factors may also affect the scrutiny with which a nominee's personal and professional qualities are examined: whether or not the President's party controls the Senate and the degree to which the President becomes involved in supporting the nomination. The Senate confirmation process is centered at the committee level. On the day the President submits a nomination to the Senate, the Senate's executive clerk refers it to the appropriate committee or committees. When making a referral, the executive clerk is guided by Senate Rule XXV, which establishes the subject matters under the purview of each committee and directs that "all proposed legislation, messages, petitions, memorials, and other matters relating primarily to [those] subjects" be referred to that committee. The executive clerk is also guided by precedents set by prior referrals and by standing orders and unanimous consent (UC) agreements pertaining to referral of nominations. Most nominations are sent to a single committee. Occasionally, the Senate has agreed, by unanimous consent, by standing order, or by statute, to refer one or more nominations to more than one committee. Committee nomination activity generally includes investigation, hearing, and reporting stages. As part of investigatory work, committees may draw on information provided by the White House as well as information they themselves collect. Hearings provide a public forum to discuss a nomination and any issues related to the program or agency for which the nominee would be responsible. Even if confirmation is thought to be a virtual certainty, hearings may provide Senators and the nominee with an opportunity to go on the record with particular views or commitments. Senators may use hearings to explore a nominee's qualifications, articulate a policy perspective, or raise related oversight issues. Some committees hold hearings on nearly all nominations that are referred to them; others hold hearings for only some. The committee may discontinue acting on a nomination at any point—upon referral, after investigation, or after a hearing. If the committee votes to report the nomination back to the full Senate, it has three options: it may report the nomination to the Senate favorably, report it unfavorably, or report it without recommendation. If the committee elects not to report a nomination, the Senate may, under certain circumstances, discharge the committee from further consideration of the nomination in order to bring it to the floor. Although the Senate confirms most nominations, some nominations are not confirmed. Rarely, however, does the full Senate reject a nomination. Most nominations that are not confirmed fail in committee, either by committee vote or by committee inaction. Rejections in committee occur for a variety of reasons, including opposition to the nomination, inadequate amount of time for consideration of the nomination, or factors that may have nothing to do with the merits of the nomination. If a nomination is not acted upon by the Senate by the end of a Congress, it is returned to the President. Pending nominations also may be returned automatically to the President at the beginning of a recess of more than 30 days, but the Senate rule providing for this return is often waived. In the final stage, the confirmed nominee is given a commission signed by the President, with the seal of the United States affixed thereto, and is sworn into office. The President may sign the commission at any time after confirmation. Once the appointee is given the commission and sworn in, he or she has full authority to carry out the responsibilities of the office. The Constitution also empowers the President to make limited-term appointments without Senate confirmation when the Senate is in recess. Such recess appointments expire at the end of the next full session of the Senate. Table B -1 provides the dates of the Senate recesses for the 110 th Congress. One recess appointment was made to a position on a regulatory or other collegial board or commission during the 110 th Congress for reasons discussed below. The recess during which this took place is shown in the table. Presidents have occasionally used the recess appointment power to circumvent the confirmation process. In response, Congress has placed restrictions on the President's authority to make a recess appointment. Under 5 U.S.C. § 5503(a), if the position to which the President makes a recess appointment falls vacant while the Senate is in session, the recess appointee may not be paid from the Treasury until he or she is confirmed by the Senate. The salary prohibition does not apply (1) if the vacancy arose within 30 days before the end of the session; (2) if a nomination for the office (other than the nomination of someone given a recess appointment during the preceding recess) was pending when the Senate recessed; or (3) if a nomination was rejected within 30 days before the end of the session and another individual was given the recess appointment. A recess appointment falling under any one of these three exceptions must be followed by a nomination to the position not later than 40 days after the beginning of the next session of the Senate. For this reason, when a recess appointment is made, the President generally submits a new nomination for the appointee even when an earlier nomination is still pending. In addition, although a recess appointee whose nomination to a full term is subsequently rejected by the Senate may continue to serve until the end of his or her recess appointment, a provision of the FY2008 Financial Services and General Government Appropriations Act might prevent an appointee from being paid after his or her rejection. During the 110 th Congress, the Senate employed, apparently for the first time, another method intended to restrict the President's recess appointment power. This method is predicated on the notion that the President could be restricted from making a recess appointment during a period of three days or less. The Constitution does not specify the length of time that the Senate must be in recess before the President may make a recess appointment. Over the last century, as shorter recesses have become more commonplace, the Department of Justice has offered differing views on this issue. In 1993, however, a Justice Department brief implied that the President may make a recess appointment during a recess of more than three days. The authors reasoned that because the "Constitution restricts the Senate's ability to adjourn its session for more than three days without obtaining the consent of the House … [i]t might be argued that this means that the Framers did not consider one, two and three day recesses to be constitutionally significant." As a practical matter, the shortest recess during which appointments have been made during the past 20 years was 10 days. From November 2007 through the end of the Bush presidency, the Senate structured its recesses in a way that was intended, at least initially, to prevent the President from making recess appointments by preventing the occurrence of a recess of more than three days. On November 16, 2007, the Senate majority leader announced that the Senate would "be coming in for pro forma sessions during the Thanksgiving holiday to prevent recess appointments." The Senate recessed later that day, and pro forma meetings were convened on November 20, 23, 27, and 29, with no business conducted. The Senate next conducted business after reconvening on December 3, 2007. Similar procedures were followed during other periods, during the remainder of President Bush's term, that would otherwise have been Senate recesses of a week or longer in duration. The President made no recess appointments between the initial pro forma sessions in November 2007 and the end of his presidency. Federal executive branch boards and commissions discussed in this report share, among other characteristics, the following: (1) they are independent executive branch bodies located, with four exceptions, outside executive departments; (2) several members head each entity; (3) the members are appointed by the President with the advice and consent of the Senate; and (4) the members serve fixed terms of office, and, except in a few bodies, the President's power to remove them is restricted. For most of the boards included in this report, the fixed terms of office for the member positions have set beginning and end dates, irrespective of whether the posts are filled or when appointments are made. The end dates of the fixed terms of a board's members are staggered, so that the terms do not expire all at once. The use of terms with fixed beginning and end dates is intended to minimize the occurrence of simultaneous board member departures and thereby increase leadership continuity. Under such an arrangement, an individual is nominated to a particular position and a particular term of office. An individual may be nominated and confirmed for a position for the remainder of an unexpired term in order to replace an appointee who has resigned (or died). Alternatively, an individual might be nominated for an upcoming term with the expectation that the new term will be underway by the time of confirmation. Occasionally, where the unexpired term has been for a very short period, the President has submitted two nominations of the same person simultaneously—the first to complete the unexpired term and the second to complete the entire succeeding term of office. On some commissions, the chair is subject to Senate confirmation and must be appointed from among the incumbent commissioners. If the President wishes to appoint, as chair, someone who is not on the commission, two nominations are submitted simultaneously for the nominee—one for member and the other for chair. As independent entities with staggered membership, executive branch boards and commissions have more political independence from the President than do executive departments. Nonetheless, the President can sometimes exercise significant influence over the composition of the membership when he designates the chair or has the opportunity to fill a number of vacancies at once. For example, President George W. Bush had the opportunity to shape the Securities and Exchange Commission during the first two years of his presidency because of existing vacancies, resignations, and the death of a member. Likewise, during the same time period, President Bush was able to submit nominations for all of the positions on the National Labor Relations Board because of existing vacancies, expiring recess appointments, and resignations. Simultaneous turnover of board or commission membership may result from coincidence, but it may also be the result of a buildup of vacancies after extended periods during which the President fails to nominate, or the Senate fails to confirm, members. Two other notable characteristics apply to appointments to some of the boards and commissions. First, for 26 of the boards and commissions in this report, the law limits the number of appointed members who may belong to the same political party, usually to no more than a simple majority of the appointed members (e.g., two of three, or three of five). Second, advice and consent requirements also apply to inspector general appointments in four of these organizations and general counsel appointments in three. During the 110 th Congress, President George W. Bush submitted nominations to the Senate for 74 of the 152 full-time positions on 34 regulatory and other boards and commissions. (Most of the remaining positions were not vacant during that time.) A total of 88 nominations were submitted for these positions, of which 46 were confirmed, 15 were withdrawn, and 27 were returned to the President. The number of nominations exceeded the number of positions because the President submitted multiple nominations for some positions. In some cases, for example, the President submitted one nomination for the end of a term in progress and a second nomination of the same person to the same position for the succeeding term. In other cases, the President submitted a second nomination after his first choice failed to be confirmed. The President also submitted an "extra" nomination of the one individual to whom he had given a recess appointment in order to comply with a law affecting the payment of that appointee (see " Recess Appointments ," above). Table 1 summarizes the appointment activity for the 110 th Congress. At the end of the Congress, 15 incumbents were serving past the expiration of their terms. In addition, there were 22 vacancies among the 152 positions. The length of time a given nomination may be pending in the Senate has varied widely. Some nominations have been confirmed within a few days; others have been confirmed within several months; and some have never been confirmed. In the board and commission profiles following this opening narrative, this report provides, for each board or commission nomination that was confirmed in the 110 th Congress, the number of days between nomination and confirmation ("days to confirm"). For those nominations that were confirmed, an average of 148 days elapsed between nomination and confirmation. The median number of days elapsed was 90. The difference between these two numbers suggests that the average was pulled upward by a small number of unusually high numbers. The calculations of nomination-to-confirmation intervals provided in this report counted all the days within such intervals, including those during summer recesses and between sessions of the Senate. The inclusion of all days differs from the methodology used in similar CRS reports for previous Congresses. In these earlier reports, days during August and intersession recesses were not included in calculations of nomination-to-confirmation intervals. These changes may reduce the comparability of statistics provided in this report with those provided in earlier reports. More information on this change in methodology is available in Appendix D . Each of the 34 board or commission profiles following the narrative portion of this report is organized into three parts: a paragraph discussing the body's organizational structure, a table identifying its membership as of the end of the 110 th Congress, and a table listing nominations and appointments to its positions during the 110 th Congress. The organizational sections discuss the statutory requirements for the appointed positions, including the number of members on each board or commission, their terms of office, whether or not they may continue in their positions after their terms expire, whether or not political balance is required, and the method for selection of the chair. Data on appointment actions during the 110 th Congress appear under both the sections entitled "Membership as of the End of the 110 th Congress" and those entitled "Appointment Action in the 110 th Congress." The former identify the agencies' positions requiring Senate confirmation and the incumbents in those positions as of that time. Incumbents whose terms have expired are italicized. Most of the incumbents serve fixed terms of office and are removable only for specified causes. They generally remain in office when a new administration assumes office following a presidential election. For those agencies requiring political balance among their members, the party affiliation of an incumbent is listed as Democrat (D), Republican (R), or Independent (I). The section also includes the pay levels of the positions. For presidentially appointed positions requiring Senate confirmation, the pay levels fall under the Executive Schedule, which ranges from level I, for cabinet-level offices, to level V, for the lowest-ranked positions. Most of the chair positions are at level III, and most of the other positions are at level IV. The "Appointment Action" section provides information about each nomination, in chronological order, including the name of the nominee, the position to which he or she was nominated, the date of submission, the date of confirmation (if any), and the number of days that elapsed between submission and confirmation. Actions other than confirmation (i.e., nominations rejected by the Senate, nominations returned to or withdrawn by the President, and recess appointments) are also noted. Occasionally, where a position was vacant and the unexpired term of office was to end within a number of weeks or months, two nominations for the same nominee were submitted: the first to complete the unexpired term, and the second for a full term following completion of the expired term. Also, in the single instance during the 110 th Congress where the President gave a recess appointment to a nominee for a position covered by this report while the nomination was awaiting Senate action, a second, follow-up nomination was submitted to comply with the requirements of 5 U.S.C. § 5503(b). In tables that show more than one confirmed nomination, the mean number of days to confirm a nomination is provided. This figure was determined by calculating the number of days between the nomination and confirmation dates, adding these numbers for all confirmed nominations, and dividing the result by the number of nominations confirmed. For tables in which one individual was confirmed more than once (to be a chair and a member, for example), the mean was calculated by averaging all values in the "Days to confirm" column, including the values for both confirmations. Appendix A provides two tables. Table A -1 includes information on each of the nominations and appointments to regulatory and other collegial boards and commissions during the 110 th Congress, alphabetically organized, and following a similar format to that of the "Appointment Action" sections just discussed. It identifies the board or commission involved and the dates of nomination and confirmation. The appendix also indicates if a nomination was withdrawn, returned, or rejected, or if a recess appointment was made. The mean and median number of days taken to confirm a nomination are also provided. Table A -2 provides summary information on appointments and nominations by organization. For each of the 34 independent boards and commissions discussed in this report, the appendix provides the number of positions, vacancies, incumbents whose term has expired, nominations, individual nominees, positions to which nominations were made, confirmations, nominations returned to the President, nominations withdrawn, and recess appointments. Appendix B provides information concerning Senate recesses during the 110 th Congress. A list of organization abbreviations can be found in Appendix C . As noted above, this report employs certain methods that differ from those of previous similar reports. These methodological changes are discussed in detail in Appendix D . The CSB is an independent agency consisting of five members (no political balance is required), including a chair, who serve five-year terms. The President appoints the members, including the chair, with the advice and consent of the Senate. When a term expires, the incumbent must leave office. (42 U.S.C. § 7412(r)(6)) The CFTC consists of five members (no more than three may be from the same political party) who serve five-year terms. At the end of a term, a member may remain in office, unless replaced, until the end of the next session of Congress. The chair is also appointed by the President, with the advice and consent of the Senate. (7 U.S.C. § 2(a)(2)) The statute establishing the CPSC calls for five members, who serve seven-year terms. During a period that included the 110 th Congress, however, funding was authorized for only three of these positions. No more than three of the members may be from the same political party. A member may remain in office for one year at the end of a term, unless replaced. The chair is also appointed by the President, with the advice and consent of the Senate. (15 U.S.C. § 2053) The DNFSB consists of five members (no more than three may be from the same political party), who serve five-year terms. After a term expires, a member may continue to serve until a successor takes office. The President designates the chair and vice chair. (42 U.S.C. § 2286) The EAC consists of four members (no more than two may be from the same political party), who serve four-year terms. After a term expires, a member may continue to serve until a successor takes office. The chair and vice chair, from different political parties and designated by the commission, change each year. (42 U.S.C. § 15323) The EEOC consists of five members (no more than three may be from the same political party), who serve five-year terms. An incumbent whose term has expired may continue to serve until a successor is appointed, except that no such member may continue to serve (1) for more than 60 days when Congress is in session, unless a successor has been nominated; or (2) after the adjournment of the session of the Senate in which the successor's nomination was submitted. The President designates the chair and the vice chair. The President also appoints the general counsel, with the advice and consent of the Senate. (42 U.S.C. § 2000e-4) The Export-Import Bank Board of Directors comprises the bank president, who serves as chair; the bank first vice president, who serves as vice chair; and three other members (no more than three of these five may be from the same political party). All five members are appointed by the President, with the advice and consent of the Senate, and serve four-year terms. An incumbent whose term has expired may continue to serve until a successor is qualified, or until six months after the term expires—whichever occurs earlier. (12 U.S.C. § 635a) The President also appoints an inspector general, with the advice and consent of the Senate. (5 U.S.C. App., Inspector General Act of 1978, § 3, 12) The FCA consists of three members (no more than two may be from the same political party), who serve six-year terms. A member may not succeed himself or herself unless he or she was first appointed to complete an unexpired term of three years or less. A member whose term expires may continue to serve until a successor takes office. The President designates the chair. (12 U.S.C. § 2242) The FCC consists of five members (no more than three may be from the same political party), who serve five-year terms. When a term expires, a member may continue to serve until the end of the next session of Congress, unless a successor is appointed before that time. The President designates the chair. (47 U.S.C. § 154) The FDIC board of directors consists of five members, of whom two—the comptroller of the currency and the director of the Office of Thrift Supervision (OTS)—are ex officio . The three appointed members serve six-year terms. An appointed member may continue to serve after the expiration of a term until a successor is appointed. Not more than three of the members of the board of directors may be from the same political party. The President appoints the chair and the vice chair, with the advice and consent of the Senate, from among the appointed members. The chair is appointed for a term of five years. (12 U.S.C.§ 1812) The President also appoints the inspector general, with the advice and consent of the Senate. (5 U.S.C. App., Inspector General Act of 1978, § 3, 12) The FEC consists of six members (no more than three may be from the same political party), who may serve for a single term of six-years. When a term expires, a member may continue to serve until a successor takes office. The chair and vice chair, from different political parties and elected by the commission, change each year. Generally, the vice chair succeeds the chair. (2 U.S.C. § 437c) The FERC, an independent agency within the Department of Energy, consists of five members (no more than three may be from the same political party), who serve five-year terms. When a term expires, a member may continue to serve until a successor takes office, except that such commissioner may not serve beyond the end of the session of the Congress in which his or her term expires. The President designates the chair. (42 U.S.C. § 7171) The FHFB consisted of five members, of whom one—the Secretary of Housing and Urban Development (HUD) or his or her designee—was ex officio . The Housing and Economic Recovery Act of 2008 ( P.L. 110-289 ; 122 Stat. 2654) provided for the abolishment of this board, effective one year from the statute's July 30, 2008, enactment (§ 1311; 122 Stat. 2797). Prior to the enactment of this statute, the law provided for four appointed members who served seven-year terms, with no more than three from the same political party. An appointed member whose term expires could continue to serve until a successor was appointed. The President designated the chair from among the appointed members. (12 U.S.C. § 1422a(1)) Section 1204 of the act (122 Stat. 2785) repealed this section, but it was in effect during part of the period covered by this report. The FLRA consists of three members (no more than two may be from the same political party), who serve five-year terms. After the date on which a five-year term would expire, a member may continue to serve until the end of the next Congress, unless a successor is appointed before that time. The President designates the chair. The general counsel is also appointed by the President, with the advice and consent of the Senate. (5 U.S.C. § 7104) The FMC consists of five members (no more than three may be from the same political party), who serve five-year terms. When a term expires, a member may continue to serve until a successor takes office. The President designates the chair. (46 U.S.C. § 301) The FMSHRC consists of five members (no political balance is required), who serve six-year terms. When a term expires, the member must leave office. The President designates the chair. (30 U.S.C. § 823) The FRS consists of seven members (no political balance is required), who serve 14-year terms. When a term expires, a member may continue to serve until a successor takes office. The President appoints the chair and vice chair, who are separately appointed as members, for four-year terms, with the advice and consent of the Senate. (12 U.S.C. §§ 241, 242) The FTC consists of five members (no more than three may be from the same political party), who serve seven-year terms. When a term expires, the member may continue to serve until a successor takes office. The President designates the chair. (15 U.S.C. § 41) The FCSC, located in the Department of Justice, consists of three members (political balance is not required), who serve three-year terms. When a term expires, the member may continue to serve until a successor takes office. Only the chair, who also is appointed by the President with the advice and consent of the Senate, serves full-time. (22 U.S.C. §§ 1622, 1622c) The MSPB consists of three members (no more than two may be from the same political party), who serve seven-year terms. A member who has been appointed to a full seven-year term may not be reappointed to any following term. When a term expires, the member may continue to serve for one year, unless a successor is appointed before that time. The President appoints the chair, with the advice and consent of the Senate, and designates the vice chair. (5 U.S.C. §§ 1201-1203) The NCUA consists of three members (no more than two members may be from the same political party), who serve six-year terms. When a term expires, a member may continue to serve until a successor takes office. The President designates the chair. (12 U.S.C. § 1752a) The NLRB consists of five members, who serve five-year terms. Political balance is not required, but, by tradition, no more than three members are from the same political party. When a term expires, the member must leave office. The President designates the chair. The President also appoints the general counsel, with the advice and consent of the Senate. (29 U.S.C. § 153) The board consists of three members (no more than two may be from the same political party), who serve three-year terms. When a term expires, the member may continue to serve until a successor takes office. The board annually designates a chair. (45 U.S.C. § 154) The NTSB consists of five members (no more than three may be from the same political party), who serve five-year terms. When a term expires, a member may continue to serve until a successor takes office. The President appoints the chair, from among the members, for a two-year term, with the advice and consent of the Senate, and designates the vice chair. (49 U.S.C. § 1111) The NRC consists of five members (no more than three may be from the same political party), who serve five-year terms. When a term expires, the member must leave office. The President designates the chair. The President also appoints the inspector general, with the advice and consent of the Senate. (42 U.S.C. § 5841 and 5 U.S.C. App., Inspector General Act of 1978, §§ 3, 12) The OSHRC consists of three members (political balance is not required), who serve six-year terms. When a term expires, the member must leave office. The President designates the chair. (29 U.S.C. § 661) The Postal Rate Commission became the Postal Regulatory Commission, as provided in Section 604 of P.L. 109-435 , the Postal Accountability and Enhancement Act, enacted on December 20, 2006. The commission consists of five members (no more than three may be from the same political party), who serve six-year terms. After a term expires, a member may continue to serve until his successor takes office, but the member may not continue to serve for more than one year after the date upon which his tem otherwise would expire. The President designates the chair, and the members select the vice chair. (39 U.S.C. § 502) The board consists of five members (no more than three members of the board may be from the same political party), who serve six-year terms. When a term expires, the member may continue to serve until a successor takes office. Only the chair, who also is appointed by the President with the advice and consent of the Senate, serves full-time. (42 § 2000ee) The Implementing Recommendations of the 9/11 Commission Act of 2007, P.L. 110-53 , Title VIII, § 801 (121 Stat. 352) established the Privacy and Civil Liberties Oversight Board, and the first new nominations to the board were made in the 110 th Congress. Previously the Privacy and Civil Liberties Oversight Board functioned as part of the White House Office in the Executive Office of the President. That board ceased functioning on January 30, 2008. As of the end of the 110 th Congress, the new board had not been constituted. (See CRS Report RL34385, Privacy and Civil Liberties Oversight Board: New Independent Agency Status , by [author name scrubbed].) The board consists of three members (political balance is not required), who serve five-year terms. When a term expires, the member may continue to serve until a successor takes office. The President appoints the chair, and an inspector general, with the advice and consent of the Senate. (45 U.S.C. § 231f and 5 U.S.C. App., Inspector General Act of 1978, §§ 3, 12) The commission consists of five members (no more than three may be from the same political party), who serve five-year terms. When a term expires, the member may continue to serve until the end of the next session of Congress, unless a successor is appointed before that time. The President designates the chair. (15 U.S.C. § 78d) The STB, located within the Department of Transportation, consists of three members (no more than two may be from the same political party), who serve five-year terms. When a term expires, the member may continue to serve until a successor takes office, but not for more than one year after expiration. The President designates the chair. (49 U.S.C. § 701) The USITC consists of six members (no more than three may be from the same political party), who serve nine-year terms. A member of the commission who has served for more than five years is ineligible for reappointment. When a term expires, a member may continue to serve until a successor takes office. The President designates the chair and vice chair for two-year terms of office, but they may not belong to the same political party. The President may not designate a chair with less than one year of continuous service as a member. This restriction does not apply to the vice chair. (19 U.S.C. § 1330) The USPC is an independent agency in the Department of Justice. The commission consists of five commissioners (political balance is not required), who serve for six-year terms. When a term expires, a member may continue to serve until a successor takes office. In most cases, a commissioner may serve no more than 12 years. However, Section 11017(c) of P.L. 110-273 , enacted on November 2, 2002, provides that this limitation does not "apply to a person serving as Commissioner" when the act took effect. The President designates the chair. (18 U.S.C. § 4202) The commission was previously scheduled to be phased out, but its life has been extended several times by Congress. Under P.L. 110-312 , § 2 (122 Stat. 3013), it was extended until November 1, 2011. (18 U.S.C. § 3551) The USSC is a judicial branch agency that consists of seven voting members, who are appointed to six-year terms, and two non-voting members. The seven voting members are appointed by the President, with the advice and consent of the Senate. Only the chair and three vice chairs, selected from among the members, serve full-time. The President appoints the chair, with the advice and consent of the Senate, and designates the vice chairs. At least three members must be federal judges. Not more than four members may be of the same political party. No more than two vice chairs may be of the same political party. No voting member may serve more than two full terms. When a term expires, an incumbent may continue to serve until he or she is reappointed, a successor takes office, or Congress adjourns sine die at the end of the session that commences after the expiration of the term, whichever is earliest. The Attorney General (or designee) serves ex officio as a non-voting member. (28 U.S.C. § 991-992) The chair of the United State Parole Commission is also an ex officio non-voting member of the commission. (18 U.S.C. § 3551 note) Appendix A. Summary of All Nominations and Appointments to Collegial Boards and Commissions Appendix A. Appendix B. Senate Recesses and Presidential Recess Appointments Appendix C. Board/Commission Abbreviations Appendix D. Change in Methodology from Previous Tracking Reports The calculations of nomination-to-confirmation intervals provided in this report counted all the days within the interval, including those during summer recesses and between sessions of the Senate. The inclusion of all days differs from the methodology used in similar CRS reports for previous Congresses. In these earlier reports, days during August and intersession recesses were not included in calculations of nomination-to-confirmation intervals. The rationale for the earlier methodology was that the Senate was unlikely to continue consideration of nominations during these periods; committee hearings and votes, among other activities, typically do not occur during these times. The exclusion of days during only certain periods of adjournment—intersession recesses and August recesses, which are usually longer than 30 days—is suggested by Senate rules regarding when nominations are to be returned to the President. These provide: Nominations neither confirmed nor rejected during the session at which they are made shall not be acted upon at any succeeding session without being again made to the Senate by the President; and if the Senate shall adjourn or take recess for more than thirty days, all nominations pending and not finally acted upon at the time of taking such adjournment or recess shall be returned by the Secretary to the President. This earlier methodology was also consistent with the approach of some political scientists who study executive branch appointments. The methodology for this report is different from that which was used in previous similar reports for several reasons. First, as discussed above in the section on recess appointments, from the latter part of the first session through the end of the 110 th Congress, the Senate chose to break up what would otherwise have been longer recesses into shorter recesses separated by pro forma sessions. This introduced two options for this report with regard to the calculation of nomination-to-confirmation intervals. The first option would have been to treat each series of short recesses created in this fashion as one long recess and to subtract these days from the nomination-to-confirmation interval. The second option would have been to treat each recess in the series of short recesses created in this fashion as a short recess, and not to subtract these days from the nomination-to-confirmation interval. Arguably, the Senate and President actions were consistent with the latter construction—short recesses as short recesses. Otherwise, Senate rules would have required the return of pending nominations (or the waiver of that rule), and the President could have—and likely would have—made recess appointments. The Senate and the President did not take these actions. Because of this, short recesses created by pro forma sessions are treated as short recesses in this report. It should be noted, however, that this reduces the comparability of statistics provided in this report with statistics in previous similar tracking reports, since the intervals calculated in this report include days that, in previous reports, were part of longer recesses and therefore were subtracted from the length of the interval. Although the phenomenon underlying this methodological problem first arose during the 110 th Congress, it could arise again in future Congresses. Other reasons for the methodological change are not unique to the 110 th Congress. First, in some cases, committee or floor action on a nomination that could have been completed before a recess has been, instead, deferred until after the recess. For such a nomination, the period of Senate consideration arguably has been intentionally extended. Counting all days, including those during a long recess, in calculations of elapsed time reflects that extension of Senate consideration. Second, it is unlikely that all work pertaining to nominations stops over a recess, and the inclusion of recess days is a reflection of the fact that the nominee is still under consideration, even during recess. Member and committee staffs may still be considering nominations at that time, even though they may not take direct action in the form of hearings or votes on the nominees. Ongoing activities may include investigatory work and interviews with nominees. Finally, although, as mentioned above, some political scientists who study nominations do subtract recess days during calculations of nomination-to-confirmation intervals, many others do not. In addition, the calculation of nomination-to-confirmation intervals in CRS research concerning judicial nominations does not exclude days that fall during recesses. By using methodology that is more similar to the work of other political scientists and to CRS judicial nominations research, the research presented here could be more easily compared and combined with related work. For all of these reasons, in this report, we employ a new methodology for calculating nomination-to-confirmation intervals. | The President makes appointments, with the advice and consent of the Senate, to some 152 full-time leadership positions on 34 federal regulatory and other collegial boards and commissions. This appointment process consists of three distinct stages: selection, clearance, and nomination by the President; consideration by the Senate; and appointment by the President. These advice and consent positions can also temporarily be filled by the President alone through a recess appointment. Membership positions on this set of collegial bodies often have fixed terms, and incumbents are often protected from arbitrary removal by the President. The enabling statutes for most of these boards and commissions require political party balance in their membership. During the 110th Congress, President George W. Bush submitted nominations to the Senate for 74 of these 152 positions. (Most of the remaining positions on these boards and commissions were not vacant during that time.) A total of 88 nominations were submitted, of which 46 were confirmed, 15 were withdrawn, and 27 were returned to the President. The number of nominations exceeded the number of positions because the President submitted multiple nominations for some positions. In some cases the President submitted one nomination for the end of a term in progress and a second nomination of the same person to the same position for the succeeding term. In other cases, the President submitted a second nomination after his first choice failed to be confirmed. President Bush made one recess appointment to a board covered by this report during the 110th Congress, and he submitted an "extra" nomination of that individual in order to comply with a law affecting the payment of that appointee. At the end of the 110th Congress, 15 incumbents were serving past the expiration of their terms. In addition, there were 22 vacancies among the 152 positions. This report specifies, for the 110th Congress, all nominations to full-time positions on 34 regulatory and other collegial boards and commissions. Profiles of each board and commission provide information on their organizational structures, membership as of the end of the 110th Congress, and appointment activity during that Congress. The organizational section discusses the statutory requirements for the appointed positions, including the number of members on each board or commission, their terms of office, whether or not they may continue in their positions after their terms expire, whether or not political balance is required, and the method for selection of the chair. Membership and appointment activity are provided in tabular form. The report also includes tables summarizing the collective appointment activity for all 34 bodies, and identifying Senate recesses during the 110th Congress. The calculations of nomination-to-confirmation intervals provided in this report counted all the days within the interval, including those during summer recesses and between sessions of the Senate. The inclusion of all days differs from the methodology used in similar CRS reports for previous Congresses. The new methodology takes into consideration changes in Senate adjournment practices and is consistent with published research in this area. This change may reduce the comparability of statistics in this report with those of the earlier research. Information for this report was compiled from data from the Senate nominations database of the Legislative Information System at http://www.congress.gov/nomis/, telephone discussions with agency officials, agency websites, the United States Code, and the 2008 edition of United States Government Policy and Supporting Positions (more commonly known as the "Plum Book"). This report will not be updated. |
On April 20, 2008, a former Roman Catholic bishop, Fernando Lugo, was elected President of Paraguay, a land-locked South American nation critically wedged between Brazil, Argentina, and Bolivia. The Lugo victory was hailed as a step toward strengthening Paraguay's fragile democracy, ending six decades of one-party rule. In many ways, the election of President Lugo raised hopes for a historic break with Paraguay's past and its tradition of authoritarian leadership, political isolation, and widespread corruption. The current political environment in Paraguay has been shaped by the country's turbulent political history. Paraguay was defeated in the War of the Triple Alliance (1864-1870) against Argentina, Brazil and Uruguay and lost 25% of its territory and over half of its population. This defeat led to an extensive period of political instability, with three civil wars in the first half of the 20 th century. In the late 19 th century, a two-party political system emerged with the formation of the Colorado Party and the Liberal Party, but the Colorado Party soon became the dominant political force, ruling between 1887 and 1904. The Liberal Party captured control of the government and ruled from 1904 until 1940. A war with neighboring Bolivia between 1932-1935, the Chaco War, further weakened political institutions and hindered economic development until the military assumed control in 1940 and governed through a succession of authoritarian leaders. The Colorado Party returned to power in 1946, consolidating its control through the military, dominant economic groups, and the state bureaucracy. In the late 1940s, the party assumed greater control over state institutions to the point where party membership was a prerequisite for civil service positions and promotion in the military. General Alfredo Stroessner, a member of the Colorado party, staged a coup in 1954, and consolidated power in a repressive military dictatorship. Stroessner, who engineered his "election" to complete the unexpired term of his predecessor, was subsequently re-elected seven times, ruling almost continuously under the state of siege provision of the constitution, with support from the military and Colorado Party. Nominally governed by a constitution approved in 1967, Stroessner's rule increased the isolation of Paraguay from the world community. During Stroessner's 35-year rule, (known as the Stronato), political opponents were systematically harassed and persecuted, accused of communist sympathies or posing a threat to state security. The demise of the Stroessner military dictatorship in 1989 initiated a challenging political transition over the next 20 years. Due in large part to the country's authoritarian past, Paraguay's state institutions had remained weak while corruption continued to undercut democratic consolidation and economic development. In 1992, a new constitution was adopted, and in 1993, Paraguay elected its first civilian president in almost 40 years. For the next 15 years, however, Paraguay's democracy alternated between periods of greater and lesser instability, including an attempted military coup, the assassination of a Vice President, and the resignation of a President. Observers maintain that corruption is a major impediment to consolidating democratic institutions. President Nicanor Duarte Frutos (2003-2008) took important measures to combat corruption that included increased penalties for tax evasion, other measures to increase tax revenue, greater oversight of government spending, and a crackdown on the trade in contraband and counterfeit goods. He removed members of the Supreme Court after corruption allegations surfaced against them. These measures were partially successful, as suggested by Transparency International's 2006 corruption perceptions index in which Paraguay moved up to 111 out of 163 countries after Paraguay was ranked among the six most corrupt countries in the world in 2004. In both the 2007 and 2008 index, however, Paraguay dropped to 138 out of 180 countries, and in the 2009 index Paraguay ranked 154—ahead of only Venezuela and Haiti in the hemisphere. In April 2008, Paraguay took another historic step with the election of former bishop Fernando Lugo to the presidency. For some observers, Lugo's victory is seen as a chance for Paraguay to strengthen its democratic transition. One of President Lugo's central challenges is to establish presidential control over the entrenched government bureaucracy that is still essentially controlled by the Colorado Party. There were three major candidates in the presidential election of April 20, 2008. They were the former minister of education Blanca Ovelar of the long-ruling Colorado Party; Fernando Lugo, then known in Paraguay as the "bishop of the poor," backed by the Patriotic Alliance for Change; and former military commander Lino Oviedo, the leader of a failed 1996 coup who was released from prison in early September 2007, running as a candidate of the party that he founded, the National Union of Ethical Citizens (UNACE). In the campaign, Lugo emphasized empowering the poor, agrarian reform, health reform, and ending endemic corruption, which he viewed as the legacy of decades of Colorado Party dominance. Lugo said that he was open to private capital and a consensus-based development model. As a cornerstone of his candidacy, he pushed for renegotiating the Itaipú and Yacyretá hydroelectric power supply treaties with Brazil and Argentina and sought to raise the price of Paraguay's supply of hydro-energy to these countries. Lugo's coalition of opposition parties—the Patriotic Alliance for Change (APC—see text box for the coalition's various parties) won the election with 40.8% of the vote according to the National Election Tribunal, followed by Colorado's Blanca Ovelar with 30.6% and UNACE's Oviedo with 21.9% of the vote. International observation teams from the Organization of American States (OAS) and the U.S.-based International Foundation for Electoral Systems (IFES) praised the successful conduct of the elections. Both groups characterized the election as historic, with the OAS maintaining that "in spite of differences, political parties and movements achieved a fundamental consensus on the rules of the game, which as in the rest of Latin America, constitutes the essential minimum for the construction of democracy." Lugo took office on August 15, 2008, for a five-year term. He declared his top priorities as fighting widespread corruption and reducing economic inequality. Lugo's election greatly raised expectations among Paraguay's poor majority. The APC coalition that brought Lugo to office, however, fractured in late June 2009 following the congressional leadership elections. The APC lost the support of the influential PLRA (a wing of the Liberal Party and the second-largest party in Congress) when a faction of the PLRA chose to leave the coalition. In July 2009, the entire PLRA split from the electoral alliance and joined the opposition in criticizing Lugo. This defection included his Vice President, Frederico Franco, who accused the President of treason for his inability to make good on electoral promises in a December 2009 news article. In response to political challenges and conflict, President Lugo has reportedly retreated from leadership and has left the problems facing his reform agenda in the hands of his ministers. His inability to manage the growing opposition in Congress has raised questions about his capacity to effectively influence policy, and even the possibility of impeachment. Adding to his perceived weakness, a scandal erupted in April 2009 when the President was accused of fathering children during his years as a priest with three different women. (He has admitted to fathering one boy.) This scandal has further undermined his credibility in some quarters; however, others have argued that the political fallout from the paternity claims may not be so great in a culture where virility is highly valued. In late November 2009, Lugo held a press conference to accuse his detractors of being part of an "orchestrated campaign" led by the country's "powerful mafia groups." In December, however, he took steps to address the controversy by agreeing to a DNA test in response to the third paternity suit. In his first year in office, President Lugo had very limited success in working with an opposition congress. Lugo's reform agenda is stymied by a number of challenges: his electoral coalition has splintered; he is a political novice and has not acquired the political skills to build bridges with a constitutionally mandated strong Congress; and he faces a political and administrative culture reportedly riddled with corruption, clientelism, and a sympathy for and habituation to authoritarianism. Lugo's popular support has dwindled. A December 2009 poll showed less than 18% of respondents thought he was doing a "good" or "very good" job, down from 38% at the end of 2008. As Lugo entered his second year in office, calls for impeachment became more frequent. Impeachment is allowed by the Paraguayan Constitution and has been used recently (in 1999 and an almost successful attempt in 2003). Although factions within various parties support impeachment and in early December a Colorado Party Congress of 600 delegates voted to consider impeachment, the opposition in Congress does not appear to have the two-thirds majority needed to impeach Lugo. In November 2009, President Lugo shuffled the military leadership for the fourth time since he took office. Although he complained about pro-coup sentiment in the military when he made the announcement, he later released a statement that denied a coup plot had been discovered. The President had been under pressure to improve security since the October 2009 kidnapping of wealthy businessman Fidel Zavala by the Army of the Paraguayan People, (EPP), a small guerrilla group with reported links to some of Paraguay's peasant organizations. In January 2010, his Vice President, Frederico Franco, now in opposition to President Lugo, called for increased security measures in the north of the country, where the kidnapping occurred, and more aggressive action against the EPP. Fortunately for Lugo, Zavala was released unharmed on January 17, 2010, after more than three months of captivity following the reported payment of a ransom by his family. Lugo has pledged to bring the kidnappers to justice and increase security in the area where the EPP operates. Despite congressional gridlock and vocal opposition, President Lugo has had some political successes. His focus on increasing social and health expenditures to reduce inequality has resulted in modest reforms of education and healthcare. Progress to reduce poverty included an expansion of the conditional cash transfer program. He enacted policies to provide more poor families with conditional benefits (about $40 per month while their children remain in school) from 50,000 to 70,000 families. In a meeting with the President of Brazil on July 25, 2009, President Lugo obtained an agreement to sharply increase the payments received from Brazil for hydro-electric power from the Itaipú Dam, one of his campaign promises. The dam, constructed on the Parana River jointly by the Brazilian and Paraguayan governments, is the second-largest hydropower producer in the world. Sale of the power is regulated by a treaty that gives each country the right to 50% of the 14 gigawats of electricity generated by the dam. Paraguay now uses only about 5% of the power from the project. Until 2023, when the treaty expires, the unused electricity generated for Paraguay must be sold to Brazil's state-owned power utility Electrobas at a fixed price. In the July 2009 accord, Brazil agreed to triple the price it paid Paraguay for the energy, and included financing for high-capacity transmission lines to be constructed from the dam to the Paraguayan capital, Asunción. Some analysts see the new agreement as an effort by Brazilian President Lula da Silva to offer President Lugo a hand as his electoral coalition was fracturing. Lugo had pledged during the campaign to use the power sale proceeds to finance poverty relief, health care, school nutrition programs, and ultimately, far-reaching land reform. The Paraguayan Congress quickly approved the new agreement, but it has moved slowly through the Brazilian Congress, where it must also be ratified. The new agreement would boost Paraguay's income from the dam to $360 million and is expected to be approved by the Brazilian Congress in the first half of 2010. In terms of foreign policy, Lugo has resisted ideological labels. During the electoral campaign, Lugo refrained from criticizing the United States, and also was careful not to criticize or praise Venezuelan President Hugo Chávez. Lugo has declared his intention to maintain good bilateral relations with the United States. When Lugo visited the White House on October 27, 2008, President George W. Bush said he "stood with" Lugo in pursuing a "social justice agenda" and supported his efforts to fight corruption. Following the 2008 visit, Paraguay received a one-time increase in health and economic growth assistance from the United States of $10 million. The United States has supported anti-corruption and democratization programs in Paraguay including providing more than $60 million in funding from the Millennium Challenge Corporation (see " U.S. Assistance "). The two countries collaborate extensively on anti-narcotics and anti-smuggling efforts. Some of Lugo's opponents accuse him of maintaining close ties to President Chávez, a charge that Lugo denies. He has maintained friendly relations with President Chávez but has not shown an inclination to join the Bolivarian Alternative for the Americas (ALBA), the leftist political alliance organized by Venezuela's President, which includes Cuba, Bolivia, Ecuador, and Nicaragua. Paraguay is a member of the Common Market of the South (Mercosur) along with Brazil, Argentina and Uruguay, and has been aligned with the trade group despite being Mercosur's poorest member. In August 2009, Lugo was forced to withdraw his support of legislation allowing Venezuela's membership in Mercosur because he lacked a majority in his Congress. As a full voting member of Mercosur, Paraguay has opposed the elevation of Venezuela to full membership in the customs union because of strong animosity toward Chávez in the Paraguayan Congress. Paraguay, approximately the size of California, has a population of about 6.9 million people who are concentrated in and around the capital city of Asunción. The majority of the population is of mixed Spanish and Guaraní Indian descent. Both Spanish and Guaraní are the official languages, with over 90% of the population fluent in Guaraní. In 2008, Paraguay's gross national income (GNI) was $16.3 billion, with a per capita GNI of $2,180, up from $1,670 in 2007. Paraguay's small, primarily agricultural economy grew by a robust 6.8% in 2007. It is one of the poorest countries in Latin America, however, and has suffered significantly from a recent drought and the global economic downturn. The Paraguayan economy is particularly dependent on its two larger neighbors, Brazil and Argentina, for its export markets. While GDP growth slowed to an estimated 5.8% in 2008, it has contracted sharply in 2009. Economic growth is estimated to have contracted by 3.8% in 2009, with a projected return to growth of 4.2% in 2010. Paraguay experienced an economic recession for several years in the aftermath of a series of bank failures from 1996-1998 that wiped out half of Paraguay's locally owned banks. When inaugurated in 2003, former President Duarte inherited a government that had defaulted on $138 million in debt, primarily as a result of low tax revenue. Under President Duarte, the economy rebounded, due in part to the implementation of reforms that included anti-corruption initiatives, which increased revenue, strengthened institutions, and created a more favorable environment for foreign investment. The Paraguayan economy remains heavily dependent on its traditional agricultural exports of soybeans, cotton and meat. Approximately 20% of GDP is derived from agriculture, and agricultural activities employ approximately one-quarter of the country's workforce. Other agricultural products include wheat, corn, sugarcane, sesame and other fruits and vegetables. Paraguay's industrial sector is still largely underdeveloped, with much of the population still employed in subsistence agriculture. Economic growth tends to be limited by Paraguay's dependence on imports of manufactured goods, as well as capital goods that are necessary to supply the industrial and investment requirements of the economy. The small manufacturing sector includes agricultural goods, leather, textile, automatic data processing (ADP) machine parts, and tobacco products. The service sector is dominated by communications, which has benefitted from strong foreign direct investment (FDI) and electricity production from the Itaipú hydropower plant co-owned with Brazil and the Yacyretá plant co-owned with Argentina. Paraguay's informal sector is very large and may be twice the size of the formal sector. Consequently, while the official unemployment rate is relatively low (5.4% estimated for 2008), the actual unemployment and underemployment rates are estimated to be much higher. Poverty rates have dropped slightly from 61% of the population in 2001 to 58.2% in 2008. Remittances from Paraguayans living abroad have significantly contributed to economic growth, increasing from approximately $200 million in 2000 to $800 million in 2008. A significant but declining part of the country's commercial sector consists of importing goods from the United States and Asia for re-export into neighboring countries. Most of these imported goods are not declared at customs, preventing the government from obtaining substantial tax revenue. Counterfeit trade and smuggling are prevalent in the country's border regions. Increased government enforcement of taxes and custom laws is having an impact on the underground economy as a whole, although much remains to be done. Overriding a presidential veto, Paraguay's Congress voted to delay implementation of a personal income tax for a third successive time in June 2009. This was a blow to the Lugo Administration's plans to raise social expenditures and implement a land reform program. The Colorado/UNACE majority in Congress also increased the fiscal deficit by raising the state pension for low income earners and other public sector wages. Members of Lugo's inner circle accused the Congress of sabotaging the President's land and fiscal reform policies. The personal income tax was again due to take effect in early 2010, but opposition in Congress has continued to prevent implementation. While promising to address income inequality and land reform, President Lugo has continued the orthodox macroeconomic policies adopted by the predecessor Duarte Administration in 2003. Those policies contributed to a slow and steady economic recovery after a period of recessions and weak recoveries and led to the achievement of positive economic growth. Lugo's appointment of Dionisio Borda as finance minister, and of other centrist politicians to his cabinet, are seen by many observers as an indication of his intent to consolidate macroeconomic stability. Borda is an independent economist, known for implementing fiscal reform. Stricter fiscal controls begun under the prior administration, which Borda also served, continue to increase the number of registered taxpayers and the amount of revenue generated by the business income tax. Paraguay and the United States have good relations, cooperating extensively on counternarcotics and counterterrorism efforts. The United States strongly supports the consolidation of Paraguay's democracy and continued economic reforms. Following the April 2008 election, then-U.S. Ambassador to Paraguay James Cason congratulated Lugo and the APC on their victory and expressed a commitment to work with them to strengthen bilateral relations. U.S. imports from Paraguay totaled $78.4 million in 2008 while the value of U.S. exports to Paraguay was over $1.6 billion. Machinery and electrical machinery account for the lion's share of U.S. exports to Paraguay. The protection of intellectual property rights (IPR, e.g., fighting piracy, counterfeiting, and contraband) has been a U.S. concern. The Duarte government made significant efforts to improve IPR protection, but the United States Trade Representative maintains that the country continues to have problems due to its porous border and ineffective prosecutions. In 2003, U.S. and Paraguayan officials signed a Memorandum of Understanding (MOU) to strengthen legal protection and enforcement of intellectual property rights in Paraguay. In December 2007, the MOU was revised and extended through 2009, and in November 2009 the agreement was extended again through 2011. The United States provided about $13.1 million in foreign assistance to Paraguay in FY2008 and an estimated $26.1 million in FY2009. The increase in FY2009 was due to a one-time addition of $10 million for health and economic growth assistance resulting from the October 2008 meeting between President Lugo and former President Bush. Under the Obama Administration's FY2010 request, Paraguay would receive $13.9 million in assistance, with $2.1 million to support Global Health and Child Survival, $5.8 million in Development Assistance, $425,000 in International Military Education and Training, $750,000 for Foreign Military Financing, $500,000 in International Narcotics Control and Law Enforcement assistance, and $4.3 million for the continuation of a Peace Corps program in the country, with approximately 200 volunteers. In 2009, the Department of Defense also provided Paraguay one-time security and stabilization assistance authorized under Section 1207 of the National Defense Authorization Act (NDAA). In FY2009, Paraguay received a total of $6.69 million in "Section 1207" funding divided between counternarcotics and development accounts to support democratic consolidation and reduce violence in eastern Paraguay during the country's transition from one-party rule to multi-party democracy. In addition to regular foreign assistance funding, Paraguay signed a $34.65 million Threshold Program agreement with the Millennium Challenge Corporation (MCC) in May 2006. Those funds, which are administered by the U.S. Agency for International Development (USAID), are targeted to strengthen the rule of law and build a transparent business environment. The program has been credited with reducing the time it takes to start a business in Paraguay by half, among other accomplishments. In May 2009, the USAID-administered program was renewed with the signing of a second two-year MCC Threshold program for $30.3 million. The program supports anti-corruption efforts by Paraguay's government in law enforcement, customs, health care, and judicial sectors. The MCC program also aims to increase public support for anti-corruption efforts. Paraguay also signed an agreement with the United States in 2006 under the Tropical Forest Conservation Act that provided Paraguay with $7.4 million in debt relief in exchange for the Paraguayan government's commitment to conserve and restore tropical forests in the southeastern region. Paraguay is a major transit country for illegal drugs destined primarily for neighboring South American states and Europe. It produces over half of the marijuana grown in South America. The Chaco region in the northwestern part of the country adjacent to Bolivia is a major transshipment point for illegal drugs, along with the tri-border area (TBA) with neighboring Argentina and Brazil. A 1987 U.S.-Paraguay bilateral counternarcotics agreement was extended in 2006. U.S. counternarcotics efforts in Paraguay have focused on providing training, equipment and technical assistance to strengthen the country's National Anti-Drug Secretariat (SENAD), and to combat money laundering and corruption. The United States assisted in the completion of a helicopter pad and support facilities for SENAD. According to the State Department's February 2009 International Narcotics Control Strategy Report, SENAD continued to make progress against illegal narcotics trafficking in 2008 with record seizures of marijuana, although cocaine seizures were markedly down. The report notes that President Lugo has said he wants to reverse Paraguay's status as a "major drug transit country." Currently, SENAD agents are civil servants and they are not issued weapons. The Paraguayan Senate rejected a bill that would have made the SENAD an autonomous institution with the power to regulate its agents as law enforcement agents who can carry and use weapons. The bill had passed the Chamber of Deputies. This defeat is considered by some to be a major setback. Finally, INCSR notes that SENAD's work is limited by budget constraints, weak laws and pervasive corruption. After President Evo Morales of Bolivia kicked out the U.S. Drug Enforcement Administration (DEA) in late 2008, 10 of the 56 agents working in that country were redeployed to Paraguay in early 2009. In April 2009, bills entitled the "U.S.-Paraguay Partnership Act of 2009" were introduced in the House ( H.R. 1837 ) and Senate ( S. 780 ). On September 14, 2009, the ATPDEA Expansion and Extension Act of 2009 ( S. 1665 ) was introduced in the Senate. Each of these bills would amend the Andean Trade Promotion and Drug Eradication Act (Title XXXI of the Trade Act of 2002, P.L. 107-210 ) to extend trade preferences to Paraguay. Currently, Colombia, Ecuador, and Peru benefit from the ATPDEA in exchange for cooperation under anti-narcotics agreements. Bolivia lost its eligibility for the program in 2008 when the Bush Administration determined that Bolivia no longer met the anti-narcotics cooperation requirements. The United States is particularly concerned about illicit activities in the tri-border area (TBA) of Paraguay, Argentina, and Brazil, where money laundering, drug trafficking, arms smuggling, and trade in counterfeit and contraband goods are prevalent. The tri-border region is loosely controlled due to porous borders, a lack of surveillance, weak law enforcement and pervasive local corruption, especially in the Paraguayan border city of Ciudad del Este. The United States has worked closely with the governments of the TBA countries on counterterrorism issues through the "3+1" regional cooperation mechanism, which serves as a forum for discussions, and the United States has provided anti-terrorism and anti-money-laundering support to Paraguay. U.S. Immigration and Customs Enforcement (ICE) sent a team of specialists to the tri-border region to investigate trade-based money laundering in 2006, and has assisted the Paraguayan government in developing a Trade Transparency Unit to examine discrepancies in trade data in order to detect customs fraud, trade-based money laundering or the financing of terrorism. U.S. Treasury officials have held workshops in the region to encourage more banking sector involvement in efforts against money laundering. The U.S. embassy's legal adviser in Asunción held training courses for local investigators and prosecutors to combat possible terrorism links. The United States has been concerned for a number of years that the radical Lebanon-based Hezbollah and the Sunni Muslim Palestinian group Hamas have used the TBA to raise funds from the region's sizable Muslim communities by participating in illicit activities and soliciting donations. Nevertheless, according to the State Department's annual terrorism report for 2008 (issued in April 2009), there is no corroborated information that these or other Islamic extremist groups have an operational presence in the TBA. The State Department's 2008 terrorism report stated although Paraguay was generally cooperative on counterterrorism efforts, its judicial system is weak and politicized, the police force is widely viewed as ineffective and corrupt, and the country lacks strong anti-money laundering and terrorist financing legislation. In June 2008, Paraguay's Congress improved money laundering legislation as part of a major overhaul of the penal code. However, according to the terrorism report, a bill to enact important criminal procedure reform to prosecute money laundering and terrorism was delayed for a year by the Congress's Legal Reform Commission. Effective terrorist financing legislation will be critical to keep Paraguay current with its international obligations. The terrorism report also maintained that Paraguay did not exercise effective immigration or customs control on its borders. Efforts to address illicit activity in the TBA were uneven because of a lack of resources, and corruption within customs, police, and the judiciary. With U.S. support, the government's Secretariat for the Prevention of Money Laundering reportedly made progress against money laundering, including December 2008 raids on illegal exchange houses. Under the MCC Threshold Program, the United States provided assistance with the training of judges, prosecutors and police in investigation techniques critical to money laundering and terrorist cases. Paraguay made some progress on counterterrorism legislation in 2009. The Paraguayan Congress passed a measure in July 2009 that modifies the anti-money laundering law. The passed bill empowers the Secretariat for the Prevention of Money Laundering (SEPRELAD) in several ways. It elevates the agency to the level of a ministry that reports directly to the President, it broadens its capacity to require Suspicious Transaction Reports from a wider group of financial institutions, and it increases SEPRELAD's power to audit financial institutions to ensure their procedures are adequate to prevent money laundering. In addition, the Executive has initiated legislation that would criminalize the offences of terrorism, terrorist association and terrorist financing. Attempts to gain the approval of Congress on such legislation were made in 2007, November 2009, and December 2009. In December 2009, President Lugo withdrew the counterterrorism legislation that would modify some aspects of the criminal code over objections raised by human rights organizations who argued that the new legislation threatened the international protection of human rights and may undermine freedom of assembly and freedom of speech. Paraguayan authorities, however, remain optimistic that a modified initiative may pass later in 2010. | Paraguay, a landlocked nation in the center of South America, has friendly relations with the United States and has been a traditional ally. Paraguay's turbulent political history and tradition of political authoritarianism have resulted in international isolation that the country is seeking to overcome. The population of 6.9 million people is one the most homogenous mestizo populations in the hemisphere. Paraguay's largely agrarian economy has grown well in recent years on the strength of global commodity prices. However, in 2009, a severe drought and the impact of the global economic recession sharply reduced growth, but a recovery is anticipated in 2010. The April 2008 election of Fernando Lugo, a former Roman Catholic bishop and leader of the Patriotic Alliance for Change, as President ended 61 years of one-party rule by the still-dominant Colorado Party. The United States has encouraged the strengthening of democracy in Paraguay, and hailed the peaceful transition of power. Known as the "bishop of the poor" after a decade of work in an impoverished rural diocese, Lugo pledged to introduce land and agrarian reform, improve education and health services to better serve Paraguay's poor majority, and combat widespread corruption. Yet, as he entered his second year in office, there were more frequent calls for his impeachment. His loose electoral alliance had splintered, and he faced broad opposition in the opposition-dominated Paraguayan Congress that had stymied his center-left agenda at nearly every turn. At the end of 2009, polls indicated that Lugo had one of the lowest popularity ratings of any leader in the region. The United States and Paraguay cooperate in a number of areas but especially in the fight against corruption, and on anti-drug, counterterrorism and anti-smuggling initiatives. In 2006 and 2009, the United States and Paraguay signed two Millennium Challenge Corporation threshold agreements totaling more than $60 million dollars to combat corruption and strengthen the rule of law. Paraguay is a major transit country for cocaine and produces the largest crop of marijuana in South America. The United States remains concerned about illegal activities in the loosely controlled tri-border region with neighboring Brazil and Argentina, such as money-laundering, drugs and arms trafficking, and trade in counterfeit and contraband goods. The 111th Congress has expressed growing interest in Paraguay. In April 2009, two bills were introduced entitled the "U.S.-Paraguay Partnership Act of 2009" (H.R. 1837 and S. 780). On September 14, 2009, the ATPDEA Expansion and Extension Act of 2009 (S. 1665) was introduced in the Senate. Each of these bills would amend the Andean Trade Promotion and Drug Eradication Act (Title XXXI of the Trade Act of 2002, P.L. 107-210) to extend unilateral trade preferences to Paraguay. Indicating additional interest in Paraguay, the House Democratic Partnership (formerly the House Democratic Assistance Commission) made a study trip to Paraguay in August 2009. Members of the eight-member delegation had discussions with the bicameral Congress and the executive about the need to work together to support democracy in Paraguay. This report examines recent political and economic developments in Paraguay and issues in U.S.-Paraguayan relations. |
Financial derivatives are widely used throughout the economy by financial firms, corporations, farmers, and investors to serve a number of different purposes. A broad set of factors are responsible for the 2008-2009 financial crisis, but derivatives played a key role in the crisis by fueling a housing bubble and enabling large-scale systemic risk in the financial system. Congress plays a major role in the derivatives market by passing laws and regulations that define the nature of derivatives market activity and through its oversight role over the major regulators of the derivatives markets. The 2008-2009 financial crisis spurred policymakers from a range of countries, spearheaded by the G-20, to commit their countries to reforming domestic and international rules governing the over-the-counter (OTC) derivatives markets. Most assessments generally agree that a broad set of factors played a role in the financial crisis and in the ensuing sovereign debt crisis in Europe. However, actions by investors in the derivatives markets likely aggravated the financial crisis, required billions in government assistance to American International Group, Inc. (AIG) and other financial firms to cover losses associated with credit default swaps (CDS), and played a key role in destabilizing financial markets. In addition, public and congressional attention has continued to focus on derivatives markets as a result of the key role derivatives played in worsening Greece's financial crisis and the roughly $6 billion in derivatives-trading losses in 2012 reported by JP Morgan. According to standard finance theory, derivatives markets benefit financial markets and the wider economy by improving the pricing of risk, adding to liquidity, and helping market participants manage their risks. In particular, derivatives are used by financial firms, corporations, farmers, and investors to hedge against, or speculate on, changes in prices, rates, or indices, or even on events such as the potential defaults on debts. As a result, they have added to liquidity and been instrumental in expanding financial opportunities for a broad range of market participants, particularly in mitigating risks associated with changes in exchange rates and interest rates. Nevertheless, OTC derivatives can add substantial risk to financial markets due to the very nature of derivatives. OTC derivatives contracts often involve lengthy commitments during which time a position can potentially generate a substantial counterparty credit exposure. Also, since OTC derivatives often require a small initial outlay of cash, small changes in the value of the underlying securities of the derivatives can abruptly expand the potential liabilities and raise counterparty credit risk dramatically during periods of market turbulence. In addition, derivatives markets and transactions span national borders and national regulators. Consequently, troubles in derivatives markets can reverberate far beyond the original source of the problem. The Financial Crisis Inquiry Commission concluded that derivatives contributed to the 2008-2009 financial crisis in three major ways. First, credit default swaps were instrumental in fueling the securitization of mortgages and mortgage-backed securities and in the subsequent housing bubble. Next, credit default swaps were essential in creating synthetic collateralized debt obligations (CDO), or financial instruments that served as bets on the performance of real mortgage-backed securities, which amplified the losses from the collapse of the housing bubble by allowing multiple bets on the same securities and helped spread the losses throughout the financial system. Finally, once the housing boom ended, derivatives were at the center of the crisis due to (1) concerns that losses associated with derivatives would trigger cascading losses throughout the global financial system; and (2) the lack of transparency concerning the overall size of the derivatives market and the extent of derivatives transactions between systemically important financial institutions that directly added to uncertainty and panic in global financial markets. Perhaps the best known example of problems stemming from large OTC derivatives exposure in the financial crisis came from the near-collapse of the large conglomerate American International Group, Inc. (AIG), which wrote about $1.8 trillion worth of OTC derivatives contracts for credit default swaps. These credit default swaps guaranteed payment if certain mortgage-backed securities defaulted or experienced other "credit events." Many of AIG's contracts did require it to post collateral as the credit quality of the underlying securities (or AIG's own credit rating) deteriorated, but AIG did not post an initial margin, as this was deemed unnecessary because of the firm's triple-A rating. As the subprime crisis worsened, AIG was subjected to margin calls that it could not meet. To avert bankruptcy, with the risk of global financial chaos, the Federal Reserve and the Treasury put tens of billions of dollars into AIG, the bulk of which went to its derivatives counterparties. The AIG case illustrates two aspects of OTC markets that are central to derivatives reform proposals. First, as noted above, AIG was able to amass an OTC derivatives position so large that it threatened to destabilize the entire financial system when the firm suffered unexpected losses, and the risks of default to AIG derivatives counterparties grew. In a market with mandatory clearing and margin, in which AIG would have been required to post an initial margin to cover potential losses, there is a stronger possibility that AIG would have run out of money long before the size of its position had reached $1.8 trillion. Second, because OTC contracts were not reported to regulators, the U.S. Federal Reserve (the Fed) and the U.S. Treasury Department lacked information about which institutions were exposed to AIG, and the size of those exposures. Uncertainty among market participants about the size and distribution of potential derivatives losses flowing from the failure of a major dealer was a factor that exacerbated the "freezing" of credit markets during the peaks of the crisis, and made banks unwilling to lend to each other. A basic theme in derivatives reform proposals is to get the OTC market to act more like the exchange-traded futures market—in particular, to have bilateral OTC swaps cleared by a third-party clearing organization. Generally, OTC derivatives are used in a variety of ways, including hedging, investing, exploiting arbitrage opportunities, and position-taking. OTC derivative instruments are generally referred to as swaps. Yet swaps have widely differing characteristics and degrees of standardization, and can include bets on a number of different types of assets. The global OTC derivatives markets are dominated by five different types of swaps: foreign exchange swaps; interest rate swaps; equity-linked swaps; commodity swaps; and credit default swaps, as indicated in Table 1 . At the end of 2011, the total notional amounts outstanding of OTC derivatives amounted to $647.8 trillion, down about 8% from the $706.9 trillion in derivatives recorded in June 2011. The notional amount, also called the reference amount, refers to the underlying value of the assets that are being bet on through a derivatives contract. Figure 1 depicts the relative total sizes of the global derivatives market; world assets; world GDP; and the world's official reserves. It demonstrates that the size of the global derivatives market, in terms of notional value, tends to dwarf these other major categories. Financial markets that trade derivatives grew rapidly over the past decade and now serve large trades involving vast amounts of funds, as indicated in Table 2 . According to data published by the International Monetary Fund (IMF) and the Bank for International Settlements (BIS), global trading in OTC foreign exchange derivatives and OTC interest rate derivatives amounted to $567 trillion in 2011, or approximately nine times world gross domestic product (GDP) of $70 trillion. These data do not include trading in equity and commodity-linked derivatives, which likely would boost these numbers substantially higher. In addition, the total notional value, or the total gross nominal value of the underlying assets, of derivatives in 2011 was reported as being more than twice the size of the total value of all stocks, bonds, and bank assets, as indicated in Table 2 . The United States, with the largest gross domestic product (GDP) of any country (and about the same size as the EU's GDP) also had the largest single share of OTC interest and exchange rate derivatives trading in 2011—a share slightly greater than that of the Euro area—in terms of the notional value of the derivatives. The financial crisis of 2008-2009 exposed weaknesses in the OTC markets that contributed to the build-up of systemic risk and threatened to disrupt the functioning of international financial markets. OTC derivatives are traded by a large and diverse group of market participants, including banks, hedge funds, pension funds, other institutional investors, corporations, and government entities. This market, however, is dominated by a limited number of dealers. Such dealers provide liquidity to the market by selling derivatives contracts to customers and managing the resulting risk exposures through offsetting transactions in the underlying assets, exchange traded derivatives, and further trades with dealers and traders in OTC markets. These dealers are highly interconnected through a network of trades and, therefore, are highly exposed to spillover, or contagion, effects from turmoil in other parts of the markets. Such market disruptions can trigger a chain of credit-related losses which, in turn, could result in severe market disruptions and potentially a chain of defaults. According to the Financial Stability Board (FSB), these weaknesses include (1) the build-up of large counterparty exposures between particular market participants through collateralized debt obligations (CDOs) and credit default swaps which have not been appropriately risk-managed; (2) contagion risk arising from the interconnectedness of the OTC derivatives market participants; and (3) the limited transparency of overall counterparty credit risk exposures that can precipitate a loss of confidence and market liquidity in times of stress. In November 2008, as the heads of state of the G-20 nations met in Washington, DC, to respond to the financial crisis, they agreed to implement a number of reforms to address the perceived failures in the financial system. The G-20 leaders concluded at that time that major failures in regulation and supervision of financial markets, in combination with increased risk-taking by banks, had created fragilities that threatened to undermine the financial system. In particular, the leaders concluded that the global financial system had become highly interconnected, but that the system lacked a commensurate level of transparency regarding the associated counterparty exposures that was comparable to the level of complexity. The growing interconnectedness of financial markets means that a shock that originates in one country or asset market can quickly affect other markets and other countries, known as contagion. However, while global financial markets have become increasingly interconnected, large and highly complex financial firms have grown to straddle continents and markets. At the same time, regulators and regulations have remained national in scope and have been unprepared to address financial crises with cross-border implications. Due to the challenges of effectively harmonizing all regulations across national boundaries and legal systems, and possibly as a result of few effective institutional mechanisms to ensure such coordination of national regulatory bodies, national regulators have focused on meeting national objectives. At times, this can lead to a lack of uniformity, or even conflicts, between regulatory regimes. Arguably, it can lead to national priorities subsuming concerns about global financial stability. Through successive summits, G-20 leaders have addressed these perceived failures by refining their goals and developing increasingly detailed objectives for the G-20 members to improve financial market infrastructures (FMIs). One of these first steps included "improving the infrastructure of over-the-counter" (OTC) derivative markets and credit default swaps. The Bank for International Settlements (BIS) has argued that providing harmonized standards for FMIs is important to the functioning of the financial system and in fostering stability. The BIS concluded that FMIs, or systemically important payments systems, play a critical role in the financial system and the broader economy by facilitating the clearing, settlement, and recording of monetary and other financial transactions, such as payments, securities, and derivatives contracts.... While safe and efficient FMIs contribute to maintaining and promoting financial stability and economic growth, FMIs also concentrate risk. If not properly managed, FMIs can be sources of financial shocks, such as liquidity dislocations and credit losses, or a major channel through which these shocks are transmitted across domestic and international financial markets. In addition, at the November 2008 Washington, DC, summit, the leaders supported actions by regulators to speed up efforts to reduce the systemic risks associated with credit default swaps and over-the-counter derivatives transactions. They also supported efforts to ensure greater transparency for OTC derivatives and an adequate infrastructure to support the growing volumes of OTC derivatives trading. These three objectives—improving transparency, mitigating risk, and protecting against market abuse—continue to drive G-20 reforms of the OTC derivatives markets. The G-20 leaders have expressed their support for reforming the OTC derivatives markets in successive G-20 summits. Actions taken by the G-20 leaders at some of the Summits have been particularly noteworthy: At the Pittsburgh Summit in September 2009, G-20 leaders agreed that all standardized OTC derivative contracts should be traded on exchanges or electronic trading platforms, where appropriate, and cleared through central counterparties (CCPs) by the end of 2012. In addition, they agreed that all OTC contracts should be reported to trade repositories (TRs). The G-20 leaders also tasked the Financial Stability Board with assessing the implementation of the agreed reforms and determining whether those reforms would be sufficient to achieve the main goal of improving transparency in the derivatives markets, mitigating systemic risk, and protecting against market abuse. In October 2010, the FSB published a report containing 21 recommendations for the G-20 nations to assist them in implementing the G-20 leaders' commitments concerning standardization, central clearing, exchange or electronic platform trading, and reporting of OTC derivatives transactions to trade repositories. The FSB then published an updated report in October 2011, a third report in June 2012, and a fourth report in October 2012. These reports detail country commitments in six specific areas of reform: (1) standardization of OTC derivatives contracts; (2) central clearing of OTC derivatives contracts; (3) exchange or electronic platform trading; (4) transparency and trading; (5) reporting to trade repositories; and (6) application of central clearing requirements. In April 2011, the Committee on Payments and Settlement Systems of the Bank for International Settlements published a consultative report on recommendations regarding OTC derivatives data reporting. In January 2012, the committee published its final report. At the Cannes G-20 Summit in November 2011, the leaders adopted the recommendations of the derivatives markets working group and agreed to continue making progress in reforming the OTC derivatives market. The summit final communiqué declared that: Reforming the over-the-counter derivatives markets is crucial to building a more resilient financial system. All standardized over-the-counter derivatives contracts should be traded on exchanges or electronic trading platforms, where appropriate, and centrally cleared, by the end of 2012; OTC derivatives contracts should be reported to trade repositories, and non-centrally cleared contracts should be subject to higher capital requirements. We agree to cooperate further to avoid loopholes and overlapping regulations. A coordination group is being established by the FSB to address some of these issues, complementing the existing OTC derivatives working group. As indicated above, the FSB was tasked by the G-20 with monitoring and reporting on the success of G-20 nations in meeting the year-end 2012 deadline of implementing the OTC derivatives market reforms. These reforms have focused on the three major objectives of the reforms as articulated by the G-20 leaders at the Washington, DC, summit: improving transparency, mitigating risk, and protecting against market abuse. These three objectives have been addressed through five broad areas of reforms: (1) standardizing OTC derivatives contracts; (2) developing international standards and policy for central clearing and for risk management of non-centrally cleared derivatives; (3) developing international standards and policy for exchanges or electronic platform trading; (4) developing the infrastructure to facilitate reporting OTC transactions to trade repositories (TR); and (5) developing and implementing international standards and policies for capital requirements. As a result of self-assessments by G-20 members, except for France, Germany, and Italy, which are represented by the EU in the survey, and such FSB members as Singapore and Switzerland, the FSB offered four general conclusions: Only Japan and the United States had adopted the necessary legislation to reach the goal of having derivatives centrally cleared by the end of 2012, while the EU had reached a political consensus regarding legislation. Most authorities estimated that a significant proportion of interest rate derivatives will be centrally cleared by year-end 2012, but they were less confident of progress for other asset classes and could not make firm estimates when central clearing could be achieved. On the whole, the countries surveyed were markedly behind in implementing commitments that standardized contracts should be traded on exchanges or electronic platforms by year-end 2012. According to the BIS, increasing the proportion of the market traded on organized platforms is important for improving transparency, mitigating systemic risk, and protecting against market abuse. Only the United States had passed legislation with requirements for pre- and post-trade transparency and proposed detailed regulations; the EU had made legislative proposals, and the Japanese Diet had approved legislation with provisions to improve the transparency of derivatives markets. The increased standardization of contracts is a core element of the G-20 nations' commitment relating to central clearing, organized trading and reporting to TRs, and increasing the benefits in terms of improved transparency, reduced systemic risk, and greater protection against market abuse. Most countries have made progress in developing legislative frameworks to have all OTC derivatives contracts reported to trade repositories (TRs), although not all members have adopted legislation. The majority of members have published consultative documents regarding the establishment of TRs and the related reporting requirements. The FSB lacked information on capital requirements for non-bank regulated entities, because capital standards related to banks' exposures to central clearing parties are still being developed. The Basel Committee on Banking Supervision (BCBS) published a report in November 2011 on capital standards for banks' exposures, and the BIS published a report in March 2012 on collateral requirements for central clearing of OTC derivatives and a report in July 2012 on capital requirements for bank exposures to central counterparties. The BIS expected that by the start of 2012 the higher capital requirements associated with the higher counterparty credit risk of non-centrally cleared derivatives contracts would have been met internationally for banks through the Basel III standards. The BIS expects that the higher capital standards for non-centrally cleared contracts will provide incentives for standardization and central clearing. In March 2010, 14 of the largest derivatives dealers committed to take a number of steps to make derivatives trading more transparent, expand central clearing, improve standardization of derivatives contracts, and manage collateral associated with derivatives trading. These commitments included specific target levels for the central clearing of OTC credit derivatives and OTC interest rate derivatives that were eligible for central clearing counterparties. It was acknowledged, however, that the enhanced clearing targets covered only part of the OTC market, because most derivative contracts were not eligible for central counterparty clearing. In order to address this issue and to implement the G-20 recommendations, the FSB initiated a working group, led by the Committee on Payment and Settlement Systems (CPSS) of the Bank for International Settlements (BIS), the International Organization of Securities Commissions (IOSCO), and the European Commission (EC) to assess and develop policy options for promoting the increased use of standardized products and for implementing at the global level the mandatory clearing of derivatives contracts and the exchange or electronic trading requirements. The following sections examine the major issues involved and the progress made to date in the five broad areas of reforms addressed by the FSB surveys: (1) standards for OTC derivatives contracts; (2) central clearing and non-centrally cleared derivatives; (3) exchanges or electronic platform trading; (4) reporting to trade repositories (TR); and (5) capital requirements. Issue : Standardization of derivative contracts is a core element in meeting the G-20 commitments for central clearing, organized trading, and reporting to trade repositories (TRs). As indicated previously, 14 major derivatives dealers developed a broad "roadmap" for increasing standardization of derivatives products. In a second, 2011 letter to New York Federal Reserve President William C. Dudley, the group discussed this roadmap, consisting of three core initiatives to (1) develop ongoing analyses to benchmark the level of standardization in each asset class; (2) continue ongoing work in standardizing products in each asset class; and (3) work with central clearing parties, trade repositories, and other infrastructure providers to standardize processes in each asset class. Progress : According to the FSB, about half of the surveyed countries have adopted, or have plans to adopt, legislative and regulatory measures to increase the use of standardized derivative products and processes. Those jurisdictions with markets that already are highly standardized reported that they expected to remain at those levels. Latest Developments : The October 2012 FSB progress report concluded that uncertainty over the legislative and regulatory requirements about which specific products and market participants will be covered under new clearing requirements is slowing progress in offering products for clearing and in developing new services to support mandatory central clearing. The FSB also indicated that the lack of standardization of financial products and uncertainty about which features will ultimately be used as the measure for "standardization" across jurisdictions is slowing progress in offering new products and services. Issue : The mandatory clearing of standardized derivatives through central counterparties (CCPs) such as clearinghouses stands as the centerpiece of international efforts to improve stability in global financial markets, as it is expected to enhance counterparty risk management. According to recent research, an expanded role for CCPs fills a number of important market roles, as described by the European Central Bank (ECB). First, CCPs are in a unique position to assess the risks that are faced by the financial system as a whole, because they have information on all cleared transactions. Such information enhances transparency and improves the ability of CCPs to assess the risks to existing transactions that may arise from new transactions. Second, since CCPs have a more complete understanding of risk exposures than individual counterparties, they can provide a more accurate assessment of exposures, which improves risk management and the allocation of capital. Third, as independent clearing agents, CCPs have the ability to provide effective insurance against counterparty risk by pooling risks. The growing role of CCPs also entails certain risks. CCPs are arguably systemically important institutions that could become "too big to fail." According to some analysts, this potential for systemic risk argues in favor of the regulation, supervision, and oversight of CCPs. In addition, effectively implementing central clearing is affected by such factors as the size of the market, governance of the market, and the structure of the market. Since pooling risk by a CCP is one of the main benefits of centralized clearing, the size and liquidity of the market are important. Achieving sufficient liquidity may require mandatory central clearing of transactions. Relying on market incentives alone may not be enough to induce individual participants to join in central clearing, because the costs of clearing for an individual participant may outweigh the benefits. The economic benefits of central clearing tend to be fully realized only as the number of participants rises. The ECB also contends that CCPs require outside supervision to ensure that the profit motive of the CCPs does not conflict with the requirement for providing appropriate risk mitigation. In addition, supervising CCPs requires balancing efficiency with safety considerations. Competition between CCPs may decentralize the clearing process, making the process efficient, but having it operate at a level that is less than optimal. On the other hand, concentrated clearing may increase the risks of concentrating excessive risk and present obstacles to adequately overseeing and supervising CCPs, especially for CCPs that operate on a cross-border basis. Based on recommendations prepared by the International Organization of Securities Commissions (IOSCO) and the Committee on Payment and Settlement Systems (CPSS), the BIS proposed a set of standards for the central clearing of derivatives that was adopted by the G-20 members and some FSB members in 2012. According to the FSB, these standards harmonize, strengthen, and replace previously separate sets of international principles for financial market infrastructures. In addition, the standards "seek to enhance safety and efficiency in payment, clearing, settlement and recording arrangements and, more broadly, to limit systemic risk and foster transparency and financial stability." According to the BIS, the "nature of counterparty exposures in OTC derivatives markets is widely considered to have exacerbated" the 2008-2009 financial crisis, and "exposures were often inadequately collateralized." The BIS also concluded that: "[C]learing trades centrally can mitigate these structural weaknesses." About half of all derivatives contracts are not cleared by a CCP, but are simply settled as bilateral contracts. This has arguably resulted in a proliferation of redundant overlapping contracts, exacerbating counterparty risks and adding to the complexity and opacity of the interconnections in the financial system. CCPs are expected to reduce counterparty credit risk by (1) imposing multilateral netting of exposures whereby market participants net all of their derivative positions with a common counterparty; and (2) reducing risk by enforcing collateralization of exposures. The G-20 leaders agreed that all standardized derivatives contracts should be cleared through central counterparties by the end of 2012 to help mitigate systemic risk. That potentially means a sharp increase in the volume of transactions and in the collateral requirements of central counterparties. Non-centrally cleared contracts should be subject to higher capital requirements, according to the Basel Committee on Banking Supervision. These standards also include measures for evaluating the factors that should be taken into account when determining whether a derivative contract is standardized and, therefore, suitable for clearing. According to 2012 data used by the FSB, 40% of interest rate derivatives were cleared through a central counterparty (CCP); but only about 10% of credit default swaps were cleared by a CCP. Except for the United States, few of the G-20 nations were confident that significant proportions of credit or commodity derivatives would be centrally cleared by year-end 2012, and no G-20 country indicated that large proportions of equity or foreign exchange derivatives would be centrally cleared by year-end 2012. Progress : The FSB's October 2012 report indicated that the EU, Japan, Hong Kong, and the United States had taken significant steps towards implementing legislation that mandates central clearing of standardized OTC derivatives. Other jurisdictions were generally less advanced, but reported making progress. Also, the FSB noted that in many jurisdictions, including the United States, Japan, and the EU, legislative changes must be followed up with more technical implementing regulations in order for the requirements to become fully effective. Some jurisdictions have been waiting for the key elements of the regulatory frameworks adopted in the United States, Japan, and the EU before adopting their own regulations. According to the FSB, the basic market infrastructure is in place and "does not appear to be an impediment to further progress in meeting the G-20 commitments for OTC derivatives trading, central clearing, and reporting." The FSB also concluded that regulatory uncertainty remains the "most significant impediment to further progress and to comprehensive use of market infrastructure." As a result, it urged jurisdictions to promptly put in place their legislation and regulations. According to the FSB, most of the jurisdictions in the G-20 countries require CCPs to register or obtain an exemption from registration from the relevant domestic regulators in that jurisdiction in order to provide clearing services to its domestic market participants. This registration requirement applies both where the CCP has a local presence and where it offers cross-border services, which means that CCPs intending to offer services in multiple locations are required to register in multiple jurisdictions in order to provide services to market participants operating in those jurisdictions. These requirements are being felt by some of the largest banks and brokerage firms in the world, with subsidiaries, affiliates, or branches in multiple jurisdictions that serve as clearing members of CCPs. Latest D evelopments : In October 2012, the FSB reported a number of conclusions following a survey of the G-20 members on the extent and progress of meeting the year-end 2012 goal of broad-based central clearing of derivatives contracts. The main FSB conclusions are 1. CCPs are available to clear some OTC derivatives products in each of the five asset classes (foreign exchange contracts; interest rate contracts; equity-linked contracts; commodity contracts; and credit default swaps), with many of the CCPs expected to expand clearing services in the near term. 2. Of the 19 CCPs included in the FSB's survey, 9 are located in different jurisdictions; 5 reported offering services across borders and being registered in multiple jurisdictions, while 13 were supervised in and offered services in the same jurisdiction in which they are located. 3. CCPs apply their membership criteria to applicants located domestically and abroad, but direct clearing members generally are located in the same jurisdiction as the CCP. 4. Timelines for clearing new products vary considerably based on the complexity of the product; in some cases, CCPs were unable to estimate the time for introducing new products because of variation in risk management procedures and regulatory approvals. 5. Approximately half of the CCPs reported operational links to other types of market infrastructure, most commonly organized trading platforms and other CCPs. The FSB also published in November 2012 the results of a survey concerning approaches the G-20 and FSB countries expect to take on central clearing. The survey asked the countries whether their approach to central clearing would be based on the use of domestic clearing infrastructure or infrastructure located in other jurisdictions, and whether they would impose mandatory clearing requirements or rely on economic incentives, or some combination of both. According to the FSB survey, the majority of countries indicated that market participants would be able to use either domestic or cross-border CCPs to clear OTC derivatives contracts, while some countries indicated that market participants would use domestic CCPs only due to characteristics specific to a particular domestic market. In addition, the FSB concluded that most G-20 members will adopt mandatory clearing requirements or, as is the case with the United States and the EU, a combination of mandatory clearing requirements and economic incentives, to meet the G-20 commitment to have all standardized OTC derivatives contracts centrally cleared by year-end 2012. Some countries, however, have expressed concern about "fair and open" access to central clearing parties. In response, the Committee on Payment and Settlement Systems of the BIS produced a set of 24 principles for financial market infrastructures (FMIs), covering such areas as general organization; credit and liquidity risk management; settlement; central securities depositories and exchange-of-value settlement systems; default management; general business and operational risk management; access; efficiency; and transparency. The committee concluded that: Fair and open access to FMI (financial market infrastructures) services encourages competition among market participants and promotes efficient and low-cost clearing and settlement ... participation requirements should therefore encourage broad access, including access by participants, other market infrastructures, and where relevant service providers in all relevant jurisdictions, based on reasonable risk-related participation requirements. Also, the FSB identified and is coordinating a set of four safeguards for a global framework to help authorities make informed decisions on the appropriate form of central counterparties (CCPs) to meet the G-20 commitment and to ensure that global CCPs do not introduce new systemic risks into the financial system. These four safeguards are 1. Fair and open market access by market participants to CCPs, based on transparent and objective criteria; 2. Cooperative oversight arrangements between relevant authorities, both domestically and internationally and on either a bilateral or multilateral basis, that result in robust and consistently applied regulation and oversight of global CCPs; 3. Appropriate liquidity arrangements for CCPs in the currencies in which they clear; and 4. Robust resolution regimes to ensure that the core functions of CCPs are maintained during times of crisis and that consider the interests of all jurisdictions where the CCP is systemically important. As further guidance on these issues, the BIS published documents relating to the capital requirements for banks dealing with central counterparties and on the recovery and resolution of such financial market infrastructures as CCPs. The report on recovery and resolution provides guidance on the essential features of recovery and resolution regimes that are necessary "to ensure that the core function of the CCPs can be maintained during times of crisis and in a manner that considers the interests of all jurisdictions where the CCP is systemically important." Issue : As previously indicated, the G-20 leaders agreed at the Pittsburgh Summit in September 2009 that all standardized OTC derivative contracts should be traded on exchanges or electronic trading platforms, where appropriate, and cleared through CCPs by the end of 2012. At the time of the summit, nearly 90% of derivatives contracts were transacted over-the-counter, or directly between two contracting parties without the use of an exchange or other intermediary. To assist in making the transition to trading platforms, the G-20 tasked the BIS and such other organizations as the International Organization of Securities Commissions (IOSCO) to provide guidance and recommendations. These organizations utilized a broad spectrum of legal and regulatory regimes that had been developed over time to regulate the trading of derivatives. In addition, there were existing, well-established international principles for securities regulation that include standards for the organization of secondary market trading. These legal and regulatory regimes and basic principles share a common purpose with the more current efforts at reform: ensuring that the trading architecture provides an orderly market that protects investors. Whether measured by turnover, notional outstanding value, or number of contracts, approximately three-quarters of total derivatives are interest rate derivatives. Currently, trading platforms fall into two broad categories: those with multiple liquidity providers, or multi-dealer platforms; and those with a single liquidity provider, or a single-dealer platform. These platforms fulfill broadly the same function, but they may differ in the trade execution models they use to affect the transactions. There also may be differences in the participants that are covered by the various platforms: there may be differences in the degree of automation, the scope of asset class of products that are covered, and the geographic coverage. There are five common forms of trading platforms: An order book system , which typically is fully automated and provides a system in which market participants can enter multiple bids and offers, observe bids and offers entered by other market participants, and choose to transact such bids and offers. A market maker system has one or more liquidity providers who are willing to deal on a regular or continuous basis against their proprietary capital by providing quotes to buy and sell financial instruments which are accessible to other participants in the system. Such systems can be organized on the basis of a single dealer, which acts as a counterparty to each trade, or on the basis of multiple dealers that compete for participant business. A periodic auction system in which orders are processed in batches at set intervals according to a pre-determined trading algorithm. A bulletin board system that provides an electronic quotation medium for market participants to originate, update, and display quotations in specific instruments. A hybrid system is a term that is used to describe a large variety of trading functionalities that have been refined to meet the needs of particular markets, and which may blend some of the functions of the other systems. Progress : The FSB concluded in its October 2012 report that progress in enacting legislative and regulatory frameworks for implementing the commitment to trading standardized derivatives on exchanges and electronic platforms was markedly behind the progress made toward other commitments, that progress did not appear to be on track to meet the year-end 2012 deadline, and that the most important factor inhibiting the development of trading infrastructure was uncertainty over the regulatory framework. As of October 2012, only the United States had adopted legislation that requires standardized derivatives be traded on exchanges and electronic platforms. Outside the United States, the derivatives classes for which organized platform trading are most widely available are credit default swaps and interest rate swaps. The FSB argues that, at the very least, requiring transparency in reporting the price and volume of OTC derivatives transactions should serve to inform decisions regarding mandatory organized platform trading. Latest Developments . According to the FSB's October 2012 survey, the most commonly cited reason for the lack of more widespread development and use of organized trading platforms is uncertainty about the scope and form of requirements for OTC derivatives to be traded on organized trading platforms. In addition, market infrastructure operators face challenges in creating the appropriate technology to interface with clients and other infrastructure, which could create efficiencies that would create incentives to build links with other infrastructure. The FSB also concluded that: 1. Trading infrastructure is less developed than infrastructure for central clearing and trade reporting, due to uncertainties about the scope and form of future regulatory frameworks for organized platform trading. 2. Organized trading platforms currently are available for trading certain derivatives products, primarily credit and interest rate swaps. 3. Features of existing organized trading platforms vary, reflecting a range of characteristics. 4. Most of the organized trading platforms are headquartered in Europe or the United States, with global online access and local offices and trading screens in other markets. 5. The extent that organized trading platforms are linked to other infrastructure varies, but is likely to increase. 6. New trading platforms are expected to become operational relatively quickly once regulatory frameworks for mandatory organized platform trading are put in place. 7. Some degree of product standardization is a prerequisite for an OTC derivative to be transacted on an organized trading platform. Steps to increase product standardization can lead to improved market liquidity, pricing, and transparency. Issue : Trade repositories are intended to provide national authorities with a global view of the OTC derivatives markets through full and timely access to the data they need to carry out their respective mandates. This mandate includes (1) assessing systemic risk and financial stability; (2) conducting market surveillance and enforcement; (3) supervising market participants; and (4) conducting resolution activities. In the FSB's October 2012 survey, it concluded that TRs (except for two TRs located in the European Union) predominantly serve market participants located in their home jurisdictions. Progress : The FSB has concluded that currently there is no single, industry-wide format for data reporting, processing, and storage of OTC derivatives trade data. This lack of a common format compromises one of the major objectives of the reporting requirement: the ability to aggregate OTC derivatives data across multiple TRs to support the objectives of supervisory and regulatory authorities. This issue is being addressed in a number of ways, including the development of a global Legal Entity Identifier (LEI) system through the FSB, which noted that the finance sector lags behind other industries in agreeing on and introducing a consistent global framework for entity identification. The LEI system is considered to be an important "building block" in contributing to and facilitating such financial stability objectives as (1) improved risk management in firms; (2) better assessment of micro and macroprudential risks; (3) facilitation of orderly resolution; (4) containing market abuse and curbing financial fraud; and (5) enabling higher quality and accuracy of financial data overall. As a first step, the FSB proposed the development of a Regulatory Oversight Committee (ROC) charged with responsibility for the governance of the global LEI system. A draft charter for the ROC was approved by the G-20 members in November 2012, and the ROC became operational in January 2013. Currently, the ROC is comprised of 45 authorities, primarily central banks, and 15 observers. The United States is represented by the Board of Governors of the Federal Reserve System, the Department of the Treasury, the Commodity Futures Trading Commission, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Securities and Exchange Commission. The Federal Reserve Bank of New York has observer status. Latest Developments : The FSB October 2012 report also concluded that 1. TRs exist for reporting in each of the five asset classes (foreign exchange contracts; interest rate contracts; equity-linked contracts; commodity contracts; and credit default swaps), with the greatest progress being made in reporting credit, interest rate, and equity derivatives. 2. A number of TRs are planning to extend the asset classes for which they accept trade reporting. 3. Few TRs currently have links to other FMIs. 4. The majority of TRs report that the G-15 dealers are either ready now to comply with mandatory trade reporting or are expected to be ready by year-end 2012. 5. TRs' estimates of the time required for new clients to complete the necessary administrative and technological steps to register with a TR and start trade reporting vary from six weeks to three months. 6. There is considerable commonality in the categories of data that are collected and stored by TRs, but there is no single standard format for data reporting and storage and the majority of TRs use proprietary codes and formats, which makes aggregation and reconciliation difficult. 7. Less than half of the TRs surveyed collect data or provide services in relation to portfolio-level information. 8. All TRs report maintaining a range of data security arrangements and safeguards. 9. All TRs provide access for authorities to data stored and to the public in an anonymous and aggregated form. Issue : The Basel Committee on Banking Supervision (BCBS) supported a number of reforms of international standards to ensure that banks have appropriate risk coverage of counterparty credit risk exposures arising from OTC derivatives transactions as part of the Basel III capital framework. The Basel III reforms concerning OTC derivatives strengthen the capital requirements for counterparty credit risk (CCR), or the risk that the counterparty to a transaction is unable or unwilling to meet its obligations. For non-centrally cleared OTC derivatives, banks will be subject to a credit valuation adjustment charge, or the adjustment that quantifies the potential loss caused by changes in the credit quality of the counterparty. Progress : In July 2012, the BCBS issued interim rules on capital requirements for bank exposures to central clearing parties and to clients for whom they perform central clearing services. The capital requirements are meant to ensure that the core functions of central clearing parties, and other types of financial market infrastructures, can be maintained during a crisis, especially when the CCP is considered to be systemically important. In large part, these rules are intended to create incentives for market participants to use CCPs. The interim rules set a nominal risk weight for banks that act as a clearing member of a CCP for their own purposes or on behalf of clients of 2% for trade exposures to a CCP that is supervised, among other requirements. Despite opposition from banks, they will be required to hold capital against the prospect that they may be compelled by market events to draw upon their default fund, something they have not had to do to date. The interim rules also require that banks apply a default risk of 1250% to their default fund contributions of a non-qualifying CCP. When the BIS proposed placing capital requirements on banks for exposure to centrally cleared derivatives, it also addressed the issue of risk exposure to non-centrally cleared derivatives by proposing margin requirements. In particular, the BIS argued that such margin requirements on non-centrally cleared derivatives are necessary in order to (1) mitigate systemic risk associated with the large volumes of OTC derivatives that are not sufficiently standardized for central clearing; (2) ensure that collateral is available to offset losses caused by the default of a counterparty; and (3) limit the buildup of uncollateralized exposures in the financial system. The BIS argued further that margin requirements that reflect the higher risk associated with non-centrally cleared derivatives "complement and support" the G-20 derivatives market reforms, because they promote central clearing by addressing "financial incentives that might otherwise induce market participants to customize contracts and thereby avoid the costs of clearing that arise from CCP's requirements for margin." Latest Developments : The European Banking Authority (EBA) published its final draft regulations on capital requirements for central counterparties on September 26, 2012. According to these standards the capital of a European CCP should at least be equal to the sum of (1) the CCP's gross operational expenses during the time needed to wind down or restructure its activities; (2) the capital necessary to cover the overall operational and legal risks; (3) the capital necessary to cover credit, counterparty credit, and market risks not covered by specific financial resources; and (4) business risk, to be determined by each CCP and the approval of the relevant authority. The FSB is charged with monitoring and reporting on the progress the G-20 nations have made in changing laws and regulations implementing the G-20 recommendations. The latest FSB progress report on OTC derivatives market reforms was published in October 2012, with another report expected to be published in April 2013. Table 2 provides a summary of the progress G-20 members and some FSB members have made in adopting and implementing legislation and regulations regarding OTC derivatives markets. Some countries, principally those with limited derivatives markets, tend to lag behind other countries, such as the United States, with advanced and extensive derivatives markets. According to the FSB data in Table 2 , the surveyed countries have made the most progress in adopting measures regarding reporting to trade repositories and the least progress in implementing margin requirements for non-centrally traded derivatives. The report is based on a questionnaire sent to the FSB member countries covering the members' work plans and progress to date in implementing OTC derivatives market reforms. Although the survey generally solicits simple Yes/No responses, the survey also requests detailed explanations on some issues. Responses by the individual FSB members are available to the members, but are not provided to the public. For individual country detail, see Appendix B to this report. The FSB concluded in its October 2012 report that Australia, the European Union, Hong Kong, Japan, and the United States had progressed in implementing regulations governing central clearing and reporting to trade repositories. The FSB concluded that the countries surveyed are committed to changing their legislative and regulatory framework to achieve the G-20 objectives, but that some jurisdictions were "waiting for key elements of the regulatory framework in the EU, Japan, and the United States to be finalized before putting their own legislation in place." The FSB also noted that important standard setting bodies had made "significant" progress in developing the international policies that facilitate the advancement of OTC derivatives reform across jurisdictions and that those jurisdictions needed to "promptly develop and implement legislative and regulatory frameworks." The FSB concluded, however: But legislation and regulation are not by themselves enough. Market participants need to take practical steps to ensure that the necessary market infrastructure is available by further expanding the number and scope of OTC derivatives transactions that are standardized, centrally cleared, traded on organized platforms and reported to TRs. Failure to implement the commitments by the agreed deadline risks a loss of momentum for reform, in addition to failing to deliver the benefits of improved transparency, mitigation of systemic risk, and protection against market abuse. In October 2012, the FSB offered three general conclusions concerning the state of regulatory development of OTC derivatives trading among the G-20 members: 1. Market infrastructures regarding OTC derivatives trading, central clearing, and reporting are in place and can be scaled up; 2. The international policy work on the four safeguards (fair and open markets, cooperative oversight arrangements, liquidity arrangements, and robust resolution regimes) for clearing derivatives through global counterparties is substantially completed and implementation is proceeding at a national level; and 3. The most significant impediment to further progress appears to be uncertainty regarding the regulatory framework. In addition to the general conclusions, the FSB issued a series of specific conclusions regarding the readiness of the G-20 members to meet the self-imposed deadline of year-end 2012 for implementing major reforms in the OTC derivatives market. According to the FSB: 1. Market infrastructure has been set up to provide services to a wide range of the global OTC derivatives markets, including clearing counterparties, that are capable of clearing some products in all asset classes and trade repositories exist for reporting transactions in all asset classes. 2. The proportion of transactions reported to TRs and centrally cleared has plateaued due to uncertainty over the future regulatory framework. 3. Further clarity and consensus regarding "standardization" is needed in order to reduce the risk of regulatory arbitrage in the application of central clearing and organized platform trading requirements. 4. The financial sector should accelerate its work on standardization of both products and processes to increase the use of standardization. 5. Adding new products and participants to organized trading platforms and to trade repositories takes from six months to more than a year. 6. Trade repositories have become an important source of data for authorities; however, significant gaps remain concerning the extent of reporting and the central clearing of products. 7. Impediments to aggregating data may limit progress in further developing the use of trade repositories for regulatory and financial stability purposes. 8. The FSB supports ongoing efforts to improve authorities' access to TR data and guidance on access to TR data. On November 28, 2012, financial market regulators from Australia, Brazil, the European Union, Hong Kong, Japan, Canada, Singapore, Switzerland, and the United States met to discuss progress to date in reforming the OTC derivatives markets and to address cross-border regulatory issues. In a statement, the regulators indicated they support robust and consistent standards in and across jurisdictions, but that complete harmonization, or the perfect alignment of rules across jurisdictions, is unlikely given different legal systems and market conditions. They also indicated that their objective is to prevent regulatory gaps, reduce the potential for arbitrage opportunities, and foster a level playing field for market participants, intermediaries, and infrastructures. They also indicated that conflicting, inconsistent, or duplicative rules inhibit the execution or clearing of cross-border transactions or impose additional compliance burdens. As a result of these concerns, the regulators reached mutual understanding in four areas of principles and areas for exploration. These are listed below. 1. Understanding on Clearing Determinants. The regulators agreed to consult prior to making a final determination regarding which derivatives products will be subject to mandatory clearing requirements. In addition, they agreed that once one of the authorities has decided that a certain product or class of products should be subject to a clearing requirement, then each of the other authorities will consider whether to follow suit. 2. Understanding on Sharing of Information and Supervisory and Enforcement Cooperation . The regulators agreed to adopt supervisory cooperation arrangements to enable effective supervision and oversight of cross-border activity and a bilateral enforcement agreement to provide other national authorities with assistance. 3. Understanding on Timing. While attempting to meet the G-20 timetable of implementing clearing, reporting, trading, and capital requirements by year-end 2012, the regulators acknowledged that differences in implementation dates may create gaps in regulations and uncertainty in the application of certain cross-border regulatory requirements and may lead to risks to financial markets. As a result, the regulators agreed to a "reasonable, limited" transition period to facilitate the implementation of cross-border regulations in appropriate circumstances and in consultation with other jurisdictions. 4. Areas of Exploration . The regulators agreed to follow one of a number of approaches to regulating cross-border activities when more than one set of rules applies: (1) recognize the rules or oversight of another authority; (2) as part of a registration requirement, allow foreign regulations to substitute for applicable domestic regulations; (3) allow foreign regulations to substitute for compliance with otherwise applicable transaction-level requirements; (4) provide different sets of registration categories or provide for the same regulatory requirements to be observed in different ways based on characteristics and activities. On July 4, 2012, the European Parliament and the European Council approved the European Market Infrastructure Regulation (EMIR), which entered into force on August 16, 2012, as the main legislative device for reforming the OTC derivatives market in the EU. The regulation has five major objectives: (1) establish clearing obligations for certain classes of OTC derivatives; (2) establish risk mitigation techniques for non-centrally cleared OTC derivatives; (3) establish reporting obligations to trade repositories; (4) establish organizational, conduct of business, and prudential requirements for central clearing parties; and (5) establish requirements for trade repositories, including the duty to make certain data available to the public and to relevant authorities. The EMIR requires the central clearing of all standardized OTC derivatives contracts that are judged to be subject to the clearing obligation. The definition of a standardized OTC derivatives contract follows the one developed by the FSB. The European Securities and Markets Authority (ESMA) developed draft technical standards after soliciting public comments. The standards specify the criteria for identifying those OTC derivatives that will be covered by the central clearing obligation, prudential requirements for CCPs, and the data to be reported to trade repositories. The European Commission expected to approve the standards by the end of 2012 and implement them in the first quarter of 2013. On February 6, 2013, however, the Economic and Monetary Affairs Committee (ECON) of the European Parliament voted to reject two of the six proposed regulations proposed by the ESMA. The two regulations concerned (1) indirect clearing arrangements, the clearing obligation, the public register, access to a trading venue, non-financial counterparties, and risk mitigation techniques for OTC derivatives contracts not cleared by a central counterparty; and (2) requirements for central counterparties. ECON's rejection of the proposed rules was sent to the European Parliament on February 6, 2013, for consideration. Parliament's approval of ECON's recommendation was expected to delay implementation of any of the proposed rules for at least six months. Faced with such a prospect, the European Parliament and the ESMA reached a compromise deal on February 7, 2013, that allowed energy and technology companies among non-financial firms, which deemed the standards to be too burdensome, to postpone implementation of the proposed standards for three years. The remaining standards will be implemented around mid-March 2013. The European Union has addressed the issue of the cross-border application of rules and regulations on OTC derivatives markets through the EMIR and proposed revisions of the Markets in Financial Instruments Directive and Regulation (MiFID and MiFIR). The EMIR contains a mechanism that attempts to avoid duplicative or conflicting rules, including a process for recognizing "equivalent" regimes in other jurisdictions where specified conditions are met. The EMIR permits the EC to declare that the legal, supervisory, and enforcement arrangements of another jurisdiction are equivalent to those in the EMIR for clearing and reporting obligations, risk mitigation techniques, non-financial counterparties, and implementing the framework. Where such a decision exists, an EU counterparty transacting with a foreign counterparty can apply the foreign jurisdiction's rules and be judged to have complied with its obligations under the EMIR. The EMIR also provides for recognition of foreign CCPs and foreign TRs, which allow a CCP or TR established outside the EU to provide its services to EU entities. To qualify, the EC must determine that the foreign entity is subject to equivalent rules and supervision and the European Securities and Markets Authority (ESMA) must have a cooperation agreement with the foreign authorities. Similarly, foreign trade repositories must be judged by the EC to be subject to equivalent rules and standards of supervision in its country of origin, and there must be an international agreement between the EU and each foreign authority and cooperation agreements with ESMA and the foreign authorities. The Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission of Hong Kong (SFC) have developed proposals to implement all of the OTC derivatives market reforms recommended by the G-20 countries. Hong Kong also began consultations on the scope of certain newly introduced regulated activities and the regulation of systemically important entities, which the Hong Kong authorities intend to have incorporated into proposed legislation by early 2013. Although the proposals indicate that no requirement will be mandated to require derivatives be traded on organized trading platforms, such an option is available to the regulators and potentially could be implemented following the completion of additional research into the best process to implement such a requirement. Currently, the proposed framework for regulating OTC derivatives includes defining the scope of the term "OTC derivatives transactions"; products subject to mandatory reporting and clearing; application of mandatory reporting obligations; application of mandatory clearing obligations; regulation of CCPs; capital and margin requirements; regulation of intermediaries; and oversight of "systemically important players." The Hong Kong proposal also will allow CCPs to accept members from other entities regulated by an "acceptable overseas jurisdiction" as determined by the HKMA and SFC. In addition, Hong Kong has added location requirements for reporting to trade repositories. All derivatives transactions that have a bearing on Hong Kong's financial markets would be required to be reported to the HKMA trade repository, reportedly to allow the Hong Kong authorities to obtain relevant OTC derivatives information as quickly and directly as possible. Hong Kong provides for exceptions for both clearing and reporting for central banks, monetary or similar bodies and certain global institutions, and clearing exemptions for intra-group transactions, transactions involving non-financial entity end-users engaged in commercial hedging activities, and transactions involving "closed market" participants. On September 6, 2012, the Japanese Diet approved revised legislation on the use of electronic trading platforms and market transparency. This legislation will be phased in over three years to give market participants time to comply fully with the new requirements. Initially, the requirements will apply to OTC derivatives, primarily Japanese yen-denominated interest rate swaps, which are standardized and maintain adequate liquidity. The plan envisages that yen-denominated interest rate swaps will be subject to mandatory clearing requirements, with the scope of products expanded to include foreign currency (both U.S. dollar and euro) denominated interest rate swaps and credit default swaps referenced to Japanese companies. In addition, mandatory clearing requirements will be applied to transactions in OTC derivatives products that are subject to mandatory clearing between large domestic financial institutions registered under the Financial Instruments Exchange Act (FIEA), that are members of the clearing organization the Japan Securities Clearing Corporation (JSCC), or that are subsidiaries of a parent company that is a member of JSCC. This requirement could be expanded to include foreign financial institutions under certain conditions. According to the new legislation, financial institutions registered with the FIEA will be required to report their OTC derivatives transactions to trade repositories. Such TRs will be available for credit derivatives transactions and forward, option, and swap transactions. A detailed look at the FSB's assessments of each G-20 country's progress in implementing reforms, based on each country's responses to a survey provided by the FSB semi-annually, is provided in the Appendix to this report. Congress has addressed directly the governance of the derivatives market through the Dodd-Frank Wall Street Reform and Consumer Protection Act ( P.L. 111-203 ). The Dodd-Frank Act, in its Title VII on OTC derivatives reform, addresses each of the major G-20 commitments. Often, final implementation is left to the relevant executive agencies, particularly the CFTC and the SEC—though with additional roles for the prudential regulators. Section 722 of the Dodd-Frank Act amended the Commodity Exchange Act's Section 2 to limit the applicability of the act's swaps market reforms so that they "shall not apply to activities outside the United States unless those activities—'(1) have a direct and significant connection with activities in, or effect on, commerce of the United States." However, the act left to the CFTC to determine which such activities related to the swaps markets do have such a direct and significant connection. Congress would have an oversight role in this CFTC determination—an important one, due to the global nature of the OTC derivatives markets. On July 12, 2012, the CFTC issued proposed guidance on "Cross-Border Application of Certain Swaps Provisions of the Commodity Exchange Act." The guidance was aimed at setting out how certain requirements in Title VII, such as the clearing, trade execution, registration of a person as a swap dealer or major swap participant, and other reporting and recordkeeping provisions, would apply to cross-border swaps that may be transacted across national boundaries. Under the guidance, foreign firms that do more than a de minimus amount of OTC derivatives markets activity as swap dealers would register with the CFTC. Foreign firms that do register with the CFTC, however, would be allowed to substitute compliance with a comparable and comprehensive foreign regulatory regime, for U.S. regulatory compliance. This potential for substituted foreign compliance further invokes a determination of how much regulatory progress other G-20 countries have achieved in derivatives reforms, in comparison to the United States. Again, Congress is involved through its oversight of the CFTC, which will make these assessments. This determination by the agency could potentially affect U.S. businesses with foreign operations and their dealings with non-U.S. clients and foreign businesses with U.S. operations. Indeed, the 112 th Congress considered legislation seeking to address questions raised by the extraterritorial nature of the global swaps market and the Dodd-Frank provisions. Bills introduced in the 112 th Congress included H.R. 2779 , exempting from the clearing requirement most swaps between corporate affiliates in the United States and abroad. H.R. 2779 passed the House in the 112 th Congress. Also, H.R. 3283 expressly limited the extraterritorial reach of Dodd-Frank by exempting swaps and security based swaps between U.S. and non-U.S. persons (except for reporting requirements). Such agency rulemakings and proposed legislation raise broad questions for congressional oversight or potential new legislation, such as the following: What connections to the United States would require a non-U.S. person to register as a swap dealer or major swap participant? Which Dodd-Frank Act requirements should apply to the OTC derivatives, or swaps, activities of non-U.S. persons? What about to U.S. persons, and their branches, subsidiaries, and affiliates outside of the United States? To the extent that Title VII of the Dodd-Frank requirements would apply, under what circumstances should U.S. authorities permit non-U.S. persons to comply with the regulatory regime of a foreign jurisdiction instead of complying with U.S. requirements? A look at progress achieved by foreign regimes in implementing these G-20 commitments should help Members of Congress and U.S regulators in deliberating these questions. Following the financial crisis of 2008-2009, national leaders in the G-20 have spearheaded reforms in the rules and regulations governing the trading of financial instruments known as derivatives. While these reforms are being implemented, Congress may choose to monitor them carefully to assess the comparability between regulations adopted in the United States and those adopted abroad in markets that serve as competitors for U.S. financial services firms. The objective of these reforms is to establish criteria for standardizing derivatives contracts and to have those contracts traded on organized trading markets through central counterparties that have a capital base that is sufficient to cover any risk exposure. In addition, the data on standardized contracts are expected to be reported to trade repositories and made available to regulators and policymakers in order to assess the stability and performance of the derivatives market. These reforms are being addressed through regulatory changes in five areas: (1) standardizing OTC derivatives contracts; (2) developing international standards and policy for central clearing and for risk management of non-centrally cleared derivatives; (3) developing international standards and policy for exchanges or electronic platform trading; (4) developing the infrastructure to facilitate reporting OTC transactions to trade repositories (TR); and (5) developing and implementing international standards and policies for capital requirements. In addition, as regulators in the United States, the European Union, and elsewhere craft new rules to govern the OTC derivatives markets, they confront the challenge of regulating domestic activity in markets that are fundamentally international in scope. While market participants generally have accepted the fact that the OTC derivatives markets will be reformed, they are closely monitoring how those reforms are implemented and instances of differences in implementation or regulatory arbitrage. As implementation proceeds in both the United States and abroad, Congress may be pressed at times to amend current measures. The FSB has been tasked by the G-20 to coordinate and report on the progress its members have made in adopting various derivatives market reforms. According to the latest report, the surveyed countries are making progress in such areas as having derivatives contracts centrally cleared and reported to trade repositories, but lag behind in standardizing contracts, building up capital reserves, and having contracts traded through exchanges or on electronic platforms. Without a generally accepted definition of what constitutes a standardized derivatives contract, data reported to trade repositories will not be comparable, which would greatly reduce the ability of regulators to make assessments of the state of the derivatives markets. Another key issue is the comparability of reforms across the surveyed countries. While countries are ostensibly meeting the reform objectives of the G-20, it is not possible to assess the quality of the current reforms and the potential for regulatory arbitrage. This is particularly true for G-20 members that currently are not hosts to large volumes of derivatives trading and may have relatively under-developed capital markets. As a result of a survey of the efforts made to date by G-20 members and some FSB members, the Financial Stability Board concluded in October 2012 that: Regulators and derivatives market participants were struggling to meet their commitments to implement market reforms by the end of 2012. While significant progress has been made in constructing the architecture for standardizing, clearing, and reporting derivatives contracts, regulators are juggling sometimes conflicting objectives. In particular, market participants are pressuring regulators to develop a common set of rules to reduce the prospects of regulatory arbitrage and to reduce regulatory uncertainties in cross-border transactions. Regulators in a number of countries surveyed by the FSB are closely gauging their own actions to ensure that any regulations they propose are aligned with those of the market leaders, principally the United States and the European Union. In addition, few of the surveyed countries have adopted measures for building capital reserves. Various countries face impediments in reforming the way derivatives are traded and reported, the most important being uncertainty over the regulatory framework that is being developed in the United States and European Union. As a group, the G-20 countries and the FSB members have committed to adopting legislation and regulations to fully implement the G-20 reforms, but few nations have progressed as far as the United States and most are either drafting or still finalizing regulations. According to the FSB, the market infrastructure is mostly in place for greater coordination of efforts regarding standardizing, clearing, and reporting on derivatives contracts. A lack of regulatory conformity, however, appears to be impeding progress. For instance, market leaders remain uncertain over the definition of what constitutes a standardized derivatives contract and, therefore, are hesitant to adopt regulations on clearing and reporting relative to standardized derivatives contracts. Trade repositories are positioned to report on each of the five asset classes (foreign exchange contracts; interest rate contracts; equity-linked contracts; commodity contracts; and credit default swaps). Nevertheless, there is no single standard format for data reporting and storage, and the majority of TRs use proprietary codes and formats, which make aggregation and reconciliation difficult, thereby undermining one of the main objectives in collecting and reporting data on derivatives contracts. Furthermore, these efforts are closely tied to efforts to overcome the lack of a single, industry-wide format for data reporting, processing, and storage of OTC derivatives trade data. This lack of a common format defeats one of the major objectives of the reporting requirement: the ability to aggregate OTC derivatives data across multiple TRs to support the objectives of supervisory and regulatory authorities. Appendix A. Glossary Bank for International Settlements (BIS) : headquartered in Basel, Switzerland, BIS serves the specialized needs of central banks and international organizations by promoting collaboration among central banks, conducting research, acting as a prime counterparty for central banks in their financial transactions, and serving as an agent or trustee in connection with international financial operations. Basel Committee on Banking Supervision (BCBS) : provides a forum for cooperation on banking supervisory matters by working to improve the quality of banking supervision worldwide; it seeks to reach a common understanding of key supervisory issues by exchanging information on national supervisory issues, approaches and techniques; at times, the BCBS uses this common understanding to develop guidelines and supervisory standards, in particular in the area of international standards on capital adequacy, the Core Principles for Effective Banking Supervision, and the Concordat on cross-border banking supervision. Central C ounterparties (CCPs) : act as intermediaries between counterparties to contracts traded in one or more financial markets in a central counterparty system; acts as the buyer to every seller and the seller to every buyer, through a system known as novation (an open-offer system of legally binding contracts), thereby ensuring the performance of open contracts; generally attempts to reduce risks to participants by requiring participants to provide collateral to cover current and potential future exposures. Collateralized D ebt O bligations (CDOs) : are a type of structured asset-backed security whose value and payments are derived from a portfolio of fixed-income underlying assets; CDOs are assigned different risk classes or tranches, with "senior" tranches considered to be the safest. Since interest and principal payments are made in order of seniority, junior tranches offer higher coupon payments (and interest rates) or lower prices to compensate for additional default risk. Investors, pension funds, and insurance companies buy CDOs. CDOs based on sub-prime mortgages were at the heart of the 2008-2009 global financial crises. Committee on Payment and Settlement Systems (CPSS) : established in 1990 by the G-10 countries to address general concerns regarding the efficiency and stability of payment, clearing, settlement, and related arrangements; focuses on issues related to these systems or arrangements and to their relations with the major financial markets for the conduct of monetary policy; and undertakes specific studies at the request of the Governors or on its own initiative. The CPSS is comprised of the central bank Governors of 25 central banks. Credit D efault S waps (CDS) : are a credit derivative contract between two counterparties in which the buyer makes periodic payments to the seller and in return receives a sum of money if a certain credit event occurs (such as a default in an underlying financial instrument). Payoffs and collateral calls on CDSs issued on sub-prime mortgage CDOs were a primary cause of the problems of American International Group, Inc. (AIG) and other companies in the financial crisis. European Market Infrastructure Regulation (EMIR) : is legislation that was adopted by the European Commission in July 2012 and became effective in August 2012 to implement reforms in the over-the-counter derivatives market. Reforms include reporting obligations for OTC derivatives; clearing obligations for eligible OTC derivatives; measures to reduce counterparty credit risk and operational risk for bilaterally cleared OTC derivatives; common rules for central counterparties (CCPs) and for trade repositories; and rules on the establishment of interoperability between CCPs. European Securities and Market Authority (ESMA) : an independent EU authority that helps safeguard the stability of the EU's financial system by ensuring the integrity, transparency, efficiency, and orderly functioning of securities markets, and by enhancing investor protection. The ESMA attempts to improve supervisory convergence among securities regulators and across financial sectors by working closely with the other European Supervisory Authorities competent in the field of banking (EBA), and insurance and occupational pensions (EIOPA). (See http://www.bis.org/publ/cpss101a.pdf .) European Banking Authority (EBA) : established by the European Parliament and Council in November 2010; it assumed the existing and ongoing tasks and responsibilities from the Committee of European Banking Supervisors (CEBS). The EBA acts as the hub in a network of EU and national bodies safeguarding the stability of the financial system, the transparency of markets and financial products, and the protection of depositors and investors. It also acts to prevent regulatory arbitrage; guarantee a level playing field; strengthen international supervisory coordination; promote supervisory convergence; and provide advice to the EU institutions in the areas of banking, payments, and e-money regulation and issues related to corporate governance, auditing, and financial reporting. (See http://www.eba.europa.eu/ .) Financial M arket I nfrastructures (FMIs) : are generally viewed as systemically important multilateral payment systems among participating institutions that facilitate the clearing, settlement, and recording of monetary and other financial transactions, such as payments, securities, and derivatives contracts. According to the BIS, FMIs provide participants with centralized clearing, settlement, and recording of financial transactions among themselves or between each of them and a central party to allow for greater efficiency and reduced costs and risks. Some FMIs are critical in helping central banks conduct monetary policy and maintain financial stability. (See Principles for Financial Market Infrastructures , Bank for International Settlements, April 2012 [ http://www.bis.org/publ/cpss101a.pdf ].) Financial Stability Board (FSB) : was created at the G-20 London Summit in April 2009 as the successor to the Financial Stability Forum; its mission is to coordinate and monitor at the international level the work of national financial authorities and international standard-setting bodies, in the interest of financial stability. The FSB is chaired by Mark Carney, Governor of the Bank of Canada; its Secretariat is hosted by the BIS. U.S. members consist of the Department of the Treasury, the Board of Governors of the Federal Reserve System, and the Securities and Exchange Commission (see http://www.financialstabilityboard.org/ ). Group of Twenty (G-20) : Members of the G-20 consist of the following countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, the United States, and the European Union; serves as a forum for advancing international economic cooperation among 20 major advanced and emerging-market countries. Originally established in 1999 to facilitate discussions among the G-20 finance ministers, its prominence increased with the onset of the global financial crisis in the fall of 2008, and the G-20 started meeting at the leader level. In September 2009, G-20 leaders announced that, henceforth, the G-20 would be the "premier" forum for international economic cooperation. International Monetary Fund (IMF) : originated in July 1944, when representatives of 45 countries met in Bretton Woods, New Hampshire, to develop a framework for international economic cooperation. It currently has 188 member countries, and provides policy advice and financing to members in economic difficulties and also works with developing nations to help them achieve macroeconomic stability and reduce poverty. In particular, the IMF (1) promotes international monetary cooperation and exchange rate stability; (2) provides policy advice to governments and central banks based on analysis of economic trends and cross-country experiences; (3) conducts research, statistics, forecasts, and analysis based on tracking of global, regional, and individual economies and markets; (4) provides loans to help countries overcome economic difficulties; (5) provides concessional loans to help fight poverty in developing countries; and (6) provides technical assistance and training to help countries improve the management of their economies. International Organization of Securities Commissions (IOSCO) : was created in 1983. It sets standards for securities markets. Its membership regulates more than 95% of the world's securities markets and it is the primary international cooperative forum for securities market regulatory agencies. Legal Entity Identifier (LEI) : a program designed to create and apply a single, universal standard identifier to uniquely identify any party to a financial transaction internationally. It helps regulators conduct more accurate analysis of global, systemically important financial institutions and their transactions with all counterparties across markets, products, and regions, allowing regulators to better identify concentrations and emerging risks. Trade R epositories (TRs ) : are entities that maintain a centralized electronic record of transaction data. Timely and reliable access to data stored in trade repositories potentially can enhance the transparency of transaction information to relevant authorities and the public to identify and evaluate the potential risks posed to the broader financial system, promote financial stability, and support the detection and prevention of market abuse. Appendix B. Individual Country Progress in Implementing Derivatives Market Reforms This Appendix presents detailed information on the progress the G-20 members, except France, Germany, and Italy, which are represented by the European Union, and such FSB members as Singapore and Switzerland, have made in meeting the G-20 self-imposed deadline of adopting reform measures by year-end 2012. The detailed information reflects self-assessments by the individual countries and is cumulative over the four surveys that have been conducted to date. The latest survey was published in October 2012. Argentina Standardization . The share of OTC derivatives composed of standardized derivatives is expected to have increased substantially by the end of 2012. Derivatives are traded through Mercado Abierto Electronico (MAE) and two other exchanges, which account for 75% of all derivatives contracts traded in Argentina. Central bank regulations were changed in order to provide for a regulatory stimulus for using guarantees and central clearing parties (CCPs) by all financial institutions supervised by the Central Bank. Argentina argues that it has no need for developing new regulations, but will expand the variety of contracts offered. Central Clearing . No central clearing. Central bank regulations provide incentives to trade derivatives on organized platforms that provide for central clearing. Exchange or Electronic Platform Trading . Argentina has a central bank regulation in place that provides incentives to trade derivatives on organized platforms that provide for central clearing. The Comision Nacional de Valores (CNV) regulates the securities markets in Argentina and requires all or any subset of standardized derivatives to be traded on exchanges or electronic trading platforms. MAE, the electronic securities and OTC derivatives trading market in Argentina, is considering increasing the standardized derivative products that can be traded on this platform. CNV requires firm use a common soft for trading negotiable securities that ensures standardization. Transparency and Trading . Argentina permits a single dealer functionality. Pre-trade price and volume transparency is required for all exchange or electronic-platform-traded and OTC derivatives. Post-trade price and volume transparency is required for all exchanges or electronic-platform-traded and OTC derivatives. Reporting to Trade Repositories . No laws are in place or are expected to be in place by year-end 2012 that require all OTC derivatives transactions to be reported to trade repositories. Derivatives operations of banks with cross-border counterparties, the bulk of OTC transactions, are subject to reporting and monitoring by the Central Bank. Legislative and/or regulatory steps have been completed toward implementing a reporting requirement. No additional legislative or regulatory steps are needed for a reporting requirement to be effective. Regulations require reporting to a governmental authority in place of a specifically designated trade repository. Application of Central Clearing Requirements . Derivatives under the jurisdiction of the CNV must be centrally cleared. Central clearing requirements cover all types of financial entities under the jurisdiction of the CNV. Current laws or regulations do not provide for intra-group transactions that are not traded through regulated markets. Australia Standardization . The main derivatives traded in Australian markets are interest rate and foreign exchange products, which already are fairly standardized. The Australian government introduced into the Parliament a legislative framework to allow requirements to centrally clear standardized derivatives through central counterparties. Implementing regulations and rules would be necessary before mandatory obligations are imposed. Australian regulators are considering changes to implement Basel III by January 2013. Central Clearing . Government has introduced legislation to establish a flexible framework for regulators to impose mandatory trade reporting, central clearing, and trade execution obligations on participants, and also establish licensing requirements for trade repositories. Exchange or Electronic Platform Trading . The government introduced into Parliament a legislative framework to require trading of standardized derivatives on trading platforms or exchanges, with final adoption of the legislation expected by the end of 2012. Implementing regulations and rules need to be developed prior to full implementation of the legislation. Transparency and Trading . Under current law, which is under review, a single-dealer platform is not required to be regulated as a market. Consequently, under the current market licensing regime if mandatory trading is imposed it would initially be on platforms or markets which offer multi-dealer functionality. Pre-trade price and volume transparency is under review for all exchange or electronic-platform-traded and OTC derivatives. Post-trade price and volume transparency is under review for all exchanges or electronic-platform-traded and OTC derivatives. Reporting to Trade Repositories . The Australian government introduced into Parliament a legislative framework to allow the imposition of mandatory trade reporting of OTC derivatives. The government expects the legislation to be in effect before the end of 2012, but implementing regulations and rules would be required before any mandatory obligations could be imposed. It also determined that if trade repositories are not available, the legislation would permit the imposition of a requirement that data be reported to a prescribed governmental authority. Application of Central Clearing Requirements . Australia is developing a framework that does not specify any asset classes that are exempt from the central clearing requirements. However, implementation of any central clearing requirements will be considered on an asset class basis and will likely be harmonized with requirements in major jurisdictions. The framework being adopted does not specify any entities that are exempt from the central clearing requirements. However, implementation of any central clearing requirements likely will be considered on an asset class basis and take into account the impact on financial and non-financial entities. Coverage will be coordinated with other FSB members. Current laws or regulations for intra-group transactions are under review. Brazil Standardization . Brazil's derivatives markets are already highly standardized. Central Clearing . Existing legislation requires all exchange-traded derivatives to be centrally cleared; non-exchange traded derivatives may be bilaterally risk managed or centrally cleared at the option of the counterparties. Mandatory clearing requirements apply only to exchange-traded derivatives. Exchange or Electronic Platform Trading . Does not have a law or regulation in place requiring all or any subset of standardized derivatives to be traded on exchanges or electronic trading platforms, but provides capital incentives for use of exchange-traded derivatives. Transparency and Trading . Multi-dealer functionality is required. Pre-trade price and volume transparency is required for the 90% of the market that is exchange-traded; no pre-trade requirement exists for the 10% of the market that is OTC derivatives. Post-trade price and volume transparency is required for all exchanges or electronic-platform-traded and OTC derivatives. Reporting to Trade Repositories . Laws currently are in place or are expected to be in place by year-end 2012 that require all OTC derivatives transactions to be reported to trade repositories. Pre-existing laws enacted by the Central Bank and Comissao de Valores Mobiliarios (CVM) (Securities and Exchange Commission of Brazil) require all OTC derivatives trades to be reported to a trade reporter. Also, derivatives transactions must be registered to have legal validity. No additional legislative or regulatory steps are needed for a reporting requirement to be effective. Regulations do not require reporting to a governmental authority in place of a specifically designated trade repository. Application of Central Clearing Requirements . Central clearing requirements apply only to exchange-traded derivatives. Current laws or regulations do not provide for intra-group transactions. Canada Standardization . The share of OTC derivatives composed of standardized derivatives is expected to have increased substantially by the end of 2012. Canada is considering new capital standards and regulatory steps relative to trading repositories to be implemented indirectly through Basel III capital standards and trade reporting. Central Clearing . Central clearing is being reviewed with legislation expected before the end of 2012. Legislation is in place in provinces where the majority of OTC derivatives trades are booked, but further work is required to harmonize rules across the provinces. The Canadian Securities Administration is working to identify and implement legislative changes that are needed to support central clearing. Canada is considering a system that would provide for central clearing of systemically important products through a CCP located in Canada for Canadian market participants, with other products cleared offshore. Alternatively, all products could be cleared at existing and planned global CCPs located in Europe or the United States. If this method is adopted, however, Canada supports adopting four safeguards to protect the safety and robustness of the Canadian market: (1) acceptable multilateral cooperative oversight arrangements; (2) satisfactory multi-currency emergency liquidity arrangements; (3) a robust recovery and resolution regime for CCPs; and (4) fair and open access to CCPs. Exchange or Electronic Platform Trading . Reviewing laws or regulations to require all or any subset of standardized derivatives to be traded on exchanges or electronic trading platforms, and is expected to publish a consultation paper in late 2012 to help develop regulations regarding the impact of a trading requirement. Transparency and Trading . Canada is developing a process for developing and implementing reporting regulations, with requirements scheduled to be implemented in 2013. The Canadian Securities Administration published a consultation paper on trade repositories and most jurisdictions are assessing what legislative changes may be required. In some provinces, legislation has been proposed. Canada anticipates that a very small number of trades may not be accepted by trade repositories Reporting to Trade Repositories . Laws will be in place by year-end 2012, depending on legislative changes in rules, to require all OTC derivatives transactions to be reported to trade repositories. The Canadian Securities Administrators published a consultation paper on trade repositories. Most jurisdictions are assessing what legislative changes may be required. Ontario and Quebec have amended legislation to support reporting to trade repositories and regulatory access to the data. It is anticipated that a small number of trades may not be accepted by trade repositories and could be reported to securities regulators. Application of Central Clearing Requirements . Central clearing requirements for coverage of all the asset classes are under review. Foreign exchange swaps and forwards may be exempted with a view toward harmonizing rules with other jurisdictions. Reviewing coverage of central clearing requirements, particular consideration is being given to systemic risk concerns and harmonization with other jurisdictions. Regarding regulations for intra-group transactions, Canadian securities regulators are considering comments received in response to a consultation paper on end-user exemptions. China Standardization . The share of OTC derivatives composed of standardized derivatives is expected to have increased substantially by the end of 2012. China has taken steps to increase the use of standardized products and procedures by adopting an improved Master agreement and Definition document for an electronic trading platform. China has approved the China Foreign Exchange Trading System (CFETS) to introduce standardized post-trade procedures for interest rate swaps. Central Clearing . Central clearing is under consideration. Legislation has not been proposed, but the Shanghai Clearing House is being encouraged to establish detailed schemes for central clearing of OTC derivatives and interest rate swaps. Exchange or Electronic Platform Trading . China is reviewing laws and/or regulations to require all or any subset of standardized derivatives to be traded on exchanges or electronic trading platforms. Has developed an electronic trading platform operated by the China Foreign Exchange Trading System (CFETS). Under regulations developed by the People's Bank of China (PBC), all standardized OTC interest rate and credit derivatives can be traded on the CFETS platform; certain types of derivatives are required to be traded on the CFETS platform. Transparency and Trading . Multi-dealer functionality is required. Pre-trade price and volume transparency is required for all exchange or electronic-platform-traded and OTC derivatives. Post-trade price and volume transparency is required for all exchanges or electronic-platform-traded and OTC derivatives. Reporting to Trade Repositories . Laws currently are in place or are expected to be in place by year-end 2012 to require all OTC derivatives transactions to be reported to trade repositories. Under current rules, all OTC interest rate, FX and credit risk mitigation tools (other than credit risk mitigation agreements) can be traded on the China Foreign Exchange Trade System (CFETS) electronic platform; interest rate trades executed outside the CFETS platform are be reported to CFETS. Additional legislative or regulatory steps are needed to determine the frequency and content of reporting and which institution will play the role of trade repositories. Regulations require reporting to a governmental authority in place of a specifically designated trade repository. Application of Central Clearing Requirements . Central clearing requirements covering all asset classes are under review. Central clearing requirements for all types of financial entities and requirements for intra-group transactions are yet to be determined. European Union Standardization . The share of OTC derivatives composed of standardized derivatives is expected to have increased substantially by the end of 2012. The European Union adopted new regulations through the European Markets Infrastructure Regulation (EMIR). The regulation introduces a reporting obligation for OTC derivatives, a clearing obligation for eligible OTC derivatives, measures to reduce counterparty credit risk and operational risk for bilaterally cleared OTC derivatives, common rules for central counterparties and for trade repositories, and rules on the establishment of cooperation between central counterparties. The EU also adopted changes to the Capital Requirements Directive to implement the Basel III commitments. The EU is also planning additional amendments to the Markets in Financial Instruments Directive (MiFID) that will include a revised directive covering market structure, exemptions from financial regulation, organization and conduct of business requirements for investment firms and trade venues, powers of national authorities, sanctions, and rules for third-country firms operating through a branch. The changes to MiFID also include a new regulation which provides requirements for trade transparency, the mandatory trading of derivatives on organized venues and the provision of services by third-country firms without a branch. In addition, the EU has proposed changes to the Markets Abuse Directive (MAD) governing insider trading and information. Central Clearing . The European Markets Infrastructure Regulation (EMIR) proposal was made in September 2010, which, according to the EU's survey for the FSB, would require all standardized OTC derivatives to be cleared through central counterparties (CCPs). The measure was agreed on in March 2012, with adoption by the European Commission expected by the end of 2012. Additional technical rules are being drafted by the European Securities and Markets Authority (ESMA), the European Banking Authority (EBA), and the European Insurance and Occupational Pensions Authority (EIOPA). The technical standards are expected to be adopted by the end of 2012. Exchange or Electronic Platform Trading . Currently does not have a law or regulation in place requiring all or any subset of standardized derivatives to be traded on exchanges or electronic trading platforms, but the final rules proposed on MiFID and Markets in Financial Instruments Regulation (MiFIR) are expected to be in effect by mid-2014. Proposed amendments to MiFID would require that the trading of all OTC derivatives, subject to central clearing and which are sufficiently liquid, take place on one of three regulated venues: (1) regulated markets; (2) multilateral trading facilities; and (3) the future organized trading facilities. The amendments are expected to be adopted and technical standards developed for full implementation by mid-2014. Transparency and Trading . Multi-dealer functionality is proposed as part of the amended MiFId and MiFIR. Pre-trade price and volume transparency is required for all exchange or electronic-platform-traded and OTC derivatives. Post-trade price and volume transparency is required for all exchanges or electronic-platform-traded and OTC derivatives. Reporting to Trade Repositories . Through the European Markets Infrastructure Regulation (EMIR), laws currently are in place or are expected to be in place by year-end 2012 to require all OTC derivatives transactions to be reported to trade repositories. Technical standards are being developed by the European Securities Markets Authority (ESMA) and are expected to be adopted by the European Commission by year-end 2012. Reporting to the ESMA will be required in instances where a trade repository is not able to record the details of an OTC derivative. Application of Central Clearing Requirements . Central clearing requirements cover all asset classes. Central clearing requirements cover all types of financial entities, except for a temporary exemption for certain pension arrangements. Current laws or regulations exempt intra-group transactions. Hong Kong Standardization . Hong Kong is monitoring developments in the OTC derivatives markets and is consulting with the industry to follow changes. Interest rate swaps and forward contracts (non-deliverable forwards) are already fairly standardized. The Hong Kong Monetary Authority has completed the legislative process for incorporating the Basel III framework into its capital regime for banks for implementation in 2013, which is expected to increase standardization. Central Clearing . Hong Kong has adopted an interim legislative proposal to support voluntary clearing of certain derivatives transactions through local central clearing parties recognized by the Securities and Futures Commission. Hong Kong is drafting legislative amendments on central clearing with the intent of having them adopted by the end of 2012. Regulators are in the process of fine-tuning a regulatory regime for OTC derivatives, including mandatory clearing requirements. Exchange or Electronic Platform Trading . A regulatory proposal reviewed by the Legislative Council is being drafted that will give regulators the authority to impose trading requirements, but the timing of implementing the proposals is subject to further study by regulators. Regulators produced a consultative paper on the proposed OTC derivatives regulatory regime, including a proposal to give regulators authority to make rules to implement a mandatory trading requirement. Hong Kong indicates that it must adopt legislative amendments and engage in further market consultation before finalizing the detailed regulations regarding a mandatory trading requirement. Transparency and Trading . Dealer functionality is under consideration, with a view toward international developments. Pre-trade price and volume transparency is under consideration for all exchange or electronic-platform-traded and OTC derivatives. Post-trade price and volume transparency is under consideration for all exchanges or electronic-platform-traded and OTC derivatives. Reporting to Trade Repositories . Laws currently are in place or are expected to be in place by year-end 2012 to require all OTC derivatives transactions to be reported to trade repositories. A regulatory proposal has been reviewed by a committee of the Legislative Council and legislation is being drafted to be adopted in early 2013 to build the regulatory regime for OTC derivatives (pending detailed rules subject to international developments). Hong Kong intends to take a phased approach, beginning with interest rate swaps and non-deliverable forwards. Regulations that require reporting to a governmental authority in place of a specifically designated trade repository are being developed by the Hong Kong Monetary Authority for submission to the Legislative Council. Legislative amendments must be adopted and further market consultation is also needed before finalizing the detailed regulations on the mandatory reporting requirement. OTC derivatives transactions that have a bearing on Hong Kong's financial market will be required to be reported to the local trade repository to be developed by the Hong Kong Monetary Authority. Application of Central Clearing Requirements . Central clearing requirements covering all asset classes are being phased in. Mandatory clearing is expected to cover standardized interest rate swaps and non-deliverable forwards initially. Additional measures to extend these clearing requirements eventually to cover other types of instruments will be determined after the initial roll-out. Hong Kong's current proposal is to cover financial institutions holding positions above a certain clearing threshold, which is to be determined. Hong Kong's regulators are prepared to consider the possibility of introducing clearing exemptions in respect of intra-group transactions. Specific details on exemptions from clearing will be provided when the regulators consult on the detailed requirements in early 2013. India Standardization . The share of OTC derivatives composed of standardized derivatives is expected to have increased substantially by the end of 2012. The Clearing Corporation of India (CCIL) is expected to start guaranteed settlement in various derivatives. India is planning a gradual approach to developing new legislation. India has achieved standardization relevant to terms of coupon payment, maturity dates, and master agreements for certificates of deposit. Foreign exchange derivatives are essentially standardized. Central Clearing . No central clearing. India has no had non-guaranteed settlement of interest rate swaps since November 2008. Despite not having requirements that interest rate swaps be centrally cleared, 70% of such derivatives are centrally cleared. India is taking progressive steps toward the central clearing of OTC derivatives transactions. India is transitioning to a system of guaranteed settlement of interest rate swaps, but has no immediate timeframe for the guaranteed settlement of credit default swaps. Exchange or Electronic Platform Trading. India does not have a law or regulation in place requiring all or any subset of standardized derivatives to be traded on exchanges or electronic trading platforms. India, however, has mandated a trading requirement for all repurchase agreements in government securities, interest rate swaps, forward rate agreements, and foreign exchange forwards. Explicit authority is required to approve OTC derivatives trading platforms. Transparency and Trading . Post-trade price and volume transparency is required for all exchanges or electronic-platform-traded and OTC derivatives. Single dealer and multi-dealer facilities are available for foreign exchange derivatives. Reporting to Trade Repositories . Laws currently are in place or are expected to be in place by year-end 2012 to require all OTC derivatives transactions to be reported to trade repositories. Banks and primary dealers should report interest rate swaps (IRS) and forward rate agreements (FRA) and foreign exchange derivatives transactions to the CCIL reporting platform. Credit default swaps (CDS) all market makers must report trades on the centralized reporting platform within the stipulated time after execution of the trade. In addition to regulatory guidelines adopted in 2007 and 2011, India issued regulatory guidelines in 2012 for reporting trades of certain forwards, swaps, and options. India is considering a phased in approach to bring any remaining OTC derivatives under the reporting framework. Recommendations have been made to the Financial Sector Legislative Reform Commission to provide appropriate statutory authority for the regulation of trade repositories and for facilitating reporting to and dissemination of information from trade repositories to the appropriate members and regulators. India does not require reporting to a government authority in place of a specifically designated trade repository. Interest rate swaps are being reported to the CCIL and the details are accessible to the Reserve Bank of India. Application of Central Clearing Requirements . Central clearing facility is available for interest rate swaps, foreign exchange forwards, and repurchase agreements in government securities. Central clearing for credit default swaps is being considered, depending on market developments. Central clearing requirements cover all types of financial entities. Current laws or regulations provide for intra-group transactions, provided that the accounts are held separately. Indonesia Standardization . The share of OTC derivatives composed of standardized derivatives is expected to have increased substantially by the end of 2012. Indonesia has approved the exchange trading of standardized derivatives products on the Surabaya Stock Exchange since 2003. Rules on futures contracts and options on securities or on indexes must be traded on an exchange. Indonesia is expected to consider additional legislation in the 2013-2015 timeframe. Central Clearing . Currently, derivatives trading in Indonesia is a relatively low volume activity and takes place only on exchanges, There are no plans to establish a central clearing requirements for OTC derivatives. Exchange or Electronic Platform Trading . Indonesia does not have a law or regulation that requires all or any subset of standardized derivatives to be traded on exchanges or electronic trading platforms. Also, Indonesia does have a rule in place on futures contracts and options on securities or on securities indexes. A revision of the current rules is expected in 2012-2013. Transparency and Trading . Multi-dealer functionality is required. Pre-trade price and volume transparency is required for all exchange or electronic-platform-traded and OTC derivatives. Post-trade price and volume transparency is required for all exchanges or electronic-platform-traded and OTC derivatives. Reporting to Trade Repositories . In Indonesia, derivatives can only be traded on exchanges. Current regulations require that OTC derivative transactions be reported to trade repositories. That requirement, however, covers only debt instruments (non-derivatives). Banks are required to report interest rate derivatives and foreign exchange derivatives to the central bank. There are no proposed changes to laws or regulations. Application of Central Clearing Requirements . Central clearing requirements are under review. Central clearing requirements for all types of financial entities are under review. Japan Standardization . A considerable portion of Japan's derivatives markets is already standardized. Japan amended its Financial Instruments and Exchange Act in May 2010 to improve stability and transparency in the settlement of OTC derivatives and in September 2012 for the use of an electronic trading platform. A Cabinet Office Ordinance was adopted and is being implemented on central counterparties; use of an electronic trading platform is expected to be phased in over three years. Central Clearing . Initially, central clearing requirements will apply only to yen interest rate swaps and credit default swaps. Japan's Financial Instruments and Exchange Act (FIEA) was amended in May 2010, as a step toward mandating clearing of standardized derivatives. Also, a Cabinet Ordinance will be implemented by November 2012 that will include a requirement for a central clearing parties to clear trades "that are significant in volume and would reduce settlement risks in the domestic market." Exchange or Electronic Platform Trading . Legislation was adopted that amended the Financial Instruments and Exchange Act requiring the use of exchange or electronic trading platforms. The changes are expected to be phased in over a period up to three years. Transparency and Trading . Multi-dealer functionality is expected, but single-dealer functionality is accepted. Pre-trade price and volume transparency is being determined for all exchange or electronic-platform-traded and OTC derivatives. Post-trade price and volume transparency is being determined for all exchanges or electronic-platform-traded and OTC derivatives. Reporting to Trade Repositories . Laws currently are in place or are expected to be in place by year-end 2012 to require all OTC derivatives transactions to be reported to trade repositories. The Financial Instruments and Exchange Act was amended to introduce the legislative framework for reporting OTC derivatives transactions to trade repositories. Trade data not reported to trade repositories, primarily data on exotic OTC derivatives, will be reported to the Japan Financial Services Authority (JFSA). A Cabinet ordinance is expected to be completed by November 2012. Data reported to JFSA will be limited to information not accepted by a trade repository, such as exotic OTC derivatives trades. Application of Central Clearing Requirements . A Cabinet Ordinance on central clearing requirements for all asset classes is expected to be implemented by November 2012. Initially, the requirements will apply to Yen interest rate swaps and certain credit default swaps. After November 2012, applicable products will be further expanded based on a review. Central clearing requirements apply to major "Financial Intermediaries Business Operations" and financial institutions. The new Cabinet Ordinance is not expected to cover intra-group transactions. Mexico Standardization . Most OTC derivatives products are already highly standardized. Mexican financial authorities are developing a general framework on financial markets that is expected to be concluded by year-end 2012. Financial authorities are considering specific legislation to regulate derivatives markets. Central Clearing . Mexican authorities expect to enact a law and or secondary regulations to require all standardized OTC derivatives be cleared through central counterparties. The Mexican Financial Authority is expected to develop a general framework and submit it for approval by the legislature. Exchange or Electronic Platform Trading . Authorities plan to enact a law and secondary regulation relative to a subset of standardized derivatives that are to be traded on electronic trading platforms. Financial authorities also are developing a general framework based on the amendments to the secondary regulation to be concluded in 2012. In addition to the regulatory framework, the financial authorities are considering the need for specific legislation to regulate derivatives markets. Transparency and Trading . Multi-dealer functionality is required. Pre-trade price and volume transparency is not required for all exchange or electronic-platform-traded and OTC derivatives. Post-trade price and volume transparency is required for all exchanges or electronic-platform-traded and OTC derivatives. Reporting to Trade Repositories . Authorities plan to enact laws or secondary regulations to require all OTC derivatives transactions be reported to a trade repository. Under current law, banks report OTC derivatives transactions to the Central Bank; legislation is expected to be adopted that will require all OTC derivatives transactions to be reported to trade repositories by year-end 2012. Financial authorities are developing a general framework based on amendments to the secondary regulations to be completed by year-end 2012. In addition, financial authorities are considering developing specific new legislation to regulate the derivatives market. Currently, local financial intermediaries are required to report OTC derivatives to local authorities, but financial authorities intend to have entities report to specifically designated trade repositories. Application of Central Clearing Requirements . As an initial step, peso-denominated interest rate swaps (currently 90% of the domestic OTC derivatives) will be subject to mandatory central clearing. All derivatives determined as standardized by the Central Bank will be subject to the central clearing requirement. Initially, central clearing requirements will only apply to banks and brokerage houses. Current laws or regulations do not provide for intra-group transactions and no exemptions are planned. Russia Standardization . Russia adopted laws on clearing and clearing services that creates a legal basis for a Master agreement, standardized OTC contracts and tax preferences for agreements on standardized terms. Certain tax preferences apply only to agreements on standard terms and close-out netting. As a first step, it introduced classification codes for OTC derivatives. Implementing regulations expected to be in place by year-end 2012. Central Clearing . Existing laws provide for clearing and clearing services and create a legal basis for adopting regulations dealing with central clearing of standardized OTC derivatives. Russia is implementing regulations that are needed to implement central clearing, including close-put netting of contracts concluded under a Master Agreement and aligning close-out netting rules with the Master Agreement. Exchange or Electronic Platform Trading . Russia has adopted a law requiring platform trading of all or any subset of standardized derivatives. It is gaining practical experiences before proceeding with further regulatory measures. Current laws provide authority to adopt implementing regulations. Transparency and Trading . Dealer functionality is being determined. Pre-trade price and volume transparency is required only for exchange-traded derivatives. Post-trade price and volume transparency is being determined for all exchanges or electronic-platform-traded and OTC derivatives. Reporting to Trade Repositories . Laws currently are in place or are expected to be in place by year-end 2012 that will require those transactions that are conducted by professional market participants and transactions that are subject to close-out netting and that are executed under Master Agreements be reported to trade repositories. Such transactions as corporate repurchase agreements, derivatives, and other securities must provide a repository with the information on the transactions. The repository is responsible for maintaining a register of the transactions and for providing the register to the Federal Financial Markets Service. Additional legislative or regulatory steps are needed for a reporting requirement to be effective. Regulations require reporting to a governmental authority in place of a specifically designated trade repository. Application of Central Clearing Requirements. Central clearing requirements cover all asset classes. Central clearing requirements cover all types of financial entities. Current laws or regulations cover intra-group transactions. Saudi Arabia Standardization . Banks already use standardized contracts, known as Customer Treasury Agreements (CTA). A revised version of the CTA is being developed that will incorporate the International Swaps and Derivatives Association (ISDA) and International Islamic Financial Markets standards and Tahawwut (Hedging) Master Agreement (TMA) to standardize sharia law compliant swap-based hedging transactions. The adoption and implementation of the TMA agreement and the requirement by the Saudi Arabian Monetary Authority (SAMA) for all counterparties to use the TMA in place of the CTA will ensure that all counterparties will use a standard contract. Central Clearing . Regulations for central clearing have not been proposed, but the issue is being examined by the Saudi banking authority. A self-assessment conducted by Saudi Arabia indicated that the current and future trading volumes of derivatives are unlikely to justify establishing a domestic clearing counterparty (CCP). Instead, the Saudi Bank is being encouraged to establish clearing relationships with global CCPs. Exchange or Electronic Platform Trading . Saudi Arabia does not have laws or regulations that require all or any subset of standardized derivatives to be traded on exchanges or electronic trading platforms. Saudi Arabia has determined to establish a local Trade Repository under the supervision of the Saudi Arabian Monetary Authority. The proposed TR will provide a mechanism for increasing transparency of OTC derivatives market activity, commitments, and balances. The TR is also expected to serve as the future foundation for any electronic trading on exchanges should the need for such a mechanism arise. Saudi Arabia contends that the TR in tandem with the standardization of the OTC market through the TMA will address regulatory requirements for greater transparency and disclosure. Transparency and Trading . Saudi Arabia has determined that the existing and future volumes do not require setting up electronic trading of exchanges. A self-assessment indicates that the volumes currently be traded do not require pre-trade price and volume transparency or post-trade price and volume transparency for all exchanges or electronic-platform-traded and OTC derivatives. Reporting to Trade Repositories . As a result of a self-assessment, Saudi Arabia is planning on establishing a trade repository under the supervision of the Saudi Arabian Monetary Authority. Officials expect that appropriate regulations will be in place by year-end 2012 to require all OTC derivatives transactions to be reported to trade repositories. Application of Central Clearing Requirements . Central clearing requirements are under review. Central clearing requirements covering all types of financial entities are under review; intra-group transactions are under review. Singapore Standardization . Major dealers in the market are the 14 dealers committed to the "roadmap" plan to increase standardization. Singapore has considered draft legislation to implement Basel III capital requirements and has finalized provisions to be implemented by the end of 2012. Central Clearing . Central clearing is in place. Public consultation concerning proposed policies governing central clearing is expected to be followed by legislation by year-end 2012. Exchange or Electronic Platform Trading . Singapore is expected to introduce legislation in 2012 that will require all or any subset of standardized derivatives to be traded on exchanges or electronic trading platforms. Transparency and Trading . Pre-trade price and volume transparency is not yet determined for all exchange or electronic-platform-traded and OTC derivatives. Post-trade price and volume transparency is being determined for all exchanges or electronic-platform-traded and OTC derivatives. Reporting to Trade Repositories . Laws currently are in place or are expected to be in place by year-end 2012 to require all OTC derivatives transactions to be reported to trade repositories. Legislation is expected to be introduced by year-end 2012 to implement reporting and licensing requirements. Officials are developing detailed regulations, subject to international developments. Application of Central Clearing Requirements . Central clearing requirements cover all asset classes, accounting for systemic risk to the local market and the degree of standardization in the local market. Central clearing requirements will cover all types of financial entities and non-financial entities above a specified threshold that are licensed and regulated by the Monetary Authority of Singapore. Measures being considered would exempt intra-group transactions, subject to the application of stringent risk mitigation requirements. South Africa Standardization . South Africa has adopted a phased-in approach, although the increased use of standardized OTC derivatives is intended, but not expected to increase substantially by the end of 2012. The South Africa Financial Services Board amended its Securities Services Act to strengthen the regulation of unlisted securities, which includes OTC derivatives. A Financial Markets Bill was adopted to improve market supervision, to provide additional protections to investors, and to regulate financial markets to be fair, efficient, and transparent. Central Clearing . Central clearing is in place. A Financial Markets Bill establishing central clearing procedures was submitted to the National Treasury for Cabinet and Parliamentary approval. The Financial Markets Bill and implementing regulations are expected to be adopted by the end of 2012. Exchange or Electronic Platform Trading . South Africa does not have a law or regulation in place requiring all or any subset of standardized derivatives to be traded on exchanges or electronic trading platforms. Currently does not anticipate that electronic trading of OTC derivatives will be required. Transparency and Trading . No decision has been made regarding requirements for electronic trading of OTC derivatives. If a decision is made to require electronic trading, regulators will consider the characteristics of eligible platforms, developments in other jurisdictions, and guidance from the International Organization of Securities Commissions (IOSCO). Post-trade price and volume transparency is required for all exchanges or electronic-platform-traded derivatives, but not for OTC derivatives until they are traded on an exchange. Reporting to Trade Repositories . The Financial Markets Bill (FMB) was submitted for approval by the Treasury, Cabinet and the Parliament that will establish reporting requirements. The FMB and additional legislation is expected to be in effect by the end of 2012. Application of Central Clearing Requirements. Central clearing requirements are under review. Central clearing coverage requirements are under review. Current laws or regulations regarding intra-group transactions are under review. South Korea Standardization . The share of OTC derivatives composed of standardized derivatives is expected to have increased substantially by the end of 2012. Amended its Financial Investment Services and Capital Markets Act to include standardization of OTC derivatives. Additional amendments are expected to be submitted to the National Assembly related to enforcement of ordinances and supervisory regulations. Central Clearing . Central clearing is in place, but the National Assembly is expected to adopt amendments to the Financial Investment Services and Capital Markets Act to provide detailed provisions of enforcement ordinances and supervisory regulations and the establishment and pilot-testing of domestic central clearing. Exchange or Electronic Platform Trading . South Korea does not have a law or regulation in place requiring all or any subset of standardized derivatives to be traded on exchanges or electronic trading platforms. Currently, it is reviewing its policy options. Transparency and Trading . Multi-dealer functionality is required. Pre-trade price and volume transparency is required for all exchange or electronic-platform-traded and OTC derivatives. Post-trade price and volume transparency is required for all exchanges or electronic-platform-traded and OTC derivatives. Reporting to Trade Repositories . Laws currently are in place or are expected to be in place by year-end 2012 to require all OTC derivatives transactions to be reported to trade repositories. The Financial Investment Services and Capital Markets Act and the Foreign Exchange Transactions Act require the reporting of all OTC derivatives transactions to authorities. Additional legislative or regulatory steps are needed to improve some parts of the reporting system to meet international standards. Current regulations require reporting to a governmental authority in place of a specifically designated trade repository. Application of Central Clearing Requirements . Central clearing requirements cover all asset classes. Central clearing requirements cover all types of financial entities. Switzerland Standardization . Switzerland has experienced a greater use of standardized derivatives, it two major banks have committed to increase their use of standardized contracts, and it is making adjustments to comply with the Basel III capital requirements. The Swiss Federal Council decided on a legislative reform package to fully implement the FSB principles regarding OTC derivatives and to improve the regulation of financial market infrastructures. The draft legislation is scheduled for public consultation through the end of 2012. Central Clearing . Central clearing is not yet in place, but legislation is in progress. Draft legislation has been approved by the Swiss Federal Council and is expected to be implemented by the end of 2012 that will implement the FSB principles in the area of OTC derivatives and amend the regulation of financial market infrastructure. Exchange or Electronic Platform Trading . Switzerland's Stock Exchange Act requires exchanges to establish a trade repository of trade details and to publish quotes and volumes of on-exchange and off-exchange transactions; for collateralized certificates. Switzerland has introduced collateralized securities instruments (COSI) services to allow for automated trading, clearing without risk transfer, and settlement of these instruments. Application to OTC derivatives trading is currently under review. The Swiss Federal Council has decided on a legislative reform package to fully implement the FSB principles in the area of OTC derivatives and to improve the regulation of financial market infrastructure based on the analysis of a working group. Draft legislation is scheduled for public consultation in the first half of 2013. Transparency and Trading . Pre-trade price and volume transparency is under review for all exchanges or electronic-platform-traded and OTC derivatives. Post-trade price and volume transparency is under review for all exchanges or electronic-platform-traded and OTC derivatives. Exchanges currently are required to provide pre-trade transparency. Reporting to Trade Repositories . The legislative process is progressing toward adopting measures to require all OTC derivatives transactions to be reported to trade repositories. The Stock Exchanges and Securities Trading Act (SESTA) applies to derivatives traded on exchanges and requires securities dealers to report all the necessary information to ensure a transparent market. The Swiss Federal Council decided on a legislative reform package to fully implement the FSB principles in the area of OTC derivatives and to improve the regulation of financial market infrastructures. Draft legislation is scheduled for public consultation in the first half of 2013. Regulations are under review to require reporting to a governmental authority in place of a specifically designated trade repository. Application of Central Clearing Requirements . Swiss authorities are reviewing central clearing requirements with consideration toward covering. Central clearing requirements that cover all types of financial entities are under review. Current laws or regulations for intra-group transactions are under review. Turkey Standardization . Investment firms are prohibited from trading in OTC derivatives, while banks use standardized derivatives with standardized features. A draft Capital Markets Law was submitted to the Parliament to introduce OTC derivatives as capital market instruments. It is expected to be adopted by early 2013. Additional measures are being reviewed to prepare a legislative framework that complies with the FSB principles. Central Clearing . No central clearing is in place, but the Capital Markets Law was introduced in Parliament in July 2012 and is expected to be adopted. The measure will allow the Capital Markets Board to designate clearing agents to centrally clear OTC derivatives transactions or to require the establishment of central counterparties in certain markets. A working group has been established to develop a legislative proposal to comply with the FSB principles. Exchange or Electronic Platform Trading . Policy options are under review. Transparency and Trading . Pre-trade price and volume transparency is under review for all exchange or electronic-platform-traded and OTC derivatives. Post-trade price and volume transparency is under review for all exchanges or electronic-platform-traded and OTC derivatives. Reporting to Trade Repositories. A proposed Capital Markets Law that was introduced to the Parliament will give the Capital Markets Board (CMB) the authority to require capital markets transactions, including OTC derivatives, to be reported directly to the CMB or to an authorized trade repository. Although not currently required, equity linked OTC derivatives transactions and leveraged foreign exchange transactions are reported to the Istanbul Stock Exchange (ISE) or the ISE Custody and Settlement Bank. Legislation is under review to implement a reporting requirement. A working group was established to prepare a legislative framework that is consistent with FSB principles. The proposed Capital Markets Law is expected to give the CMB the authority to require capital markets transactions, including OTC derivatives, to be reported directly to the CMB or to an authorized TR. Application of Central Clearing Requirements . Turkish authorities are reviewing if central clearing requirements cover all asset classes. Authorities are also reviewing central clearing requirements covering all types of financial entities. Current laws or regulations for intra-group transactions are under review. United States Standardization . The share of OTC derivatives composed of standardized derivatives is expected to have increased substantially by the end of 2012. The Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) developed implementing rules as a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act ( P.L. 111-203 ) regarding processes for determining whether specific derivatives contracts will be subject to mandatory clearing. The CFTC finalized a rule that establishes a schedule for compliance with mandatory clearing requirements for swaps and proposed new rules to require that swaps in four interest rate swap classes and two credit default swap classes be required to be cleared by registered derivatives clearing organizations. The CFTC and SEC have proposed, but not finalized, additional rules designed to promote standardization. Final rules by the CFTC and the SEC are expected to be adopted, including CFTC rules to establish processes to determine whether swaps have been made available to trade and consequently subject to mandatory execution on designated contract markets or swap execution facilities. Central Clearing . With adoption of the Dodd-Frank Act in July 2010, the United States has a law in force requiring all standardized OTC derivatives to be cleared through CCPs, according to the FSB assessment. The CFTC and SEC have adopted final rules regarding processes related to determining whether specific derivatives contracts will be subject to mandatory clearing. The CFTC finalized a rule establishing a schedule for compliance with mandatory clearing requirements and proposed new rules to require that swaps in four interest rate swap classes and two credit default swap classes be required to be cleared by registered derivatives clearing organizations. The CFTC also has finalized rules on clearing documentation, the timing for acceptance of cleared trades, core principles applicable to CFTC-registered derivatives, clearing organizations, and the exception to mandatory clearing for certain non-financial entities using swaps to hedge or mitigate commercial risk. Exchange or Electronic Platform Trading . The United States has completed a legislative step toward implementing a trading requirement for standardized derivatives, as the Dodd-Frank Act requires any swap or security-based swap subject to the clearing requirement to be traded on a registered trading platform, such as an exchange or swap execution facility registered with the CFTC, or security-based swap execution facility registered with the SEC. The CFTC has finalized rules and regulations with regard to designated contract markets. In addition, the CFTC has proposed regulations with regard to swap execution facilities and regulations defining the process by which a swap is "made available to trade," by a designated contract market or swap execution facility. The SEC has proposed rules pertaining to the registration and operation of trading platforms. Final rules must be implemented for the trading requirement to be effective, the FSB assessment found. Transparency and Trading . Multi-dealer functionality is required. Pre-trade price and volume transparency is being determined for all exchange or electronic-platform-traded and OTC derivatives. Post-trade price and volume transparency is required for all exchanges or electronic-platform-traded and OTC derivatives. The Dodd-Frank Act required that market participants have the ability to execute or trade swaps or security-based swaps subject to clearing and trading mandates by accepting bids and offers made by multiple participants on an exchange or swap execution facility. The CFTC and SEC have proposed rules to implement this requirement, the FSB assessment found. Reporting to Trade Repositories . There are laws currently in place that require all OTC derivatives transactions to be reported to trade repositories, according to the FSB assessment. The main legislative approach is through the Dodd-Frank Act, adopted in July 2010. The CFTC has finalized registration requirements, duties, and core principles applicable to CFTC-regulated TRs and rules on the reporting of swaps to TRs, including swaps entered into before the Dodd-Frank Act was enacted and which had not expired and swaps entered into on or after the date of enactment but prior to the relevant reporting compliance date. Compliance with these rules will be phased-in by swap class starting in fall 2012 with credit and interest rate swaps. The CFTC also has designated a provider of legal entity identities to be used by registered entities and swap counterparties in complying with the CFTC's swap data reporting regulations and continues to assist the industry's efforts in the development of a Universal Product Identifier and product classification protocol. The SEC has proposed implementing regulations towards this reporting requirement and specifying registration requirements, duties, and core principles of SEC-regulated TRs. Reporting to a governmental authority in place of a specifically designated trade repository is expected to be limited in scope, should no trade repository be available, the FSB survey found. Application of Central Clearing Requirements . Central clearing requirements cover all asset classes, although the Department of the Treasury has proposed exempting foreign exchange swaps and forwards from mandatory clearing requirements. Central clearing requirements cover all types of financial entities, although the CFTC has adopted a final rule that exempts banks, savings associations, farm credit system institutions, and credit unions with total assets of $10 billion or less from the definition of "financial entity," making such "small financial institutions" eligible to elect to use the end-use exception to mandatory clearing for swaps that hedge or mitigate commercial risk. A similar exemption for such entities is being considered by the SEC. The SEC is considering an inter-affiliate clearing exemption, while the CFTC has proposed an inter-affiliate clearing exemption. | Derivatives, or financial instruments whose value is based on an underlying asset, played a key role in the financial crisis of 2008-2009. Congress directly addressed the governance of the derivatives markets through the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank; P.L. 111-203; July 21, 2010). This act, in Title VII, sought to bring the largely unregulated over-the-counter (OTC) derivatives markets under greater regulatory control and scrutiny. Pillars of this approach included mandating that certain OTC derivatives be subject to central clearing, such as through a clearinghouse, which involves posting margin to cover potential losses; greater transparency through trading on exchanges or exchange-like facilities; and reporting trades to a repository, among other reforms. In the debates over Dodd-Frank and in subsequent years, many in Congress have raised the following important questions: If the United States takes stronger regulatory action than other countries, will business in these OTC derivatives markets shift overseas? Since OTC derivatives markets are global in nature, could derivatives trading across borders, or business for U.S. financial firms that engage in these trades, be disrupted if other countries do not adopt similar regulatory frameworks? The first step in addressing these congressional concerns is to examine the degree to which other major countries have adopted similar legislation and regulation as the United States, particularly in light of commitments from the Group of Twenty nations (G-20) to adopt certain derivatives reforms. Following the financial crisis, G-20 leaders (generally political heads of state) established a reform agenda and priorities within that agenda for regulating and overseeing OTC derivatives. The G-20 as an organization has no enforcement capabilities, but relies on the members themselves to implement reforms. According to recent surveys, most members are making progress in meeting the self-imposed goal of implementing major reforms in derivatives markets. Only the United States appears to have met all the reforms endorsed by the G-20 members within the desired timeframe of year-end 2012. The European Union (EU), Japan, Hong Kong, and the United States have each taken significant steps towards implementing legislation requiring central clearing. However, in most of these jurisdictions legislation has not yet been followed up with technical implementing regulations for the requirements to become effective, according to the Financial Stability Board (FSB), which conducts the surveys. Most authorities surveyed estimated that a significant proportion of interest rate derivatives would be centrally cleared by year-end 2012, but they were less confident of progress for other asset classes. The EU appeared to be making progress in its G-20 derivatives regulatory commitments, particularly in central clearing and trade repository-reporting requirements, but at a slower pace than the United States, according to the FSB. This may be due in part to the need for legislation to be passed by individual national legislatures even when agreed broadly by the EU. As of October 2012, however, only the United States had adopted legislation requiring standardized derivatives to be traded on exchanges and electronic platforms. This report examines the G-20 recommendations for reforming OTC derivatives markets and presents the result of self-assessment surveys measuring the performance of G-20 members and some FSB members to date in meeting their commitments. The Appendix to the report presents more detailed information on the status of individual jurisdictions in implementing the G-20-endorsed reforms. The Glossary defines key international bodies and related financial terms and concepts. |
The Elementary and Secondary Education Act (ESEA), as amended by the Every Student Succeeds Act (ESSA; P.L. 114-95 ), specifies the requirements for the state assessments that states must incorporate into their state accountability systems to receive funding under Title I-A. Title I-A of the ESEA authorizes aid to local educational agencies (LEAs) for the education of disadvantaged children. Title I-A grants provide supplementary educational and related services to low-achieving and other students attending elementary and secondary schools with relatively high concentrations of students from low-income families. As a condition of receiving Title I-A funds, states, LEAs, and public schools must comply with numerous requirements related to standards, assessments, and academic accountability systems. All states currently accept Title I-A funds. For FY2017, the program was funded at $15.5 billion. The ESEA requires that states implement high-quality academic assessments in reading, mathematics, and science. States must test all students in reading and mathematics annually in grades 3 through 8 and once in high school. States must also test all students in science at least once within three grade spans (grades 3-5, 6-9, and 10-12). The ESEA therefore requires states to implement annually, at a minimum, 17 assessments for students in elementary and secondary schools. While many of the assessment requirements of the ESEA have not changed from the requirements put into place by the No Child Left Behind Act (NCLB; P.L. 107-110 ), the ESSA provides states some new flexibility in meeting them. For example, states may choose to administer one summative assessment or multiple statewide interim assessments that result in a single summative score. For the first time, the ESSA allows states to use "nationally recognized tests" to meet the high school assessment requirement, provided there is evidence the tests align with state standards. It also includes provisions for states' use of alternate assessments for students with the "most significant cognitive disabilities," which was previously addressed only in regulations. The ESSA explicitly authorizes the use of computer adaptive assessments. Computer adaptive assessments adjust to a student's individual responses, which means that all students will not see the exact same questions. The ESSA also authorizes an exception to state assessment requirements for 8 th grade students taking advanced mathematics in middle school that permits them to take an end-of-course assessment rather than the 8 th grade mathematics assessment, provided certain conditions are met. In addition, the ESSA authorizes a new demonstration authority for states to create an "innovative assessment system" that would permit them to use different assessment formats (e.g., competency-based assessments) and assessments that validate when students are ready to demonstrate mastery or proficiency, and allow for differentiated student support based on individual learning needs. The ESSA also includes a new provision that permits the Secretary of Education (the Secretary) to reserve a portion of funds available under the State Assessment Grant program to award competitive grants to states for assessment audits. The purpose of this report is to describe the general assessment requirements of the ESEA as amended and discuss the new flexibility states have in meeting these requirements. The report also discusses some issues related to the changes enacted by ESSA regarding the use of assessments in accountability systems that are receiving attention as they are implemented. More specifically, this report examines issues related to assessment of student growth, assessment of students with disabilities and English learners, the use of computer adaptive assessments, student assessment participation requirements, and testing burden. While these changes have the potential to add flexibility and nuance to state accountability systems, states face the challenge of implementing them in such a way as to maintain the validity and reliability of the required assessments. Students participate in many assessments in elementary and secondary schools. As mentioned above, the ESEA requires states to administer annually, at a minimum, 17 assessments collectively in reading, mathematics, and science. To meet this requirement, states typically use summative assessments. For reading and mathematics, the results of these assessments are then used in the state accountability system to differentiate schools based, in part, on student performance. In addition to these assessments, states, LEAs, and schools administer a number of other assessments for different purposes and within different content areas. The focus of this report is on the assessments required in Title I-A of the ESEA. Title I-A of the ESEA outlines the requirements for state assessment and accountability systems. Section 1111(b) specifically details the "academic assessments" requirements. While many of the requirements for academic assessments have not changed from the requirements put in place by the NCLB, a few changes are noteworthy. This section discusses the general state academic assessment requirements and highlights some of the changes made by the ESSA. It also discusses the State Assessment Grants program, including how funds are allocated to states. The section closes with a discussion of the Secretary's new ability to reserve funds under the State Assessment Grants program to make competitive grants to states for conducting assessment audits, and a new authority included in the ESSA related to the use of innovative assessments. This section of the report examines current ESEA assessment requirements with respect to the content areas and grades assessed, student participation, properties of the assessments, new assessment options, and public information about assessments. In each case, the discussion specifies whether current requirements existed prior to the implementation of the ESSA or whether they were added by the ESSA. Under the requirements of the ESEA both prior to and following the enactment of the ESSA, each state must implement a set of high-quality academic assessments in reading, mathematics, and science. Reading and mathematics assessments must be administered annually in grades 3 through 8 and once in high school. Science assessments must be administered at least once within three grade spans (grades 3-5, 6-8, and 9-12). Assessments in other grades and subject areas may be administered at the discretion of the state. All academic assessments must be aligned with state academic standards and provide "coherent and timely" information about an individual student's attainment of state standards and whether the student is performing at grade level. The reading and mathematics assessment results must be used in the state's accountability system to differentiate the performance of schools. For the most part, under the ESEA, the same academic assessments must be used to measure the achievement of all public elementary and secondary school students in a state. States are required to measure annually the achievement of not less than 95% of all students and 95% of all students in each subgroup on the required assessments. A state must explain how this requirement will be incorporated into its accountability system. As mentioned above, academic assessments must be the same academic assessments used to measure the achievement of all students, which includes most students with disabilities and English learners (ELs). Students with the "most significant cognitive disabilities" may participate in an alternate assessment aligned with alternate achievement standards. For ELs, under certain circumstances, assessments may be administered in the language and form that is most likely to produce accurate results. The ESSA added two new provisions related to a parent's right to opt a child out of the required assessments. First, it added a provision that provides that nothing "shall be construed as preempting a state or local law regarding the decision of a parent to not have the parent's child participate in the academic assessments." Second, the ESSA now requires any LEA receiving Title I-A funds to notify parents of their right to receive information about assessment participation requirements, which must include a policy, procedure, or parental right to opt the child out of state assessments. State assessments must meet several requirements regarding (1) format, (2) administration, and (3) technical quality. While a required assessment format is not specified, the ESEA continues to require that the assessment measures higher-order thinking skills and understanding. It also adds some examples of how this requirement may be met, which may include measures of student growth and "may be partially delivered in the form of" portfolios, projects, or extended performance tasks. The ESSA provides some new flexibility regarding the administration of state assessments. Prior to its enactment, states were required to administer a single, summative assessment to meet the requirements of Title I-A. Under the ESEA as amended by the ESSA, states have the option of using a single, summative assessment or multiple statewide interim assessments that result in a single summative score. The ESSA also includes a new provision that allows each state to set a target limit on the amount of time devoted to the administration of assessments for each grade, expressed as a percentage of annual instructional hours. States must continue to provide evidence that academic assessments are of adequate technical quality for each purpose required under the ESEA. Prior to the enactment of the ESSA, states were required to provide this evidence to the Secretary and make it public upon the Secretary's request. Under the ESEA as amended by the ESSA, states are now required to include such evidence on the state education agency's (SEA's) website. As required prior to the enactment of the ESSA, state assessments must be used for purposes for which they are valid and reliable and must be consistent with nationally recognized professional and technical standards. They must also "objectively measure academic achievement, knowledge, and skills." To increase the likelihood of valid and reliable results, the ESSA continues to require that states use "multiple up-to-date measures" of academic achievement. The ESSA explicitly authorizes two new assessment options to meet the requirements discussed above. First, in selecting a high school assessment for reading, mathematics, or science, an LEA may choose a "nationally-recognized high school academic assessment," provided that it has been approved by the state. To receive state approval, the nationally recognized high school assessment must (1) be aligned to the state's academic content standards; (2) provide comparable, valid, and reliable data as compared to the state-designed assessments for all students and each student subgroup; (3) meet all general requirements for state assessments, including technical quality; and (4) provide for unbiased, rational, and consistent differentiation between schools in the state. Second, the ESSA explicitly authorizes the use of "computer adaptive assessments" as state assessments. Previously, it was unclear whether computer adaptive assessments met the requirement that statewide assessments be the same assessments used to measure the achievement of all elementary and secondary students. Computer adaptive assessments adjust to a student's individual responses, which means that all students will not see the exact same questions. The ESSA added language clarifying that students do not have to be offered the same assessment items on a computer adaptive assessment. Computer adaptive assessments, however, must meet one explicit requirement beyond the general requirements of state assessments. The computer adaptive assessment must, at a minimum, measure each student's academic proficiency in state academic standards for the student's grade level and growth toward such standards. Once the assessment has measured the student's proficiency at grade level, it "may" measure the student's level of academic proficiency above or below the student's grade level. The ESSA also authorized an exception to state assessment requirements for 8 th grade students taking advanced mathematics in middle school. These students are now permitted to take an end-of-course assessment rather than the 8 th grade mathematics assessment, provided certain conditions are met. For example, a student benefitting from this exception must take a mathematics assessment in high school that is more advanced than the assessment taken at the end of 8 th grade. The ESSA added specific requirements that each LEA receiving funds under Title I-A must provide information to the public regarding state assessments. More specifically, for each grade served by the LEA, it must provide information on (1) the subject matter being assessed, (2) the purpose for which the assessment is designed and used, (3) the source of the requirement of the assessment, (4) the amount of time students will spend taking assessments, (5) the schedule of assessments, and (6) the format for reporting results of assessments (if such information is available). While this report focuses on the assessments required by the ESEA, the assessments are used in a state accountability system that determines which schools will be identified for support and improvement based on their performance. Prior to the implementation of the ESSA, states were required to determine whether schools and LEAs were making adequate yearly progress (AYP) based on the percentage of all students and the percentage of students by subgroup who (1) scored at the proficient level or higher on the mathematics and reading assessments, (2) met the requirements of an additional academic indicator, which had to be a graduation rate for high school students, and (3) met an assessment participation rate. The failure of the all students group or any subgroup to meet any of these requirements for two consecutive years or more triggered a set of outcome accountability consequences that required schools and LEAs to take actions specified in statutory language. As states were required to establish goals for proficiency on the mathematics and reading assessments based on 100% of students reaching the proficient level by the end of the 2013-2014 school year, as that deadline drew closer, more schools and LEAs failed to meet at least one of the requirements to make AYP. Thus, under the accountability system prior to the enactment of the ESSA, it was possible that based on student assessment results, all or most LEAs and schools in a state could fail to make AYP and be required to implement various improvement requirements. This system of making outcome accountability decisions based on assessment results was considered a high-stakes assessment system, as poor performance on either the mathematics or reading assessment by the all students group or any individual subgroup could trigger consequences. Under the ESEA following the enactment of the ESSA, changes have been made to the accountability system that could lessen the high-stakes association between student assessment results and the determination of whether a school is identified for improvement, depending on decisions made by the state in designing its accountability system. Under the ESSA, student proficiency on the mathematics and reading assessments is still considered in the state accountability system along with several other indicators. Based on these indicators, the SEA must annually establish a system for "meaningfully differentiating" all public schools. The system must also identify any public school in which any subgroup of students is "consistently underperforming," as determined by the state. The results of this process are used to help determine which public schools need additional support to improve student achievement. Based on this system of meaningful differentiation, an SEA informs LEAs in its state which low-achieving schools within the LEA require comprehensive support and improvement. More specifically, SEAs are required to identify for comprehen sive support and improvement: (1 ) at least the lowest-performing 5% of all school s receiving Title I-A funds, (2 ) all public high schools failing to graduate 67% or more of their students, (3 ) schools required to implement additional targeted support that have not improved in a state-determined number of years, and (iv) additional statewide categories of schools, at the state's discretion. States must also inform LEAs whether there are subgroups of "consistently underperforming" students within a school that have been identified for targeted support and improvement. Depending on how a state chooses to identify schools for comprehensive or targeted support and improvement, the number or percentage of schools in a given state that may be subject to outcome accountability requirements may be substantially lower than the number or percentage of schools that were subject to outcome accountability requirements prior to the enactment of the ESSA. Thus, as a result of the changes made by the ESSA, the high-stakes emphasis placed on assessment in the accountability system may be diminished relative to the emphasis place on assessment prior to the enactment of the ESSA. No longer does poor overall student performance or subgroup performance on an assessment have to mean that a school is automatically identified as being in need of improvement. States determine how much weight to put on assessment results in the accountability system and the extent to which schools will be identified for comprehensive or targeted support and improvement as a result of their performance on all of the indicators included in the state accountability system. The ESEA continues to authorize funding for State Assessment Grants. Two funding mechanisms continue to be authorized: (1) formula grants to states for the development and administration of the state assessments required under Title I-A, and (2) competitive grants to states to carry out related activities beyond the minimum assessment requirements. The allocation of funds depends on a "trigger amount" within the legislation. For annual appropriations at or below the trigger amount, the entire appropriation is used to award formula grants to states. For an annual appropriation above the trigger amount, the difference between the appropriation and trigger amount is used to award competitive grants to states. For amounts equal to or less than the trigger amount, the Secretary must reserve 0.5% of the appropriation for the Bureau of Indian Education and 0.5% of the appropriation for the Outlying Areas prior to awarding formula grants to states. The Secretary has the option of reserving 20% of the funds appropriated to make grants for assessment system audits. After making these reservations, the Secretary then provides each state with a minimum grant of $3 million. Any remaining funds are subsequently allocated to states in proportion to their number of students ages 5 to 17. Any funds appropriated in excess of the trigger amount are awarded by the Secretary to states and consortia of states through a competitive grant process. The funds are then used for assessment activities. The ESEA as amended by the ESSA permits the Secretary to reserve funds from the formula grant portion of the State Assessment Grant program to make grants to states to conduct an assessment system audit. As previously noted, the Secretary may reserve up to 20% of the funds appropriated for state assessment formula grants for the purpose of conducting these audits. From the funds reserved, the Secretary makes annual grants to states of not less than $1.5 million to conduct a state assessment system audit and to provide subgrants to LEAs to conduct assessment audits at the LEA level. To receive a grant under this section, a state must submit an application to the Secretary detailing the assessment system audit, planned stakeholder participation and feedback, and subgrants to LEAs. Each state must ensure that LEAs conduct an audit of local assessments. Following the audit, each state is required to develop a plan to improve and streamline the state assessment system by eliminating unnecessary assessments, supporting the use of best practices from LEAs in other areas of the state, and supporting LEAs in streamlining local assessment systems. The state is required to report the results of the state and each LEA audit in a format that is publicly available. The ESEA as amended by the ESSA includes a new demonstration authority for the development and use of an "innovative assessment system." States or consortia of states may apply for the demonstration authority to develop an innovative assessment system that "may include competency-based assessments, instructionally embedded assessments, interim assessments, cumulative year-end assessments, or performance based assessments that combine into an annual summative determination for each student" and "assessments that validate when students are ready to demonstrate mastery or proficiency and allow for differentiated student support based on individual learning needs." A maximum of seven SEAs, including not more than four states participating in consortia, may receive this authority. Separate funding is not provided under the demonstration authority; however, states may use formula and competitive grant funding provided through the State Assessment Grant program discussed above to carry out this demonstration authority. States and consortia may apply for an "initial demonstration period" of three years to develop innovative assessment systems and implement them in a subset of LEAs. If the initial demonstration period is successful, states and consortia may apply for a two-year extension in order to transition the innovative assessment system into statewide use by the end of the extension period. If the SEA meets all relevant requirements and successfully scales the innovative assessment system for statewide use, the state may continue to operate the innovative assessment system. In general, applications for innovative assessment systems must demonstrate that the innovative assessments meet all the general requirements of state assessments discussed above. The only explicit differences between state assessment systems and innovative assessment systems are the format of assessment (i.e., competency-based assessments, instructionally embedded assessments, interim assessments, cumulative year-end assessments, and performance-based assessments) and that the reporting of results can be expressed in terms of "student competencies" aligned with the state's achievement standards. Both prior to and following the enactment of the ESSA, states have had the authority to select their own assessments and the academic content and performance standards to which the assessments must be aligned. For reading and mathematics assessments administered in grades 3-8, states use state-specific assessments, common assessments used by multiple states, or a combination of the two. For these subjects at the high school level, states use state-specific assessments, common assessments, and end-of-course assessments administered to all students. For science assessments, states can continue to use (1) state-specific assessments, (2) end-of-course exams for courses like biology or chemistry, or (3) a combination of the state-specific assessments and end-of-course exams. The ESSA added a new option for high school assessments, allowing states to use a "nationally recognized" high school academic assessment. While the state assessment landscape is constantly changing, examples of how states are currently meeting the ESEA assessment requirements are provided in the discussion that follows. When the NCLB was enacted in 2002, it expanded the number and role of state assessments required by the ESEA. Under the NCLB, each state developed and administered state-specific assessments aligned with state-specific academic content and performance standards. This resulted in each state having its own set of academic assessments, academic content standards, and academic performance standards denoting various levels of proficiency. Because each state had its own system, there was no straightforward way to compare student performance across states. In 2009, due in part to this lack of standardization, there was a grassroots effort led by the National Governors Association (NGA) and the Council of Chief State School Officers (CCSSO) to develop a common set of standards for reading and mathematics, known as the Common Core State Standards Initiative (CCSSI). This effort intended to create a set of college- and career-readiness standards that express what students should know and be able to do by the time they graduate from high school. Having common content and performance standards and aligned assessments could be used to facilitate comparisons among states using the same standards and assessments. Adoption of these standards by states is optional. While the federal government had no role in developing the standards, the Obama Administration expressed support for the standards and took three major steps to incentivize their adoption and implementation: (1) Race to the Top (RTT) State Grants, (2) RTT Comprehensive Assessment Systems (CAS) Grants, and (3) the ESEA flexibility package. Under the RTT State Grants program, participating states were required to "develop and implement common, high-quality assessments aligned with common college- and career-ready K-12 standards." To support the development of the required assessments included in the RTT State Grants program, the Department of Education (ED) created the RTT CAS Grant program and provided funds to two consortia of states for "the development of new assessment systems that measure student knowledge and skills against a common set of college- and career-ready standards." Both winning consortia, the Partnership for Assessment of Readiness for College and Careers (PARCC) and the Smarter Balanced Assessment Consortium (SBAC), proposed to use the Common Core State Standards as the common standards to which their assessments would be aligned. At the time the grants were awarded, 25 states and the District of Columbia were part of the PARCC coalition and 31 states were part of the SBAC coalition. In 2011 the Obama Administration announced the availability of an ESEA flexibility package that allowed states to receive waivers of various ESEA provisions if they adhered to certain principles. One of these principles was having college- and career-ready expectations for all students, including adopting college- and career ready standards in reading and mathematics and aligned assessments. While it is not possible to know how many states may have ultimately adopted the Common Core State Standards or the assessments developed by PARCC or SBAC without the aforementioned federal incentives, initial interest and participation in the common assessment administration was high, followed by declining participation in later years. In addition to supporting the use of common standards, both the George W. Bush and Obama Administrations also supported measuring student achievement based on growth rather than proficiency only. ED encouraged states to incorporate measures of student growth into their state accountability systems through two sets of waivers. The first set was announced under the George W. Bush Administration in 2005. The growth model pilot waiver allowed states to add measures of student growth to their accountability systems to make determinations of adequate yearly progress (AYP). The Obama Administration subsequently required that states' assessments measure student growth in at least grades 3-8 and once in high school in order to receive waivers of various ESEA requirements. Two organizations, the Education Commission of the States (ECS) and Education Week, collect data on the types of assessments being used by states to meet the requirements of Title I-A. ECS collects information from state departments of education and tracks state assessment administration. The most recent information collection was published in January 2017. Education Week conducts an annual survey of current state assessment administration. The most recent information was published in February 2017. Thus, both surveys reflect the state of assessment prior to states submitting their state plan under the provisions of the recently amended ESEA. Based on the data collected by these organizations, about half of all states reported using only state-specific assessments and end-of-course assessments in school year 2015-2016. Some states reported using a combination of common assessments, state-specific assessments, end-of-course exams, and nationally recognized high school academic assessments. For example, Michigan used a combination of state-specific assessment items and SBAC assessment items. Louisiana and Massachusetts state-level officials have approved a similar, blended approach. In these three examples of blended approaches, Michigan used the PSAT as a high-school assessment, Massachusetts used a state-specific assessment, and Louisiana used end-of-course assessments. Other states relied entirely on common assessments in the 2015-2016 school year. Seven states reported using only SBAC assessments, and four states reported using only PARCC. The current status of state assessment systems is in flux as states have been submitting their ESEA consolidated state plans to receive funding under a number of ESEA formula grant programs, including Title I-A, in 2017. Each state's plan must be approved by the Secretary. All 50 states, the District of Columbia, and Puerto Rico were required to submit ESEA state plans to ED by one of two deadlines (April 3, 2017, or September 18, 2017) to continue to receive funding under various ESEA formula grant programs, including Title I-A. ED maintains a website of state plans submitted for approval under the ESEA. Within the state plans, each state details the state assessments it will use to meet the Title I-A requirements. Based on information available from state plans that were approved by October 16, 2017, states have indicated that they expect to use combinations of assessments, such as SBAC, end-of-course assessments, and PSAT/SAT (e.g., Delaware and Nevada), or to rely primarily on state-specific annual assessments (e.g., New Jersey and New Mexico). Several of the changes included in the ESEA as amended by the ESSA provide states with more flexibility with respect to using assessment for accountability purposes. Many of the changes have the potential of adding nuance to state accountability systems. For state accountability systems to function effectively, however, the changes to the requirements of Title I-A must be implemented in such a way as to retain the validity and reliability of state assessments and not to detract from the value or accuracy of state accountability systems. It remains important to understand how the measurement of student achievement with assessments affects determinations made by the state accountability systems. This section of the report includes a discussion of several assessment-related issues that have garnered attention in relation to ESSA-enacted changes. These include issues related to assessment of student growth, assessments for students with special needs, computer adaptive assessments, student opt-out practices, and testing burden. The discussion identifies ways in which ESSA-enacted adjustments are intended to enhance the use of assessments in accountability systems and/or facilitate the ease of operating such systems. Some topics related to valid and reliable uses of assessment for purposes of accountability which may be relevant to these adjustments are discussed as well. These topics are ones that have surfaced in the reauthorization discourse or in the years in which NCLB provisions were in effect. They are presented not to forecast problems, but rather to explain some challenges that may have to be navigated and to identify some inherent tensions in using assessments in accountability systems. These issues may bear monitoring as ESSA-enacted adjustments are deployed. Prior to the enactment of the ESSA, state accountability systems were only required to report student proficiency, a static measure of student achievement. A singular focus on proficiency has been criticized for many reasons, most notably that proficiency may not be a valid measure of school quality or teacher effectiveness. Often, proficiency is a measure of factors outside of the school's control (e.g., demographic characteristics, prior achievement). One of the unintended consequences of static measures, like proficiency level, was the way instruction may have been targeted toward students just below the proficient level, possibly at the expense of other students. In an effort to raise the percentage of proficient students, schools and teachers may have targeted instructional time and resources toward those students who were near the proficiency bar. Because time and resources are limited, fewer instructional resources may have been available for students who were far below proficiency or those who were far above proficiency. Under the ESEA as amended by the ESSA, states, LEAs, and schools are still required to report data on student proficiency on the required assessments. Some education policy groups have argued for a different way to report static achievement than has been used in the past. They have asserted that by continuing to focus only on proficiency, more emphasis will continue to be placed on students just below the level of proficiency. Some education policy groups have advocated instead for the use of a "performance index" for static measures. Using a performance index, states can get credit for reaching various levels of achievement (e.g., 0.75 points for partial proficiency, 1 point for reaching proficient, 1.25 points for reaching advanced levels). By using a performance index, some say, schools would have an incentive to try to increase the achievement of all students. Another way to report static achievement in a way that represents all students would be to report average scale scores. Scale scores are much more sensitive to changes in achievement than proficiency levels. They also have better statistical properties for research and analysis. Scale scores exist along a common scale so that they can be compared across students, subgroups, schools, and so forth. By placing assessment results along a common scale, changes over time can be determined more accurately. To address some of the concerns raised about relying only on proficiency as a measure of student academic achievement on required assessments, the ESEA as amended by the ESSA specifically provides the option for student achievement to be measured using student growth as well. Prior to the enactment of the ESSA, some states had already incorporated specific measures of student growth into their accountability systems after obtaining a waiver from ED to do so. Under the ESEA as amended by the ESSA, additional states may choose to incorporate measures of student growth into their accountability systems, while other states may choose to revise their student growth measures. The type of growth model selected for a state accountability system depends on many different factors beyond the type of assessment measure used. The selection of an assessment, however, can limit the choices states have in developing and implementing growth models. The remainder of this section discusses different types of growth models currently used by states and the assessment requirements of such models. Measuring growth takes several forms. A review of 29 state accountability systems that use student growth identified three types of growth models: State-set targets of student growth (14 states): State-set targets measure the degree to which a student meets a set amount of growth or reaches a performance benchmark. Student growth percentiles (SGPs) (12 states): SGPs examine a student's academic achievement relative to academic peers who began at the same place. An SGP is a number from 1 to 99 that represents how much growth a student has made relative to his or her peers. An SGP of 85 would indicate that a student demonstrated more growth than 85% of peers. SAS EVAAS (3 states): This model measures value-added growth. "Value-added growth" refers to the additional positive effect that a certain factor has on student achievement above what is considered "expected" growth. This type of growth model follows students over time and provides projection reports on a student's future achievement. The CCSSO also released a paper that outlines many considerations in the development and implementation of growth models in ESEA accountability systems. In this analysis, five common growth models were identified. These models are briefly described below, including information on their assessment requirements: Gain scores: Gain scores are calculated by finding the difference between test scores. Using scale scores, the results of an earlier score (e.g., 3 rd grade mathematics) is subtracted from the results of a later score (e.g., 4 th grade mathematics). In terms of assessment, the use of gain scores requires a vertical scale that creates a common scale across grade levels. Growth rates: Growth rates are calculated by using multiple results of student assessment and statistically fitting a "trend line" across the data points. In order to aggregate the data across multiple grade levels, the growth rate may require vertically scaled scores. Student growth percentiles: As mentioned above, SGPs examine academic achievement compared to a student's peers who start at the same achievement level. These scores are based on the percentage of academic peers that a student outscores. Scores are reported as percentiles (i.e., 1-99). Because SGPs compare growth to peers who participated in the same assessment at the same time, a vertically scaled assessment is not necessarily a requirement. Transition tables: Transition tables use growth in discrete "performance levels" (i.e., levels of proficiency, such as basic, proficient, and advanced). These calculations are less precise but can be aggregated across grade levels without using vertically scaled scores. Residual models: Residual models are also referred to as "value-added" models. This type of model can describe the effect of outside factors on student growth over time (e.g., teacher or school influence on student learning). Residual models compare the performance of a class, school, or LEA to the average expected change. These models can be aggregated across grades without a vertical scale; however, there are other significant data requirements, such as the ability to link student data to teachers, schools, and LEAs. Some education policy groups have cautioned against using a type of growth model that measures "growth to proficiency." The "growth to proficiency" model measures whether students are on-track to meet a proficient or higher performance standard (e.g., proficient or advanced). Using this type of model, there would be no difference between a student who moved from "not proficient" to "proficient" and a student who moved from "not proficient" to "advanced." This type of growth model would create the same incentive to focus instruction on students near the proficiency score. Students far below or above the level of proficiency may not receive appropriate attention. If states choose a "growth to proficiency" model, however, there may be ways to weight certain types of growth. Similar to a performance index, growth from "not proficient" to "proficient" could be assigned a point value and other types of growth could be assigned lower or higher points, depending on the design of the system. By measuring student growth, accountability systems are better suited to evaluate student learning over time. Measuring the amount of learning within a given school year may be a more valid measure of school accountability than proficiency, because a student's prior level of achievement can be taken into account. Under some growth models, schools would not be penalized for certain low achieving students, provided that the students are meeting growth targets set by the accountability system. This type of growth model may be a more valid measure of factors within the school's control (e.g., classroom practices, teacher, leadership, school climate, etc.). Measuring growth targets, however, is dependent on reliable assessments that are sensitive to student learning over time. The ESEA requires that all students participate in annual academic assessments. There are, however, special provisions for how to include students with special needs, including students with disabilities and ELs. For example, a subset of students with disabilities may participate in an alternate assessment, but the use of alternate assessment in state accountability systems is limited. In addition, ELs may be included in state accountability systems in different ways depending on how long they have been in the United States and their level of English language proficiency. This section explores how various assessments for students with special needs are included in state accountability systems. As was required prior to the enactment of the ESSA, states must include all students with disabilities in the statewide assessment system. Furthermore, states must disaggregate assessment results for students with disabilities. The majority of students with disabilities participate in regular academic assessments with their peers. The ESEA, however, requires states to adhere to several assessment practices to ensure that students with disabilities fully participate in state assessment systems. First, the ESEA as amended by the ESSA requires that state assessments "be developed, to the extent practicable, using the principles of universal design for learning" (UDL). UDL is an inclusive framework that can be used in the development of assessments and instructional materials. In general, UDL is based on three principles: (1) providing multiple means of representation, (2) providing multiple means of action and expression, and (3) providing multiple means of engagement. UDL can be used to reduce unnecessary cognitive burden in the assessment process. For example, UDL helps to limit the use of complex language (e.g., using "primary" vs. "most important," the use of figurative language) and visual clutter (e.g., too much information on a page, unusual font style). Second, the ESEA continues to require that states allow "appropriate accommodations" for students with disabilities. Accommodations are intended to increase the validity of the assessment of these students. For example, if a student has a learning disability in the area of reading, he or she may receive a "read aloud" accommodation on a test of mathematics ability. Because the assessment is measuring mathematics, the student's reading difficulty should not interfere with the measurement of his or her mathematics ability. Without an accommodation, the student's mathematics score may be lower than his or her true ability. If, on the other hand, the student is taking a test of reading comprehension, the "read aloud" accommodation may not be appropriate because it may inaccurately increase the student's reading score. Third, the ESSA amended the ESEA to allow for the use of an alternate assessment aligned with alternate standards for students with the "most significant cognitive disabilities." While the Individuals with Disabilities Education Act (IDEA) includes provisions regarding the identification of students with disabilities, it does not mention students with the "most significant cognitive disabilities" as a specific disability category under the law. As such, states must develop guidelines to identify students as those with the "most significant cognitive disabilities." A student's Individualized Education Program team (IEP team) applies the state guidelines to determine whether the student will participate in the alternate assessment. Determinations are made on a case-by-case basis. If it is determined that a student may participate in an alternate assessment, his or her parents must be informed of the decision and how participation in an alternate assessment may affect the receipt of a regular high school diploma. Students who are found eligible to participate in the alternate assessment are often those identified with intellectual disabilities, autism, or multiple disabilities. A state may provide an alternate assessment aligned with alternate achievement standards provided that the total number of students assessed in each content area does not exceed 1% of all tested students in the state. The "1% cap" applies only at the state level; there is no LEA-level cap. However, any LEA that assesses more than 1% of the total number of students assessed in a content area using the alternate assessment must submit information to the SEA justifying the need to do so. The state is then required to provide "appropriate oversight, as determined by the State" of any such LEA. If a state exceeds the 1% cap, scores from the assessments over the cap are counted as nonproficient in the state accountability system. An alternate assessment based on alternate achievement standards is considered a more valid assessment of students with the most significant cognitive disabilities because the alternate achievement standards are better aligned with the academic content standards for students in this group. If students with the most significant disabilities participate in the general assessment, they may be assessed on the full range of grade-level standards, which may not reflect the content they are learning. While the alternate assessment may be a more valid assessment of students with the most significant cognitive disabilities, there may be specific issues of reliability to consider. For example, many alternate assessments are given in a different format, such as portfolio assessments, rating scales, or item-based tests. These test formats are often scored against a rubric that reflects how well a student mastered the alternate achievement standard. Using this type of assessment scoring, issues of inter-scorer agreement may be particularly important to preserving the validity of the accountability system. If different scorers do not rate student performance consistently and with reliability, the validity of the achievement score may be questionable and an incorrect number of students with the most significant cognitive disabilities may be counted as "proficient" in the accountability system. States must include all ELs in the statewide assessment system and disaggregate results for these students. ELs participate in statewide assessment and accountability systems in different ways, depending on their level of language proficiency and number of years of schooling in the United States. There are two separate types of assessments for ELs: (1) assessments of English language proficiency (ELP) and (2) statewide assessments of reading, mathematics, and science that are required for all students. As was required prior to the enactment of the ESSA, states must ensure that all LEAs provide an annual assessment of English language proficiency of all ELs. The assessment must be aligned to state English proficiency standards within the domains of speaking, listening, reading, and writing. For ELP assessment purposes, most states currently participate in the WIDA consortium, which serves linguistically diverse students. The consortium provides for the development and administration of ACCESS 2.0, which is currently the most commonly used test of English language proficiency. In 2017, the WIDA consortium changed the achievement standards for English language proficiency to reflect the language demands of college- and career-readiness standards. As a result, some states are experiencing declines in reported English language proficiency levels and have fewer students exiting the school support programs for ELs. This means that more EL students may be included in accountability determinations for the EL subgroup for longer periods of time. As was also required prior to the enactment of the ESSA, states must generally provide for the inclusion of ELs in statewide assessments of reading, mathematics, and science. Similar to the provision for students with disabilities, the ESEA provides for "appropriate accommodations" for ELs and allows states to administer, "to the extent practicable," assessments in the language that is most likely to yield accurate results. The ESEA continues to require a state to assess an EL in English once the student has attended school in the United States for three or more consecutive years. An LEA, however, may decide on a case-by-case basis to assess an EL in a different language for an additional two consecutive years if the student has not reached a level of English language proficiency that allows for participation in an English language assessment of reading. The assessment of an EL in a different language may yield more accurate results for some students. As previously permitted prior to the enactment of the ESSA, a state may exclude an EL from one administration of the reading assessment if he or she has been enrolled in school in the United States for less than 12 months. The ESSA added a second option regarding the assessment of recently arrived EL students: a state may assess and report the performance of such a recently arrived EL on the statewide reading and mathematics assessments, but exclude that student's results for the purposes of the state's accountability system. If a state selects the latter option, it is required to include a measure of student growth on these assessments in the student's second year of enrollment and a measure of proficiency starting with the third year of enrollment for the purposes of accountability. The results of statewide academic assessments must be disaggregated for ELs. A state may now include the scores of formerly identified ELs in the EL subgroup for a period of four years after the student ceases to be identified an EL. That is, once an EL becomes proficient in English, his or her score may still be included in the "EL subgroup" for reading and mathematics for four years. Prior to the enactment of the ESSA, an EL that had attained proficiency in English had his or her score included in the EL subgroup for two years. Because the English language proficiency standards for many states' tests have changed, it may take longer for ELs to exit the subgroup. This change in the way EL proficiency is determined and the ability of a state to include the performance of former ELs in the EL subgroup for four years means that many ELs may remain in the EL subgroup for accountability purposes for a longer time. It is possible, therefore, that the performance of the EL subgroup improves because students presumably have higher levels of English language proficiency as time goes on. The ESSA has changed the population of the students who are included in the EL subgroup, which may increase the performance of the subgroup. Because the population of the subgroup has changed, there may be inconsistency in the performance of the EL subgroup across time as states transition from NCLB accountability systems to ESSA accountability systems. The ESEA as amended by the ESSA explicitly authorizes the use of computer adaptive assessments to meet the requirements under Title I-A. Prior to the enactment of the ESSA, it was unclear whether computer adaptive assessments were allowed due to the requirement that statewide assessments be "the same academic assessments used to measure the achievement of all public elementary school and secondary school students in the State." One property of computer adaptive assessments is that they adjust to a student's individual ability, which means that all students do not receive the same assessment items. The ESSA, therefore, added clarifying language that specifies that the requirement that all assessments be "the same" "shall not be interpreted to require that all students taking the computer adaptive assessment be administered the same assessment items." A computer adaptive assessment works by adjusting to a student's individual responses. If a student continues to answer test items correctly, the assessment administers more difficult items. The items will continue to get more difficult until the student reaches a "ceiling." A ceiling in assessment is reached when a student either (1) completes all of the most difficult assessment items (i.e., the ceiling of the assessment itself) or (2) answers a number of assessment items incorrectly (i.e., the ceiling of the student's ability). Because the assessment items are adaptive, a computer adaptive assessment can measure a student's ability above or below grade level. The ESEA requires that computer adaptive assessments must measure, at a minimum, a student's academic proficiency based on state academic standards for the grade level of the student. After measuring a student's grade level proficiency, the assessment may also measure proficiency above and below the student's actual grade level. Computer adaptive assessments are also required to measure student growth. The ESEA authorizes their use for alternate assessments for students with the most significant cognitive disabilities and English language proficiency assessments for ELs. Due to the adaptive nature of these assessments, there have been several areas of concern about using them for statewide academic assessments. First, because computer adaptive assessments generally require students to reach a ceiling, it is possible that the administration time may be longer than a traditional assessment for high-achieving students. However, some states that use computer adaptive assessments find that they are more time efficient than traditional tests. Another concern is the accurate measurement of special populations, such as students with disabilities and ELs. Special populations are more likely to have inconsistent knowledge within a content area. That is, they may not have mastered all the lower skills in a subject area, though they may have partial mastery of higher-level skills. If a student reaches the ceiling on the lower skills, he or she would not have the opportunity to demonstrate partial mastery of the higher-level skills. Some have also expressed concern that computer adaptive assessments may test a student's computer literacy skills instead of the content areas of reading and mathematics. If a student's computer literacy interferes with the measurement of reading and mathematics proficiency, the assessment result would not be a valid representation of what the student knows and can do. Other issues that have been raised related to computer adaptive assessments (as well as nonadaptive computer assessments) focus on technical, financial, and reporting issues. For example, a school using computer adaptive assessments has to have computers available to students, may have to purchase software, needs to have technical staff available to set up the assessments and troubleshoot problems that may arise during the assessment process, and may need to provide training to teachers on the use of these assessments. At the same time, depending on the nature of the test items, computer assessments can generally be scored more quickly than paper-and-pencil assessments, providing teachers with more immediate feedback on student performance. A key provision of statewide assessment systems is the requirement to assess all students. This requirement is enforced through the reporting of student assessment results in the accountability system. States are required to annually measure the achievement of at least 95% of all students and 95% of all students in each subgroup. When at least 95% of assessment results are reported within the accountability system, the conclusions based on these assessment results are more likely to be valid and reliable for differentiating schools based on academic achievement. A school cannot solely decide whether students participate in academic assessments, as parents have rights concerning the participation of their children. There are two separate provisions that were enacted through the ESSA regarding parental rights in the assessment process. First, at the parent's request, the ESEA now requires the LEA to provide information on student participation in assessments and to include any policy, procedure, or parental right to opt the child out of the assessment. Second, the ESEA now explicitly states that nothing in the assessment requirements "shall be construed as preempting a State or local law regarding the decision of a parent not to have the parent's child participate in the academic assessments." Thus, if a state or local law regarding opt-outs exists, the assessment requirements of the ESEA as amended by the ESSA cannot preempt it. Although excessive numbers of opt-outs may have consequences for accountability, the primary focus of this discussion is the consequences for assessment itself. Excessive numbers of opt-outs may undermine the validity of the measurement of student achievement and, by extension, may undermine the validity of the state accountability system. Validity may be undermined because a large number of opt-outs could create a scenario in which states are measuring student achievement that is not representative of the whole student population. To explore this issue, it is important to understand a few basic statistical terms. In statewide assessment systems under the ESEA, states are required to assess the universe of students—that is, all students . In education research, it is more common to assess a representative sample of students. A representative sample of students is carefully selected from the universe of students, and the sample reflects the whole population in terms of certain demographic characteristics (e.g., gender, race/ethnicity, socioeconomic status, disability status, EL status). In a representative sample, students with desired demographic characteristics are randomly selected in specific proportions to represent the entire population. In statewide assessment systems under the ESEA, states are not permitted to select a representative sample of students. Because the ESEA requires that states assess the universe of students, large numbers of students opting out of the assessment may create an unrepresentative sample . Parents of students who choose to opt out are likely not randomly distributed across all demographic characteristics; therefore, it may create an unrepresentative sample. If a state assesses an unrepresentative sample of students, the assessment results used in its accountability system would not accurately reflect the true achievement of the population as a whole (i.e., the universe). Both prior to and following the enactment of the ESSA, the ESEA has required states to administer 17 annual assessments across three subject areas (reading, mathematics, and science). These requirements have been implemented within a crowded landscape of state, local, and classroom uses of educational assessments. The emphasis on educational assessment within federal education policies, which has coincided with expanded assessment use in many states and localities, has led to considerable debate about the amount of time being spent taking tests and preparing for tests in schools. One common criticism of test-based accountability is that it leads to a narrowing of the curriculum. There are several ways this could occur. First, the time spent administering the actual assessments, sometimes called the "testing burden," could take away from instructional time. Second, test-based accountability may lead to increases in test preparation in the classroom, which also takes away from instructional time. There is some evidence to suggest that teachers feel pressure to "teach to the test" and engage in test preparation activities at the expense of broader, higher-level instruction. Test-preparation activities take several forms, including emphasizing specific content believed to be on the assessments, changing classroom assignments to look like the format of the assessments, or presenting test taking strategies. Third, in test-based accountability systems, teachers report reallocating instructional time toward tested subjects and away from nontested subjects. Surveys of teachers have consistently reported that their instruction emphasizes reading and mathematics over other subjects like history, foreign language, and the arts. Test preparation can take many forms, and it is difficult to distinguish appropriate test preparation from inappropriate test preparation. Many schools provide test preparation to young students who have little experience with standardized testing, and this form of it can actually increase the validity of a test score because it is less likely that students will do poorly due to unfamiliarity with the testing process. Test preparation begins to affect validity in a negative way, however, when there are excessive amounts of alignment between test items and curricula, excessive coaching on a particular type of item that will appear on the test, or even outright cheating. Although these efforts are often undertaken with good intentions, overuse of test preparation strategies can lead to score inflation. Score inflation is a phenomenon in which scores on high-stakes assessments tend to increase at a faster rate than scores on low-stakes assessments. The validity of the assessment results is reduced when score inflation is present. Studying its prevalence is difficult because LEAs may be reluctant to give researchers access to test scores for the purpose of investigating possible inflation. Several studies, however, have been able to document the problem of score inflation by comparing gains on state assessments (historically, high-stakes) to those made on NAEP (low-stakes). Studies have consistently reported discrepancies in the overall level of student achievement, the size of student achievement gains, and the size of the achievement gap. These discrepancies indicate that student scores on state assessments may be inflated and that these inflated scores may not represent true achievement gains as measured by another test of a similar construct. In this case, the validity of the conclusions based on state assessments may be questioned. The ESSA added new provisions that focus on testing burden and possibly reducing the number of assessments overall (not just those required by Title I-A). Each state may set a target limit on the aggregate amount of time used for the administration of assessments for each grade that is expressed as a percentage of annual instructional hours. For each grade served by the LEA, it must provide information on (1) the subject matter being assessed; (2) the purpose for which the assessment is designed and used; (3) the source of the requirement of the assessment; and (4) the amount of time students will spend taking assessments, the schedule of assessments, and the format for reporting results of assessments (if such information is available). In addition, the Secretary may reserve funds under the State Assessment Grant program to provide grants to states for conducting audit assessments that examine whether all of the tests being used in a state are needed, and to provide subgrants to LEAs to conduct a similar examination of assessments used at the LEA level. | The Elementary and Secondary Education Act (ESEA), as amended by the Every Student Succeeds Act (ESSA; P.L. 114-95), specifies the requirements for assessments that states must incorporate into their state accountability systems to receive funding under Title I-A. While many of the assessment requirements of the ESEA have not changed from the requirements put into place by the No Child Left Behind Act (NCLB; P.L. 107-110), the ESSA provides states some new flexibility in meeting them. This report has been prepared in response to congressional inquiries about the revised educational accountability requirements in the ESEA, enacted through the ESSA, and implications for state assessment systems that are used to meet these requirements. While these changes have the potential to add flexibility and nuance to state accountability systems, for these systems to function effectively the changes need to be implemented in such a way as to maintain the validity and reliability of the required assessments. To this end, the report also explores current issues related to assessment and accountability changes made by the ESSA. The ESEA continues to require that states implement high-quality academic assessments in reading, mathematics, and science. States must test all students in reading and mathematics annually in grades 3 through 8 and once in high school. States must also test all students in science at least once within three grade spans (grades 3-5, 6-9, and 10-12). Assessments in other grades and subject areas may be administered at the discretion of the state. All academic assessments must be aligned with state academic standards and provide "coherent and timely" information about an individual student's attainment of state standards and whether the student is performing at grade level (e.g., proficient). The reading and mathematics assessment results must be used as indicators in a state's accountability system to differentiate the performance of schools. State accountability systems continue to be required to report on student proficiency on reading and mathematics assessments. However, a singular focus on student proficiency has been criticized for many reasons, most notably that proficiency may not be a valid measure of school quality or teacher effectiveness. It is at least partially a measure of factors outside of the school's control (e.g., demographic characteristics, prior achievement), and may result in instruction being targeted toward students just below the proficient level, possibly at the expense of other students. In response, the ESSA provides the option for student achievement to be measured based on proficiency and student growth. While measures of student growth remain optional, prior to the enactment of the ESSA, states were only able to include measures of student growth in their accountability systems if they received a waiver from the U.S. Department of Education to do so. The ESSA also authorizes two new assessment options to meet the requirements discussed above. First, in selecting a high school assessment for reading, mathematics, or science (grades 10-12), a local educational agency (LEA) may choose a "nationally-recognized high school academic assessment," provided that it has been approved by the state. Second, the ESSA explicitly authorizes the use of "computer adaptive assessments" as state assessments. Previously, it was unclear whether computer adaptive assessments met the requirement that statewide assessments be the same assessments used to measure the achievement of all elementary and secondary students. Computer adaptive assessments adjust to a student's individual responses, which means that all students will not see the exact same questions. The ESSA added language clarifying that students do not have to be offered the same assessment items on a computer adaptive assessment. The ESSA also authorizes an exception to state assessment requirements for 8th grade students taking advanced mathematics in middle school that permits them to take an end-of-course assessment rather than the 8th grade mathematics assessment, provided certain conditions are met. The ESSA added specific provisions related to the assessment of "students with the most significant cognitive disabilities" that were previously addressed only in regulations. It made changes in how English learners (ELs) have their assessment results included in states' accountability systems as well. Additionally, the ESEA as amended through the ESSA now requires LEAs to notify parents of their right to receive information about assessment opt-out policies in the state. If excessive numbers of students opt out of state assessments, however, it may undermine the validity of a state's accountability system. States continue to be required to administer 17 assessments annually to meet the requirements of Title I-A. These requirements have been implemented within a crowded landscape of state, local, and classroom uses of educational assessments, raising concerns about over-testing of students. The ESSA added three new provisions related to testing burden: (1) each state may set a target limit on the amount of time devoted to the administration of assessments; (2) LEAs are required to provide information on the assessments used, including the amount of time students will spend taking them, and (3) the Secretary of Education may reserve funds from the State Assessment Grant program for state and LEA assessment audits. |
The Davis-Bacon Act (DBA) requires employers to pay workers on federal construction projects at least locally prevailing wages and fringe benefits. These wages and benefits, which are determined by the U.S. Department of Labor (DOL), are the minimum hourly wages and benefits that employers must pay workers. In order to hire and retain workers, employers may pay more than locally prevailing wages or benefits. Supporters of the Davis-Bacon Act maintain that it creates stability in local construction and labor markets and ensures that projects are built by the most skilled and experienced workers. Critics of the act argue that it impedes competition, raises construction costs, and imposes additional administrative requirements on projects that receive financial assistance from the federal government. The Federal Water Pollution Control Act, commonly called the Clean Water Act (CWA), authorizes appropriations to states to operate state revolving loan funds (SRFs) that finance the construction of wastewater treatment plants. The Safe Drinking Water Act (SDWA) similarly authorizes appropriations for SRFs to finance the construction of public drinking water systems. In addition to the Davis-Bacon Act itself, Congress has added Davis-Bacon prevailing wage requirements to several statutes. The SDWA has a Davis-Bacon provision, but the provision predates the state revolving loan program. The CWA states that Davis-Bacon prevailing wages will apply to projects "constructed in whole or in part before fiscal year 1995." Authorization for appropriations expired at the end of FY1994 for the CWA and the end of FY2003 for the SDWA. Nevertheless, Congress has continued to appropriate funds for the SRFs under both statutes. After the authorization of appropriations for the SRFs under the CWA expired at the end of FY1994, Davis-Bacon coverage was the subject of considerable debate. An issue for Congress is whether to apply Davis-Bacon prevailing wages to projects financed by the state revolving loan programs under the CWA or SDWA. The American Recovery and Reinvestment Act (ARRA) provided FY2009 supplemental appropriations to both revolving loan programs, and required Davis-Bacon prevailing wages on projects funded in whole or in part by the act. As interpreted by the Environmental Protection Agency (EPA), regular appropriations for the EPA for FY2010 required Davis-Bacon prevailing wages on any project funded with FY2010 appropriations or any agreement signed in FY2010, even if the funds were appropriated in a prior year. EPA appropriations for FY2012 requires Davis-Bacon prevailing wages for projects funded under both revolving loan programs for FY2012 and future fiscal years. This report reviews the prevailing wage requirements of the DBA and discusses whether prevailing wages must be paid to workers on construction projects funded by the revolving loan programs established by the CWA and SDWA. The report also summarizes legislation that requires the payment of Davis-Bacon wages on projects funded by the two revolving loan programs. The DBA of 1931, as amended, requires employers to pay at least locally prevailing wages and fringe benefits to workers employed on contracts in excess of $2,000 to which the federal government is a party. The act applies to the construction, alteration, or repair of public buildings and public works. The purpose of the act is to stabilize local construction and labor markets by ensuring that contractors pay wages and fringe benefits that are consistent with local labor markets. Congress has added Davis-Bacon prevailing wage requirements to other statutes, including the CWA and SDWA. Under these so-called "related acts," Davis-Bacon wages apply to federal construction projects that are funded through grants, loans, loan guarantees, or other forms of financing. These related acts cover construction in such areas as transportation, housing, and water pollution control. Each contractor subject to the Davis-Bacon prevailing wage requirements must furnish a weekly payroll statement to the contracting agency. The statement must include the name of each covered worker and the worker's job classification, hourly rate of pay, and number of hours worked. DOL publishes locally prevailing wages and fringe benefits for four types of construction: residential, building, highway, and heavy construction. Davis-Bacon prevailing wages and fringe benefits are based on DOL surveys of construction contractors, subcontractors, and building trades unions. The surveys collect information on wages and fringe benefits paid to workers on active construction projects. Congress enacted the CWA in 1948 to improve water quality in the United States. While the CWA sought initially to provide states with technical assistance, it has been amended several times to accomplish other goals. In 1956, Congress adopted legislation (P.L. 84-660) that created the Construction Grants Program, which provided grants directly to local governments for the construction of municipal wastewater treatment plants. Subsequent amendments expanded the grants program in order to aid communities in meeting the goals and performance requirements of the act. In addition, amendments adopted in 1972 require construction contractors to pay at least locally prevailing wages on projects "for which grants are made" under the CWA. This requirement is included in Section 513 of the CWA. In 1987, Congress again amended the CWA ( P.L. 100-4 ) to phase out the Construction Grants Program and establish the State Water Pollution Control Revolving Fund Program. Under the loan program, Congress appropriates funds to states for capitalization grants. The Environmental Protection Agency (EPA) allocates the funds to the states based on a formula included in the CWA. States provide a matching amount equal to 20% of the capitalization grants they receive from the program. The states then make loans or provide other financial assistance to local governments for the construction of wastewater treatment facilities. As local governments repay the loans to states, the states loan the money to other local governments—hence, the revolving nature of the program. The 1987 amendments also added Section 602(b)(6) to the CWA. Section 602(b)(6) states that Section 513 applies to projects "constructed in whole or in part before fiscal year 1995 with funds directly made available by capitalization grants." Under the 1987 amendments, federal grants to capitalize the SRFs were expected to end with FY1994, the last year identified in the authorization of appropriations. Although Congress has not updated the section of the CWA that authorizes appropriations for the SRFs, it has appropriated funds for capitalization grants each fiscal year since 1994. After FY1994, questions arose over whether the Davis-Bacon prevailing wage requirements also expired. In 1995, EPA issued a memorandum in which it said that projects that began construction after the end of FY1994 did not have to comply with the requirements of Section 602(b)(6). The Building and Construction Trades Department (BCTD) of the AFL-CIO disagreed with EPA's interpretation of the law. The BCTD argued that Davis-Bacon coverage applied to projects funded by the SRFs as long as Congress continued to appropriate funds for the program. The BCTD asked DOL to rule that Davis-Bacon requirements continued to apply to projects that began after FY1994 and were funded with assistance from the SRFs. In June 2000, EPA and the BCTD proposed a settlement agreement that would require states to ensure that prevailing wages were paid for work performed on projects funded through the SRF program "for as long as grants are awarded to the states." EPA indicated that it was "persuaded of the appropriateness of the view that CWA section 513 imposes a continuing, independent obligation on the Agency to ensure that Davis-Bacon Act requirements apply to the grants made under the CWA for treatment works, including capitalization grants." Under the agreement, the BCTD would also agree to avoid further legal action before DOL or any other federal agency. The final settlement agreement between EPA and the BCTD appeared in the Federal Register in January 2001. The agreement was to take effect in July 2001. But, on June 19, 2001, EPA indicated that it would not implement the terms of the settlement agreement because it believed that Section 513 of the CWA was precluded by Section 602(b)(6), which addresses projects "constructed in whole or in part before fiscal year 1995." Although EPA stated that it would publish a formal notice of its changed position in the Federal Register , it does not appear to have done so. It was reported in September 2001 that EPA was delaying implementation of the settlement agreement until October 1, 2001. It does not appear that the settlement agreement was ever implemented. As discussed below, in recent legislation Congress has imposed Davis-Bacon prevailing wage requirements on projects that receive financial assistance from SRFs under the CWA. Congress approved the SDWA in 1974 to protect the quality of public drinking water supplies in the United States. EPA may regulate drinking water contaminants pursuant to the SDWA. In 1996, Congress amended the SDWA ( P.L. 104-182 ) to create a state revolving loan program modeled after the loan program in the CWA. The purpose of the revolving loan program is to help public water systems finance improvements needed to comply with federal drinking water regulations. The 1996 amendments authorized the EPA to make grants to states to capitalize Safe Drinking Water SRFs. States must provide a match equal to 20% of their annual grant. Funding authority for the Safe Drinking Water SRFs expired at the end of FY2003. Nevertheless, Congress has appropriated funds for capitalization grants each year since. The SDWA contains a Davis-Bacon provision, but the provision predates the state revolving loan program. Section 1450(e) of the SDWA states that the EPA Administrator "shall take such actions as may be necessary to assure compliance with provisions of [the Davis-Bacon Act]." In 2004, as the Senate considered legislation that would have amended the SDWA to require the payment of prevailing wages for projects financed with assistance provided from a Safe Drinking Water SRF. The Senate Committee on Environment and Public Works observed: "As enacted, Davis Bacon applies only to those contracts to which the Administrator or Federal Government is a contractee. In the case of the SRF, the contracts are between the State and the municipality and therefore, Davis Bacon does not apply to the SRF." In recent Congresses, legislation has been enacted that requires Davis-Bacon prevailing wages on projects that receive financial assistance from SRFs under both the CWA and SDWA. Other legislation has been considered that would have applied Davis-Bacon wages to projects funded by both programs. Appropriations acts for EPA for FY2010 and FY2012 included provisions that applied Davis-Bacon prevailing wages to projects financed by the state revolving loan programs under both the CWA and SDWA. The Consolidated Appropriations Act, 2012 ( P.L. 112-74 ) provided capitalization grants to the Clean Water SRFs and Safe Drinking Water SRFs for FY2012. The act applies Davis-Bacon prevailing wages to projects funded under both revolving loan programs for FY2012 and future fiscal years. Specifically, P.L. 112-74 stated: For fiscal year 2012 and each fiscal year thereafter, the requirements of section 513 of the Federal Water Pollution Control Act (33 U.S.C. 1372) shall apply to the construction of treatment works carried out in whole or in part with assistance made available by a State water pollution control revolving fund as authorized by title VI of that Act (33 U.S.C. 1381 et seq.), or with assistance made available under section 205(m) of that Act (33 U.S.C. 1285(m)), or both. For fiscal year 2012 and each fiscal year thereafter, the requirements of section 1450(e) of the Safe Drinking Water Act (42 U.S.C. 300j-9(e)) shall apply to any construction project carried out in whole or in part with assistance made available by a drinking water treatment revolving loan fund as authorized by section 1452 of that Act (42 U.S.C. 300j-12). The Department of the Interior, Environment, and Related Agencies Appropriations Act, 2010 ( P.L. 111-88 ) provided capitalization grants to the Clean Water SRFs and Safe Drinking Water SRFs for FY2010. The legislation stated that prevailing wages would be required for work performed on construction projects carried out in whole or in part with funds from the two SRFs: For fiscal year 2010 the requirements of section 513 of the Federal Water Pollution Control Act (33 U.S.C. 1372) shall apply to the construction of treatment works carried out in whole or in part with assistance made available by a State water pollution control revolving fund as authorized by title VI of that Act (33 U.S.C. 1381 et seq.), or with assistance made available under section 205(m) of that Act (33 U.S.C. 1285(m)), or both. For fiscal year 2010 the requirements of section 1450(e) of the Safe Drinking Water Act (42 U.S.C. 300j–9(e)) shall apply to any construction project carried out in whole or in part with assistance made available by a drinking water treatment revolving loan fund as authorized by section 1452 of that Act (42 U.S.C. 300j–12). In November 2009, EPA provided guidance on the FY2010 appropriations and the payment of prevailing wages. In a memorandum to water management division directors, EPA announced that Davis-Bacon coverage would extend to any "assistance agreement" funded with FY2010 appropriations. EPA also stated that Davis-Bacon coverage would extend to any agreement executed during FY2010, even if the source of the funds was a prior year's appropriations. EPA noted the following: States must include in all assistance agreements, whether in the form of a loan, bond purchase, grant, or any other vehicle to provide financing for a project, executed on or after October 30, 2009 (date of enactment of P.L. 111-88 ), and prior to October 1, 2010, for the construction of treatment works under the CWSRF or for any construction under the DWSRF, a provision requiring the application of Davis-Bacon Act requirements for the entirety of the construction activities financed by the assistance agreement through completion of construction, no matter when construction commences. Application of the Davis-Bacon Act requirements extends not only to assistance agreements funded with Fiscal Year 2010 appropriations, but to all assistance agreements executed on or after October 30, 2009 and prior to October 1, 2010, whether the source of the funding is prior year's appropriations, state match, bond proceeds, interest earnings, principal repayments, or any other source of funding so long as the project is financed by an SRF assistance agreement. If a project began construction prior to October 30, 2009, but is financed or refinanced through an assistance agreement executed on or after October 30, 2009 and prior to October 1, 2010, Davis-Bacon Act requirements will apply to all construction that occurs on or after October 30, 2009, through completion of construction. Although some questioned the breadth of the November 2009 guidance, it appears possible to interpret the SRF funding provisions in the FY2010 appropriations measure to allow Davis-Bacon coverage to extend to projects that were financed with funds appropriated in prior years. P.L. 111-88 stated that prevailing wages were required for projects "carried out in whole or in part with assistance" from the SRFs. Thus, the measure did not seem to limit the application of the Davis-Bacon requirements to projects funded only with appropriations for FY2010. Concerns were raised about the effect of imposing Davis-Bacon prevailing wage and reporting requirements on all projects that received assistance from the SRFs in FY2010. Some argued that the requirements could affect projects that were already planned. For example, the requirements could affect cost estimates, contract preparation, and administrative costs. It was also argued that the requirements could cause some projects to be delayed. The American Recovery and Reinvestment Act ( P.L. 111-5 , ARRA) provided supplemental appropriations for FY2009 to the state revolving loan programs. Section 1606 of ARRA required the payment of prevailing wages for work performed on projects "funded directly by or assisted in whole or in part by and through the Federal Government" pursuant to the act. Thus, while Davis-Bacon prevailing wage requirements already applied to much of the construction funded by ARRA, Congress imposed Davis-Bacon requirements on all construction projects funded by the act. In several recent Congresses, legislation has been reported, but not enacted, that would have reauthorized appropriations for the CWA and SDWA state revolving fund loan programs and would have extended Davis-Bacon prevailing wage requirements to those programs. In the 111 th Congress, the Senate Environment and Public Works Committee reported S. 1005 , the Water Infrastructure Financing Act. In addition to authorizing additional funding for the SRFs under both the CWA and SDWA, the legislation required Davis-Bacon prevailing wages on all projects financed in whole or in part by a state revolving loan fund. The bill applied Davis-Bacon both to the initial loans made by an SRF with funds from a new congressional appropriation and, as communities paid back the loans, to loans made using these repayments. In the 111 th Congress, the House passed H.R. 1262 , the Water Quality Investment Act of 2009. The legislation reauthorized the CWA SRF program for five years and applied Davis-Bacon prevailing wages to all projects financed in whole or in part through an SRF. Also in the 111 th Congress, the House Energy and Commerce Committee reported H.R. 5320 , the Assistance, Quality, and Affordability Act of 2010. As approved by the full committee, H.R. 5320 applied Davis-Bacon prevailing wages to projects financed through a SDWA revolving loan fund. | The Davis-Bacon Act requires employers to pay workers on federal construction projects at least locally prevailing wages and fringe benefits. These wages and benefits are the minimum hourly wages and benefits that employers must pay workers. In order to hire and retain workers, employers may pay more than locally prevailing wages or benefits. Supporters of the Davis-Bacon Act maintain that it creates stability in local construction and labor markets and ensures that projects are built by the most skilled and experienced workers. Critics of the act argue that it impedes competition, raises construction costs, and imposes additional administrative requirements on contractors. The Federal Water Pollution Control Act, commonly called the Clean Water Act (CWA), authorizes appropriations to states to operate state revolving loan funds (SRFs) that finance the construction of wastewater treatment plants. The Safe Drinking Water Act (SDWA) authorizes appropriations for SRFs to finance the construction of public drinking water systems. An issue for Congress is whether to apply Davis-Bacon prevailing wages to projects financed by the state revolving loan programs under the CWA and SDWA. The SDWA has a Davis-Bacon provision, but the provision predates, and does not apply to, the state revolving loan program. The CWA states that Davis-Bacon prevailing wages apply to projects that are "constructed in whole or in part before fiscal year 1995" with funds from the revolving loan program. Authorization for appropriations expired at the end of FY1994 for the CWA and the end of FY2003 for the SDWA. Nevertheless, Congress has continued to appropriate funds for the SRFs under both statutes. After the authorization of appropriations for the SRFs under the CWA expired at the end of FY1994, Davis-Bacon coverage was the subject of considerable debate. In 1995, the Environmental Protection Agency (EPA) issued a memorandum stating that projects that began construction after the end of FY1994 did not have to comply with the Davis-Bacon requirements. However, the Building and Construction Trades Department (BCTD) of the AFL-CIO disagreed with EPA's interpretation of the law. The BCTD argued that Davis-Bacon coverage applied to projects funded by the SRFs as long as Congress continued to appropriate funds for the program. In June 2000, EPA and the BCTD proposed a settlement agreement that would require states to ensure that prevailing wages are paid for work performed on projects funded through the SRF program "for as long as grants are awarded to the states." The agreement was to take effect in July 2001. Later, the implementation date was moved to September 2001, and then to October 2001. It does not appear that the settlement agreement was ever implemented. The American Recovery and Reinvestment Act (ARRA) provided FY2009 supplemental appropriations funds to the CWA and SDWA SRFs, and required Davis-Bacon prevailing wages on projects funded in whole or in part by the act. Regular appropriations for EPA for FY2010 and FY2012 included provisions that applied Davis-Bacon prevailing wages to projects financed by the state revolving loan programs under both the CWA and SDWA. As interpreted by the EPA, regular appropriations for the EPA for FY2010 required Davis-Bacon prevailing wages on any project funded with FY2010 appropriations or any agreement executed in FY2010, even if the funds were appropriated in a prior year. Appropriations for FY2012 required Davis-Bacon prevailing wages for projects funded under both revolving loan programs for FY2012 and future fiscal years. |
The Central Asian region—bordering regional powers Russia, China, and Iran—is an age-old east-west and north-south trade and transport crossroads. After many of the former Soviet Union's republics had declared their independence by late 1991, the five republics of Central Asia followed suit. Since this beginning of independence, surprising to most of the region's population, the Central Asian countries have taken some uneven steps in building defense and other security structures and ties. In some respects, the states have viewed their exposure to outside influences as a mixed blessing. While welcoming new trade, aid, and other ties, the leaders of Central Asia have been less receptive to calls to democratize and respect human rights. This report discusses the internal and external security concerns of the Central Asian states. Security concerns faced by the states include mixes of social disorder, crime, corruption, terrorism, ethnic and civil conflict, border tensions, water and transport disputes, the proliferation of weapons of mass destruction (WMD), and trafficking in illegal narcotics and persons. The Central Asian states have tried with varying success to bolster their security forces and regional cooperation to deal with these threats. The United States has provided assistance for these efforts and boosted such aid and involvement after the terrorist attacks on the United States on September 11, 2001, but questions remain about what should be the appropriate level and scope of U.S. interest and presence in the region. Central Asia's states have slowly consolidated and extended their relations with neighboring and other countries and international organizations that seek to play influential roles in Central Asia or otherwise affect regional security. These include the bordering or close-by countries of Russia, Afghanistan, China, Iran, Turkey, and the South Caucasus states (see below, Appendix ), and others such as the United States, Germany, France, India, Israel, Pakistan, Saudi Arabia, South Korea, and Ukraine. In terms of ties with close-by states, Turkmenistan may be concerned more about bordering Iran and Afghanistan than with non-bordering China, while Kazakhstan may be concerned more about bordering Russia than with non-bordering Afghanistan. While soliciting and managing ties with these states, the Central Asian countries also seek assistance through regional and international organizations, including the World Bank, International Monetary Fund (IMF), Economic Community Organization (ECO), Organization of the Islamic Conference (OIC), the European Union (EU), the Commonwealth of Independent States (CIS), the Shanghai Cooperation Organization (SCO), and NATO. Outside powers, while sometimes competing among themselves for influence in Central Asia, also have some common interests. After September 11, 2001, Russia, China, and the United States cooperated somewhat in combating terrorism in the region. This cooperation has appeared to ebb since then, but as the security situation in Afghanistan becomes more complicated, cooperation may improve. Cooperation is also needed to combat drug, arms, and human trafficking, manage water resources, develop and deliver energy, and tackle infectious diseases. Iran and Russia have collaborated since the latter 1990s to hinder the United States and Turkey from further involvement in developing Caspian Sea oil and natural gas resources. Some observers warn that increasing collaboration or similarity of interests among Russia, Iran, and China in countering the West and in attempting to increase their influence could heighten threats to the sovereignty and independence of the Central Asian states. Others discount such threats, stressing the ultimately diverging goals of the three states. The problems of authoritarian regimes, crime, corruption, terrorism, and ethnic and civil tensions jeopardize the security and independence of all the new states of Central Asia, though to varying degrees. Kazakhstan has faced the potential of separatism in northern Kazakhstan where ethnic Russians are dominant, although this threat has appeared to ebb in recent years with the emigration of hundreds of thousands of ethnic Russians. Tajikistan faces threats from economic mismanagement and the possibility of separatism, particularly by its northern Soghd (formerly Leninabad) region. In Kyrgyzstan, northern and southern regional interests vie for influence over central political and economic decision-making. Turkmenistan faces clan and provincial tensions and widespread poverty that could contribute to instability. Uzbekistan faces escalating civil discontent and violence from those whom President Islam Karimov labels as Islamic extremists, from a large ethnic Tajik population, and from an impoverished citizenry. Ethnic Uzbeks and Kyrgyz clashed in 1990 in the Fergana Valley. This fertile valley is divided between Kyrgyzstan, Tajikistan, and Uzbekistan, and contains about one-fifth of Central Asia's population. All the states are harmed by drug and human trafficking and associated corruption and health problems. Despite these problems, Turkmenistan's oil and gas wealth could contribute to its long-term stability. Also, its location at a locus of Silk Road trade routes potentially could increase its economic security. Uzbekistan's large population and many resources, including oil, natural gas, and gold, could provide a basis for its stable development and security. Kyrgyzstan's beleaguered civil society might eventually succeed in reducing authoritarianism and boosting entrepreneurial activity and good governance, which eventually might permit the country to increase its budgetary expenditures for defense and security. It would seem that affinities among the current regional elites would facilitate cooperative ties. Many of the officials in the states learned a common language (Russian) and were Communist Party members. Religion (Islam) and ethnicity (Turkic or Persian) are other seeming grounds for links among most in the region. In actuality, however, regional cooperation has been halting. The vast majority of the people in the Central Asian states suffered steep declines in their quality of life in the first few years after the dissolution of the Soviet Union. The gap widened between the rich and poor, accentuating social tensions and potential instability. Social services such as health and education, inadequate during the Soviet period, declined further. In the new century, however, negative trends in poverty and health have been reversed in much of Central Asia, according to one World Bank report, although the quality of life remains far below that of Western countries. Economic difficulties associated with the world financial crisis that began in 2008 could exacerbate social tensions, separatism, and extremism, although large percentages of the states' populations remain employed in the agricultural sector where economic gyrations have been somewhat buffered. This sector has a surfeit of manpower, however, and cannot readily absorb new workers as the populations continue to increase. In the past, substantial out-migration by many workers to Russia and the return of remittances to relatives in Central Asia somewhat eased poverty and tension and buttressed national GDPs. However, Russia's economic problems have caused these remittances to fall off and have forced many of these guest workers to return to their countries of origin. Calls for government to be based on Sharia (Islamic law) and the Koran are supported by small but increasing minorities in most of Central Asia. Most of Central Asia's Muslims appear to support the concept of secular government, but the influence of fundamentalist Salafist and extremist Islamic groups is growing. Tajikistan's civil conflict, where the issue of Islam in political life contributed to strife, has been pointed to by Central Asian leaders to justify crackdowns. They also point to Russia's conflict with its breakaway Chechnya region and other areas in Russia's North Caucasus as evidence of the threat. In many cases, government crackdowns ostensibly aimed against Islamic extremism have masked clan, political, and religious repression. In some regions of Central Asia, such as Uzbekistan's portion of the Fergana Valley, some Uzbeks kept Islamic practices alive throughout the repressive Soviet period, and some now oppose the secular-oriented Uzbek government. Islamic extremist threats to the regimes may well increase as economic distress fails to dissipate or widens as a result of the global economic crisis. Heavy unemployment and poverty rates among youth in the Fergana Valley are widely cited by observers as making youth more vulnerable to recruitment into religious extremist organizations. Although much of the attraction of Islamic extremism in Central Asia is generated by factors such as poverty and discontent, it is facilitated by groups in Afghanistan, Pakistan, Saudi Arabia, and elsewhere that provide funding, education, training, and manpower to the region. Some of these ties were at least partially disrupted by the U.S.-led coalition actions in Afghanistan and the U.S. call for worldwide cooperation in combating terrorism. The Central Asian states impose several controls over religious freedom. All except Tajikistan forbid religious parties such as the Islamic Renewal Party (Tajikistan's civil war settlement included the IRP's legalization), and maintain Soviet-era religious oversight bodies, official Muftiates, and approved clergy. The governments censor religious literature and sermons. According to some analysts, the close government religious control may leave a spiritual gulf that underground radical Islamic groups seek to fill. Officials in Uzbekistan believe that the country is increasingly vulnerable to Islamic extremism, and they have been at the forefront in Central Asia in combating this threat. Reportedly, thousands of alleged Islamic extremists have been imprisoned and many mosques have been closed. Restrictions were tightened when the legislature in 1998 passed a law on "freedom of worship" banning all unregistered faiths, censoring religious writings, and making it a crime to teach religion without a license. The Uzbek legislature also approved amendments to the criminal code increasing punishments for setting up, leading, or participating in religious extremist, separatist, fundamentalist, or other illegal groups. Public expressions of religiosity are discouraged. Women who wear the hijab and young men who wear beards are faced with government harassment and intimidation. As recommended by the U.S. Commission on International Religious Freedom (USCIRF), then-Secretary Rice in November 2006 designated Uzbekistan a "country of particular concern" (CPC), where severe religious and human rights violations could lead to U.S. sanctions. Since 2000, USCIRF also has recommended that Turkmenistan be designated as a CPC. Uzbekistan and other Central Asian states have arrested many members of Hizb ut-Tahrir (HT; Liberation Party, a politically oriented Islamic movement calling for the establishment of Sharia rule), sentencing them to lengthy prison terms or even death for pamphleteering, but HT reportedly continues to gain adherents. Uzbekistan argues that HT not only advocates terrorism and the killing of apostates but is carrying out such acts. Kyrgyz authorities emphasize the anti-American and anti-Semitic nature of several HT statements and agree with the Uzbek government on designating the group as an illegal terrorist organization, but some prominent observers in Kyrgyzstan argue that the group is largely pacific and should not be harassed. Terrorist actions aimed at overthrowing regimes have been of growing concern in all the Central Asian states. Some analysts caution that many activities the regimes label as terrorist—such as hijacking, kidnapping, robbery, assault, and murder—are often carried out by individuals or groups for economic benefit or for revenge, rather than for political purposes. Also, so-called counter-terrorism may mask repressive actions against religious or political opponents of the regime. Terrorist activities of the Islamic Movement of Uzbekistan (IMU) and similar groups in the region were at least temporarily disrupted by U.S.-led coalition actions in Afghanistan, where several of the groups were based or harbored. Many observers, however, warn that terrorist cells have re-formed and are expanding in Central Asia and that surviving elements of the IMU and other terrorist groups are infiltrating from Afghanistan, Pakistan, and elsewhere. Ominously, the IMU and its splinter group, the Islamic Jihad Union (IJU; see below), have become even more closely allied with international terrorist groups, particularly Al Qaeda. Moreover, the IMU and IJU have expanded their activities beyond Central and South Asia to other areas of the globe. Several explosions outside government buildings in Tashkent on February 16, 1999, were variously reported to have killed 13-28 and wounded 100-351 individuals. Uzbek officials detained hundreds or thousands of suspects, including political oppositionists and HT members. The first trial of 22 suspects in June 1999 resulted in six receiving the death sentence. Karimov in April 1999 alleged that Mohammad Solikh (former Uzbek presidential candidate and head of the banned Erk Party) was the mastermind of the plot, and had received support from the Taliban and Uzbek Islamic extremist Tohir Yuldash. The 22 suspects were described in court proceedings as receiving training in Afghanistan (by the Taliban), Tajikistan, Pakistan, and Russia (by Al Qaeda terrorist Khattab in Chechnya), and as led by Solikh and Yuldash and his ally Jama Namanganiy, the latter two the heads of the IMU. Testimony alleged that Solikh had made common cause with Yuldash and Namanganiy in mid-1997, and that Solikh, Yuldash, Namanganiy, and others had agreed that Solikh would be president and Yuldash defense minister after Karimov was overthrown and a caliphate established. According to an Uzbek media report in early July 1999, the coup plot included a planned attack on Uzbekistan by Namanganiy and other Tajik rebels transiting through Tajikistan and Kyrgyzstan ( see below ). Another secret trial in August 1999 of six suspects in the bombings (brothers of Solikh or members of his Erk Party) resulted in sentences ranging from 8 to 15 years. In November 2000, the Uzbek Supreme Court convicted twelve persons of terrorism, nine of whom were tried in absentia. The absent Yuldash and Namangoniy were given death sentences, and the absent Solikh 15.5 years in prison. U.S. officials criticized the apparent lack of due process during the trial. Solikh has rejected accusations of involvement in the bombings or membership in the IMU. Yuldsash too has eschewed responsibility for the bombings, but warned that more might occur if Karimov does not step down. On March 28 through April 1, 2004, a series of bombings and armed attacks were launched in Uzbekistan, reportedly killing 47. President Karimov asserted on March 29 that the violence was aimed against his government, in order to "cause panic among our people, to make them lose their trust in the policies being carried out." An obscure Islamic Jihad Group of Uzbekistan (IJG; Jama ' at al-Jihad al-Islami , reportedly an alias of the IMU or a breakaway part of the IMU) claimed responsibility for the violence. After the attacks, media censorship intensified. The first national trial of fifteen suspects accused of attempting to overthrow the government ended in late August 2004. They all confessed their guilt and received sentences of 11-16 years in prison. Some of the defendants testified that they belonged to the IJG and were trained by Arabs and others at camps in Kazakhstan and Pakistan. They testified that IMU member Najmiddin Jalolov (one of those convicted in absentia in 2000) was the leader of the IJG and linked him to Taliban head Mohammad Omar, Uighur extremist Abu Mohammad, and Osama bin Laden. Over 100 individuals reportedly were convicted in various trials. Suicide bombings occurred in Tashkent, Uzbekistan, on July 30, 2004, at the U.S. and Israeli embassies and the Uzbek Prosecutor-General's Office. Three Uzbek guards reportedly were killed and about a dozen people were injured. All U.S. and Israeli diplomatic personnel were safe. The next day, then-Secretary of State Colin Powell condemned the "terrorist attacks." The IMU and the IJG claimed responsibility and stated that the bombings were aimed against the Uzbek and other "apostate" governments (see also CRS Report RS21818, The 2004 Attacks in Uzbekistan: Context and Implications for U.S. Interests , by [author name scrubbed]). Dozens or perhaps hundreds of civilians were killed or wounded on May 13, 2005, after Uzbek troops fired on demonstrators in the eastern town of Andijon. The protestors had gathered to demand the end of a trial of 23 prominent local businessmen charged with belonging to an Islamic terrorist group. The night before, a group stormed a prison where those on trial were held and released hundreds of inmates. There is a great deal of controversy about whether this group contained foreign-trained terrorists or was composed mainly of the friends and families of the accused. Many freed inmates then joined others in storming government buildings. President Islam Karimov flew to the city to direct operations and reportedly had restored order by late on May 13. The United States and others in the international community have called for an international inquiry, which the Uzbek government has rejected (see also CRS Report RS22161, Unrest in Andijon, Uzbekistan: Context and Implications , by [author name scrubbed]). On May 25-26, 2009, a police checkpoint was attacked on the Kyrgyz-Uzbek border, attacks took place in the border town of Khanabad, and four bombings occurred in Andijon in the commercial district, including at least one by suicide bombers. Several deaths and injuries were alleged, although reporting was suppressed. Uzbek officials blamed the IMU, although the IJU allegedly claimed responsibility. President Karimov flew to Andijon on May 31. In late August 2009, shooting took place in Tashkent that resulted in the deaths of three alleged IMU members and the apprehension of other group members. The Uzbek government alleged that the group had been involved in the 1999 explosions and in recent assassinations in Tashkent. In early December 2009, the Andijon regional court reportedly convicted 22 individuals on charges of involvement in the May 2009 events, and sentenced them to prison terms ranging from five to 18 years. In recent years there have been sporadic suicide bombings and other attacks seemingly aimed against the government. One took place at the Oberon market in Bishkek in December 2002, one at a currency exchange outlet in Osh in southern Kyrgyzstan in May 2003, and one in Bishkek that targeted policemen in November 2004. The explosion at the Oberon market killed seven Kyrgyz citizens and injured over 20 people. One person was killed in Osh. Five people, including three Uzbeks, a Uighur citizen of China, and a Kyrgyz, were charged in July 2003 with involvement in the first two bombings. Kyrgyz security officials claimed that they were IMU members trained in Chechnya (by Al Qaeda's Khattab) and Afghanistan and that they had also planned to bomb the U.S. Embassy in Bishkek but were foiled by tight security around the embassy. In contrast to these terrorist incidents, the former Bush Administration regarded the March 2005 ouster of Akayev as a popular uprising. Several hundred Islamic extremists and others who fled repression in Uzbekistan and settled in Tajikistan (some of whom were being forced out at Uzbekistan's behest), and rogue groups from Tajikistan that refused to disarm as part of the Tajik peace settlement, entered Kyrgyzstan in July-August 1999. Namanganiy headed the largest guerrilla group. The guerrillas seized hostages, including four Japanese geologists, and occupied several Kyrgyz villages, stating that they would cease hostilities if Kyrgyzstan provided harborage and would release hostages if Uzbekistan released jailed extremists. The guerrillas were rumored to be seeking to create an Islamic state in south Kyrgyzstan as a springboard for a jihad in Uzbekistan. In mid-October 1999, Kyrgyzstan's defense minister announced success in forcing virtually all the guerrillas into Tajikistan (some critics argued that the onset of winter weather played an important part in the guerrilla retreat). Uzbek aircraft targeted several alleged guerrilla hideouts in Tajikistan and Kyrgyzstan, eliciting protests from these states of violating airspace. Uzbek President Islam Karimov heavily criticized Kyrgyzstan's then-President Askar Akayev for supposed laxity in suppressing the guerrillas. The Tajik government, which had mercurial relations with Uzbekistan, incensed it by allowing the guerrillas to enter Afghanistan rather than wiping them out. According to many observers, the incursion indicated both links among terrorists in Afghanistan, Kyrgyzstan, Uzbekistan, and Russia (Chechnya and Dagestan) and the weakness of Kyrgyzstan's security forces in combating threats to its independence. Observers were split on whether this terrorism was related more to Islamic extremism, or to efforts to control narcotics resources and routes. Dozens of IMU and other insurgents again invaded Kyrgyzstan and Uzbekistan in August 2000, in Kyrgyzstan taking foreigners hostage and leading to thousands of Kyrgyz fleeing the area. Uzbekistan provided air and some other support, but Kyrgyz forces were largely responsible for defeating the insurgents by late October 2000. In Uzbekistan, the insurgents launched attacks near Tashkent and in the southeast that were defeated by Uzbek troops. Limited engagements by Kyrgyz border troops with alleged insurgents or drug traffickers were reported in late July 2001. According to some reports, the IMU did not engage in major attacks in 2001 because of its increasing attention to bin Laden's agenda, particularly after September 11, 2001, when IMU forces fought alongside bin Laden and the Taliban against the U.S.-led coalition. The activities of the IMU appeared to have been dealt a blow by the U.S.-led coalition. Tajikistan was among the Central Asian republics least prepared and inclined toward independence when the Soviet Union broke up. In September 1992, a loose coalition of nationalist, Islamic, and democratic parties and movements—largely consisting of members of Pamiri and Garmi regional elites who had long been excluded from political power—tried to take over. Kulyabi and Khojenti regional elites, assisted by Uzbekistan and Russia, launched a successful counteroffensive that by the end of 1992 had resulted in 20,000-40,000 casualties and up to 800,000 refugees or displaced persons, about 80,000 of whom fled to Afghanistan. In 1993, the CIS authorized "peacekeeping" in Tajikistan. These forces consisted of Russia's 201 st Rifle Division, based in Tajikistan, and token Kazakh, Kyrgyz, and Uzbek troops (the Kyrgyz and Uzbek troops pulled out in 1998-1999). Terrorist actions were carried out by both sides, and international terrorist groups provided some support to the Tajik opposition. Reportedly, these groups included the IMU, Iran's Revolutionary Guards, and Al Qaeda. As the civil war wound down in the late 1990s, most of these forces left Tajikistan. After the Tajik government and opposition agreed to a cease-fire in September 1994, the UNSC established a small U.N. Mission of Observers in Tajikistan (UNMOT) in December 1994 with a mandate to monitor the cease-fire, later expanded to investigate cease-fire violations, monitor the demobilization of Tajik opposition fighters, assist ex-combatants to integrate into society, and offer advice for holding elections. In December 1996, the two sides agreed to set up a National Reconciliation Commission (NRC), an executive body composed equally of government and opposition members. On June 27, 1997, Tajik President Emomaliy Rakhman and opposition leader Seyed Abdullo Nuri signed the comprehensive peace agreement , under which Rakhman remained president but 30% of ministerial posts were allotted to the opposition. Benchmarks of the peace process were largely met, including the return of refugees, demilitarization of rebel forces, legalization of rebel parties, and the holding of elections. In March 2000, the NRC disbanded, and UNMOT pulled out in May 2000. The CIS declared its peacekeeping mandate fulfilled in June 2000, but Russian troops remain under a 25-year basing agreement. Stability in Tajikistan remains fragile. According to some estimates, there are some 4,000 IMU fighters in Afghanistan. Pakistan reported in November 2006 that it had arrested IJU members who had placed rockets near presidential offices, the legislature, and the headquarters of military intelligence in Islamabad. Reportedly, the IJU was targeting the government because of its support for the United States. Pakistani media reported in March-April 2007 that dozens of IMU members had been killed in northern Pakistan when local tribes turned against them, possibly reducing their strength or forcing them to move into Afghanistan and Central Asia. More alleged IMU and IJU members were reported killed by Pakistani forces during fighting in North Waziristan in October 2007. Indicating a widening of the IMU's focus, Tohir Yuldash called in January 2008 for creating a Shariah state in Pakistan. Among other incidents: In January 2008, an IJU website seemed to indicate that Abu Laith al-Libi—an al Qaeda official who had been killed by the United States in Pakistan—had been one of the leaders of the IJU. In March 2008, an IJU website claimed that one of its members—the German-born Cunyt Ciftci (alias Saad Abu Fourkan)—had assisted Taliban forces in Afghanistan by carrying out a suicide bombing that killed two Afghan and two U.S. troops and wounded several others. According to the IJU website and other sources, IJU is playing a more significant role in fighting in Afghanistan. In June 2008, an IJU video claimed that one Uzbek IJU member had taken part in the 1999 attack in Kyrgyzstan, and later had fought in Afghanistan against the Northern Alliance and then against U.S. and NATO forces. Another Uzbek member had been trained in Chechnya by Khattab in 1998 and also had fought against U.S. and NATO forces in Afghanistan. In July and September 2009, ISAF and the Afghan military reportedly carried out operations in the northern Konduz province against IMU terrorists who supposedly had moved into the province after being forced out of Pakistan. Tohir Yuldash allegedly was killed in Pakistan by a U.S. predator missile on September 26, 2009. A Russian Tatar, Abdur Rakhman, allegedly became the new leader of the IMU. On October 11, 2009, 10 terrorists attacked the army headquarters in Rawalpindi, resulting in 20 deaths. The government alleges that three of the attackers belonged to the IMU. In late October 2009, Pakistani armed forces reportedly were attacking an IMU base in the town of Kaniguram in South Waziristan. In February 2010, Pakistani media reported that a U.S. predator missile killed several terrorists in North Waziristan, including four Uzbek citizens. The terrorists were said to be linked to Al Qaeda. In February 2010, alleged IMU terrorists attacked a police station in Bannu, North West Frontier Province, Pakistan, killing 15 police and civilians. Some officials in Central Asia have warned that the crackdown on the IMU and IJU in Pakistan and Afghanistan may be forcing some of the terrorists to return to Central Asia. Other officials have stated that a large-scale influx has not yet occurred. Officials in Germany arrested four individuals on September 5, 2007, on charges of planning explosions at the U.S. airbase at Ramstein, at U.S. and Uzbek diplomatic offices, and other targets in Germany. The IJU claimed responsibility and stated that it was targeting U.S. and Uzbek interests because of these countries' "brutal policies towards Muslims," and targeting Germany because it has a small military base in Termez, Uzbekistan, which is used to support NATO operations in Afghanistan. Reportedly, the suspects had received their orders from Gofir Salimov (not apprehended), who is wanted in Uzbekistan in connection with the 2004 bombings. The suspects were part of a larger IJU branch in Germany. In U.S. congressional testimony on September 10, 2007, the then-Director of the National Counterterrorism Center, John Redd, and the then-Director of National Intelligence, Mike McConnell, stated that U.S. communications intercepts shared with Germany had facilitated foiling the plot. In July 2009, German media reported that the suspects had confessed that they were trained at an IJU terrorist training camp in Afghanistan. The leader of the IJU was identified as Najmiddin Jalolov (mentioned above), a.k.a. "commander Ahmad." In testimony in September 2009, two of the defendants admitted that while in Afghanistan in 2006, they had launched attacks against two U.S. military camps. Among other incidents: In May 2008, French, German, and Dutch authorities reported that they had detained 10 individuals for suspicion of running a network to funnel money to the IMU in Uzbekistan. In late September 2008, German authorities reported the arrest of two suspected members of IJU and issued wanted posters for two other suspected members. The four allegedly had received terrorist training in Pakistani IJU camps. German authorities also arrested two people allegedly attempting to leave the country to undergo terrorism training in Pakistan by the IJU (they later were released on the grounds of inconclusive evidence). A video released by the IJU in late October 2008 stated that as long as Germany supports NATO operations in Afghanistan, and uses a base in Uzbekistan to support these operations, it is subject to IJU attacks. A video was released by the IJU in January 2009 that threatened German "occupation" troops in Afghanistan. Turkish authorities arrested over three dozen alleged IJU members in April 2009. German media reported in June 2009 that a video released by the IJU provided more evidence that the terrorist organization was linked to al Qaeda. Borders among the five Central Asian states for the most part were delineated by 1936, based partly on where linguistic and ethnic groups had settled, but mainly on the exigencies of Soviet control over the region. The resulting borders are ill-defined in mountainous areas and extremely convoluted in the fertile Fergana Valley, parts of which belong to Kyrgyzstan, Tajikistan, and Uzbekistan. Over a dozen tiny enclaves add to the complicated situation, as does Soviet-era decisions to build roads and railways with scant regard to intra-regional borders. Some in Central Asia have demanded that borders be redrawn to incorporate areas inhabited by co-ethnics, or otherwise dispute the location of borders. Caspian Sea borders have not been fully agreed upon, mainly because of Iranian intransigence, but Turkmenistan and Azerbaijan also have not resolved their mutual claims to undersea oil and gas resources. In August 2009, Turkmenistan called for the issue of the disputed offshore resources to be adjudicated, presumably by the International Court of Justice. In November 2009, Senior Advisor to the US State Department in Eurasian Energy Affairs, Daniel Stein, reportedly offered U.S. good offices to mediate the dispute, but stated that even if such a settlement is not soon reached, the United States believed that trans-Caspian pipelines still could be built. Iran's foreign minister Manoucher Mottaki reportedly denounced the U.S. offer, asserting that the littoral states will be the sole arbiters of the borders. Russia and Kazakhstan have agreed on delineation and shared exploitation of seabed oil resources. China has largely settled border delineation with Kazakhstan, Kyrgyzstan, and Tajikistan, reportedly involving "splitting the difference" on many of the disputed territories, which are usually in unpopulated areas. Popular passions were aroused in Kyrgyzstan after a 1999 China-Kyrgyzstan border agreement ceded about 9,000 hectares of mountainous Kyrgyz terrain. Kyrgyz legislators in 2001 opened a hearing and even threatened to try to impeach then-President Akayev. He arrested the leader of the impeachment effort, leading to violent demonstrations in 2002 calling for his ouster and the reversal of the "traitorous" border agreement. Dissident legislators appealed the border agreement to the Constitutional Court, which ruled in 2003 that it was legal. In June 2006, Kyrgyz President Kurmanbek Bakiyev visited China and assuaged Chinese concerns by signing a joint declaration with Chairman Hu Jintao which re-affirmed that "the parties will abide strictly by all the agreements and documents signed between the two countries on the border issue." In July 2009, the Kyrgyz Border Service reportedly rebutted claims by some Kyrgyz legislators and others that some territory was being ceded to China and confirmed that all border demarcation issues with China had been resolved. The problem of delineating their 4,200 mile border has been an important source of concern to Russia and Kazakhstan. During most of the 1990s, neither Russia nor Kazakhstan wished to push border delineation, Russia because of concerns that it would be conceding that Kazakhstan's heavily ethnic Russian northern regions are part of Kazakhstan, and Kazakhstan because of concerns that delineation might inflame separatism. In 1998, Russia established border patrols along its border with Kazakhstan for security reasons, and determined to delineate the border. By late 2004, most of the Russian-Kazakh border had in principle been delimited, but the sides are still involved in the placement of border signs and border posts. To head off separatist proclivities in the north, Kazakhstan reorganized administrative borders in northern regions to dilute the influence of ethnic Russians, established a strongly centralized government to limit local rule, and moved its capital northward. These and other moves apparently contributed to political resignation among many ethnic Russians, and many emigrated to Russia. Tajikistan and Kyrgyzstan have agreed on the delimitation of about one-half of their 579 mile shared border and pledged in September 2007 to peacefully settle contentious disputes involving borders in the Fergana Valley. These disputes have resulted in some deaths and injuries. Tensions have increased because of demographic shifts along the border. Some Kyrgyz allege that Tajiks have moved into lands in Kyrgyzstan that have been vacated by Kyrgyz, who have moved to cities or become migrant workers. Conversely, some Tajiks allege that Kyrgyz have moved into their lands. In January 2010, Tajik Foreign Minister Hamrokhon Zarifi stated that the delineation of borders with Kyrgyzstan and Uzbekistan was "very complicated since quite often the borderline crosses towns, cities, streets and even separate houses," but that Russia recently had provided archival information that might facilitate the settlement of border disputes. Uzbekistan has had contentious border talks with all the other Central Asian states. According to Kyrgyz Prime Minister Daniyar Usenov, about 40% of Kyrgyzstan's 680-mile border with Uzbekistan remains to be demarcated. Legislators and others in Kyrgyzstan in 2001 vehemently protested a border delineation agreement with Uzbekistan reached by the two prime ministers that ceded a swath of the Kyrgyz Batken region, ostensibly to improve Uzbek access to its Sokh enclave in Kyrgyzstan. Faced with this protest, the Kyrgyz government sent a demarche to Uzbekistan repudiating any intention to cede territory. Similarly, in late 2004 Kyrgyz legislators demanded that Uzbekistan's Shohimardon enclave in Kyrgyzstan (ceded in the 1930s) be returned. These and other contentious issues resulted in the cessation of border talks between Uzbekistan and Kyrgyzstan for five years until they resumed in December 2009. Uzbekistan's unilateral efforts to delineate and fortify its borders with Kazakhstan in the late 1990s led to tensions. In September 2002, however, the Kazakh and Uzbek presidents announced that delineation of their 1,400 mile border was complete, and some people in previously disputed border villages began to relocate if they felt that the new borders cut them off from their "homeland." However, many people continued to ignore the new border or were uncertain of its location, leading to several shootings of Kazakh citizens by Uzbek border troops. In one case, transit between the villages of Arnasay and Kostakyr in South Kazakhstan and the rest of Kazakhstan was cut off when an area of the sole roadway from the towns was ceded to Uzbekistan. Residents complained that Uzbek border guards were constantly arresting them for violating the border, while Kazakh officials called for the residents to relocate. The Uzbek and Tajik presidents signed an accord in October 2002 delimiting most of their 720-mile joint border. Contention has continued over about 15-20% of the border. In October 2006, the head of the Tajik border guard service complained that demarcation was being hindered by Uzbekistan's peremptory placement of border markers, barbed wire and fences. Some Tajiks have raised concerns that Uzbekistan wants to redraw borders in order to take possession of the Farhod reservoir on the Syr Darya River. Besides border claims, other problems revolve around whether borders are open or closed. Open borders within the Central Asian states after the breakup of the Soviet Union were widely viewed as fostering trafficking in drugs and contraband and free migration, so border controls increasingly have been tightened in all the states. Uzbekistan mined areas of its borders with Kyrgyzstan and Tajikistan in 1999, intending to protect it against terrorist incursions, but in fact leading to many civilian Kyrgyz and Tajik casualties. Kyrgyzstan has demanded that Uzbekistan clear mines it has sown along the borders, including some allegedly sown on Kyrgyz territory, but Uzbekistan has asserted that it will maintain the minefields to combat terrorism. (Kyrgyzstan too has raised tensions by sowing mines and blowing up mountain passes along its borders with Tajikistan.) Border tensions between Uzbekistan and Turkmenistan also flared in late 2002, after Turkmenistan accused Uzbek officials of complicity in the coup attempt. Uzbekistan's economic problems led it in mid-2002 to impose heavy duties on imports and at the beginning of 2003 to close its borders to "suitcase trading" (small-scale, unregulated trading), heightening tensions with bordering states. Sharp disagreements remain between Uzbekistan and Tajikistan on mine clearing, Uzbek restrictions on Tajik transportation, clashes between Uzbek and Tajik border guards, and the Uzbek visa regime with Tajikistan. In July 2009, Tajikistan began building a short railway spur to link the capital more directly with the Qurghonteppa region to the south, to circumvent a longer route through Uzbekistan that involved complicated customs requirements. After terrorists carried out several attacks in Uzbekistan in May 2009, Uzbekistan alleged that they had entered the country from Kyrgyzstan, and built more concrete walls, trenches, and ditches along the border. The Kyrgyz Border Service stated in June 2009 that Uzbekistan was violating bilateral accords that stipulated that such border fortifications should not be built "until the delineation and demarcation of the Kyrgyzstan-Uzbekistan state borders is completed." Uzbek officials reportedly alleged that they were forced to make unilateral decisions about the location of borders while emplacing fortifications because Kyrgyzstan had refused to meet to demarcate borders. One trench reportedly was moved to accommodate Kyrgyz concerns. Iran's intransigence in settling on Caspian Sea borders has contributed to the build-up of naval forces and the failure to build trans-Caspian oil and gas pipelines. In August 2002, Russia conducted the largest naval maneuvers in its history in the northern Caspian. Kazakhstan announced its intent to form a navy in early 2003, leading to protests from the Russian Foreign Ministry, but Kazakh military officials emphasized their determination to proceed with plans to protect their offshore oil fields and maritime borders. There reportedly were about 3,000 naval personnel in late 2008. Turkmenistan's dispute with Azerbaijan over sea borders and the ownership of offshore oilfields also has stymied the development of trans-Caspian pipelines. Organized crime networks have expanded in all the Central Asian states, and have established ties with crime groups worldwide that are involved in drug, arms, and human trafficking. All the states serve as origin, transit, or destination states for human trafficking. Crime groups collude with local border and other officials to transport people to the Middle East or other destinations for forced labor or prostitution. Corruption is a serious threat to democratization and economic growth in all the states. The increasing amount of foreign currency entering the states as the result of foreign oil and natural gas investments, the low pay of most government bureaucrats, and inadequate laws and norms are conducive to the growth of corruption. Perhaps most significantly, the weakness of the rule of law permits the Soviet-era political patronage and spoils system to continue. According to the World Bank: in Kazakhstan, corruption showed relatively little change over the period from 1996-2008. The country was at the 16 th percentile in 2008 (that is, 178 of 212 countries had better records in combating corruption); in Kyrgyzstan, corruption increased over the time period 1996-2007, but declined slightly in 2008. The country was at the 13 th percentile in 2008; in Tajikistan, corruption declined slightly over the time period 1996-2007, but increased in 2008. The country was at the 14 th percentile in 2008; in Turkmenistan, corruption showed relatively little change over the time period 1996-2008. The country was at the 5 th percentile in 2008; in Uzbekistan, corruption showed relatively little change over the time period 1996-2008. The country was at the 11 th percentile in 2008. Corrupt officials in Turkmenistan and Kazakhstan have been able to siphon off massive revenues from oil and gas exports, according to some observers. The Turkmen president controls a "presidential fund," that receives 50% of gas revenues and is ostensibly used for economic development, though budgetary transparency is lacking on how the fund is used. Perhaps the most sensational allegations of corruption have involved signing bonuses and other payments in the 1990s by U.S. energy companies operating in Kazakhstan (or by their proxies) that allegedly were funneled into Swiss bank accounts linked to Kazakh officials, allegedly including Nazarbayev. U.S. officials concurred with a Swiss decision to freeze the funds and open investigations in 1999-2000. The New York Times reported that Nazarbayev unsuccessfully raised the issue of unfreezing some of these accounts during his visit with then-President Bush in December 2001. Kazakhstan set up a National Fund in 2001 under the National Bank for receipt of oil revenues that reportedly operates under strict international accounting standards. The Central Asian states have worked to bolster their economic and defense capabilities by seeking assistance from individual Western donors such as the United States, by trying to cooperate with each other, and by joining myriad international organizations. Regional cooperation has faced challenges from differential economic development and hence divergent interests among the states, and from more nationalistic postures. Cooperation also is undermined by what the states view as Uzbekistan's overbearing impulses. Regional cooperation problems are potentially magnified by the formation of extra-regional cooperation groups such as the CIS Collective Security Treaty Organization (CSTO), NATO's Partnership for Peace (PFP), and the Shanghai Cooperation Organization (SCO). Each group reflects the diverging interests of Russia, the United States, and China, although the fact that each group stresses anti-terrorism would seem to provide motivation for cooperation. All of the Central Asian states have been faced with creating adequate military and border forces and have had vexing problems with military financing and training. At first dependent on the contract service of Russian troops and officers in their nascent militaries, the states now rely little on such manpower, but continue to depend heavily on training and equipment ties with Russia. After September 11, 2001, the states benefitted from boosted U.S. military training and equipment aid. The capabilities of the military, border, and other security forces are limited, compared to those of neighboring states such as Russia, China, or Iran. Military forces range in manpower from about 16,300 in Tajikistan (excluding Russians) to 87,000 in Uzbekistan (see Table A-1 ). The states have variously solicited training and technical assistance from the United States, Turkey, China, and other countries, have forged security ties with the Commonwealth of Independent States (CIS) and NATO's PFP, and cooperated in regional bodies such as SCO. The global economic downturn that began in 2008 contributed to halting or even reversing the growth of per capita income in the Central Asian states in 2008-2009, the first such lack of growth in several years. Reductions in remittances from migrant workers and rising food and fuel costs account for some of the decline. Regional currencies depreciated against the dollar, contributing to plummeting imports, and fluctuating world commodity prices contributed to declining exports. The banking sectors were severely stressed by a jump in non-performing loans, and banks cut back private sector lending. These economic stresses threaten government spending on health, education, and other social programs. Kazakhstan and Uzbekistan have been able to tap sovereign wealth funds to support these programs and to partly ameliorate rising budget deficits. Kyrgyzstan has been able to somewhat cushion the economic blow by means of budgetary support from Russia and the IMF, a large grain harvest, and its ample trade with China, much of which is re-exported by Kyrgyzstan to other Central Asian states. Economic cooperation among the Central Asian states began to develop by the mid-1990s, leading to several initiatives, but results have been scant. Cooperation was stymied by Uzbekistan's price controls and restrictions on currency convertibility, tariffs levied by the states on Kyrgyzstan because of its membership in the World Trade Organization, and border restrictions that stifled trade. A customs union formed between Kazakhstan and Uzbekistan in January 1994 (Kyrgyzstan and Tajikistan joined later) achieved some modest early success as a regional forum. It was renamed the Central Asian Economic Community (CAEC) in July 1998. Criticizing its scant achievements, Karimov in early 2001 proposed that it become a forum for "wide-ranging" policy discussions, and it was renamed the Central Asian Cooperation Organization in late 2001 (CACO). CACO suffered a serious blow in September 2003 when Kazakhstan joined Belarus, Russia, and Ukraine in proclaiming the building of a "common economic space." In October 2004, CACO abandoned its focus on creating a regional identity separate from Russia by admitting Russia as a member. Finally, in October 2005, CACO announced that its membership would be "integrated" into the Eurasian Economic Community (EEC; a Russia-led economic cooperation group then consisting of Russia, Belarus, Kazakhstan, and Tajikistan). In recent years, EEC members Russia, Belarus, and Kazakhstan have concentrated on common customs tariffs, which are to come into effect in mid-2010. Uzbekistan notified that EEC in October 2008 that it was suspending membership in the EEC. Among other regional economic cooperation initiatives, the Asian Development Bank in 1997 helped launch the Central Asia Regional Economic Cooperation program (CAREC; members are China, Afghanistan, Azerbaijan, Mongolia, and all the Central Asian states except Turkmenistan) to improve living standards and reduce poverty in its member states through regional economic collaboration. Also participating in CAREC are the European Bank for Reconstruction and Development (EBRD), the International Monetary Fund (IMF), the Islamic Development Bank, the United Nations Development Program (UNDP), and the World Bank. These institutions provided about $2.0 billion in loans and grants to CAREC countries (excluding China) in 2008 and $3.9 billion in 2009. The priority areas for grants and loans are transport, energy, and trade development. In 1992, Armenia, Russia, and most of the Central Asian states signed a Collective Security Treaty that stated that the members would mutually defend against security threats and would not join other security alliances. At an April 2003 summit, Armenia, Russia, Belarus, Kazakhstan, Kyrgyzstan, and Tajikistan signed a charter to create a Collective Security Treaty Organization (CSTO) with a permanent secretariat for operational military planning and budget coordination (Uzbekistan joined in 2006). It was stated that this secretariat would permit a quicker response to threats to internal or external security. On internal security, Russian Gen. Nikolay Bordyuzha, the secretary general of CSTO, has pledged that the organization would not intervene in political conflicts, but only by consensus "to resolve military, local and border conflicts, as well as to prevent ... terror acts of armed groups and to stop drug trafficking.... In addition, they will be used to fulfill special tasks such as protection of pipelines," or disaster relief. On external security, Russia's national security strategy, approved by President Medvedev in May 2009, has proclaimed the CSTO as "the main instrument designed to counter ... challenges and threats of a military-political and military-strategic nature" emanating from outside the member-states. Many observers have viewed the CSTO as a mainly Russian initiative to increase security influence over member-states and to counter U.S. and other outside influence. Its possible usefulness appeared sorely tested by the "tulip revolution" in Kyrgyzstan in March 2005. Although Bordyuzha allegedly urged intervention, Kyrgyzstan's then-President Askar Akayev vetoed his offers and fled the country. It also was not used during the unrest in Andijon in Uzbekistan in May 2005 or during the August 2008 Russia-Georgia conflict. In early 2009, the CSTO announced that an air-assault Collective Operational Reaction Force (CORF) would be set up. However, Uzbekistan raised concerns about the vague character of the force and balked at contributing troops. President Medvedev stated that the force was needed to deal with rising tensions along CSTO borders and boasted that the force would "be as good as that of NATO." The main participants in CORF are Russia and Kazakhstan. In early 2010, Bordyuzha announced that there were actually two CSTO rapid reaction forces. The first, the new CORF, is composed of over 20,000 special operation troops and is focused on defending Eurasian borders and undertaking international missions (see below), while an older (founded in 2001) and largely moribund Collective Rapid Deployment Force of 4,000 troops is being revitalized to respond to threats to Central Asia emanating from Afghanistan. According to one Russian report, another objective of the latter force is the protection of energy resources and transit routes in Central Asia that benefit Russia. Although most members of the CSTO have bilateral ties to NATO under the Partnership for Peace program, the CSTO long has called for NATO to cooperate with it as an organization on counter-narcotics, anti-terrorism, and other issues. However, the real purpose of such cooperative overtures is to receive recognition by NATO of a Russian sphere of influence in Soviet successor states, according to many observers. Bordyuzha claimed that he sent a letter to NATO in 2004 proposing cooperation, but NATO reportedly did not respond. Attempts by the CSTO to encourage NATO to establish formal ties were set back in mid-2009 when Russia urged Partnership for Peace members Armenia and Kazakhstan to boycott NATO's Partnership for Peace military exercises in Georgia. In October 2009, Foreign Minister Lavrov urged Secretary Clinton to support NATO cooperation with the CSTO as an element of the "reset" of U.S.-Russia relations. The CSTO also has attempted to play a role in global security analogous to that of NATO. Since it became an observer organization at the U.N. General Assembly in December 2004, the CSTO has urged the specialized U.N. agencies such as UNODC and the Terrorism Committee and its Executive Directorate to cooperate more with it. The CSTO also has proclaimed that it has created a "peacekeeping force" that the U.N. may use. In March 2010, the U.N. General Assembly approved a resolution drawn up by Russia that called for greater U.N. cooperation with the CSTO in "regional cooperation in such areas as strengthening regional security and stability, peacekeeping, counterterrorism, and combating illicit trafficking in drugs and weapons, combating transnational organized crime, human trafficking, the fight against natural and man-made catastrophes." President Medvedev stated in early 2009 that the CSTO would combat terrorism and offer other support benefiting ISAF operations in Afghanistan, so that the Manas airbase in Kyrgyzstan— which supported U.S. and NATO troop transport to and from Afghanistan—could be closed. Kyrgyzstan, however, decided to continue to permit U.S. troop transport by a renamed "Manas Transit Center." Although offering some assistance to ISAF, Lavrov and Bordyuzha have stressed that the CSTO will not send troops to support ISAF operations in Afghanistan. In 1996, Russia, Kazakhstan, Kyrgyzstan, and Tajikistan, signed the "Shanghai Treaty" with China pledging the sanctity and substantial demilitarization of mutual borders, and in 1997 they signed a follow-on treaty demilitarizing the 4,000 mile former Soviet-Chinese border. In 2001, Uzbekistan joined the group, re-named the Shanghai Cooperation Organization (SCO). The states signed a Shanghai Convention on joint fighting against what President Jiang Zemin termed "the forces of separatism, terrorism and extremism." China has used the SCO to pressure the Central Asian states to deter their ethnic Uighur minorities from supporting separatism in China's Xinjiang province, and to get them to extradite Uighurs fleeing China. In addition to security cooperation, China stressed the "huge economic and trade potential" of regional cooperation. Both Russia and China have encouraged the regional states to regard their security ties to the United States as redundant to their ties with the SCO. In an interview explaining why Uzbekistan joined, President Karimov seemed to indicate that the primary motive was to protect Uzbekistan's interests against any possible moves by the SCO. He appeared to stress the possible military aid the SCO might provide to beef up the Uzbek armed forces and help it combat terrorism, and to dismiss the capability of the SCO engaging in effective joint action. He also indicated that Uzbekistan wished to forge closer relations with China. Although Karimov had criticized the SCO as ineffective, in August 2003 he insisted that Uzbekistan host the SCO Regional Anti-Terrorism Structure (RATS). Appearing to return to his earlier assessment, in April 2004 he criticized the SCO for failing to aid Uzbekistan during the March-April 2004 attacks and concluded that Uzbekistan should "rely on its own power." Some observers argued that these vacillations reflected a policy of playing off the major powers to maximize aid. This policy appeared to pay dividends at the June 2004 SCO summit, when China reportedly proffered up to $1.25 billion in grants and loans to Karimov and Russia up to $2.5 billion in investment. Indicating Uzbekistan's closer ties after the 2005 events in Andijon (see below) with both Russia and China, Karimov traveled to Shanghai in June 2006 to attend the SCO summit and endorsed a communique criticizing U.S. foreign policy. In a speech just before leaving for the summit, Karimov urged "joint action" by the SCO members to combat terrorism (seemingly contradicting his 2001 speech; see above), rather than mere diplomatic statements. In September 2006, the first deputy head of Russia's Federal Security Service (FSB) became the leader of RATS, perhaps indicating Russia's growing role in the SCO. According to some reports, however, the Uzbek security service closely oversees the work of RATS, reflecting Karimov's distrust of Russia despite the closer Russian-Uzbek security ties since the events in Andijon. In August 2007, an SCO military exercise took place in Xinjiang and southern Russia, the first that included representatives of all member countries (although Russian and Chinese forces predominated). For the Central Asian states, the SCO is seen as balancing Russian and Chinese influence, since the regional states also belong to the economic and security organizations that are part of the Russia-led CIS. At the same time, according to some observers, regional leaders have preferred the economic and security cooperation offered by the SCO over what they view as U.S. advocacy of democratic "color revolutions." It may also be the case that Central Asian leaders value the SCO's economic prospects more than its security prospects, given the history of the group. The regional leaders may have devalued SCO as a security organization after September 11, 2001, when U.S. and Western military activities in Afghanistan demonstrated the lack of effectiveness of the SCO in combating terrorism. SCO members did not respond collectively to U.S. requests for assistance but mainly as individual states. Further challenges to the prestige of the SCO as a collective security organization occurred in 2005, when it failed to respond to the coup in Kyrgyzstan or to civil unrest in Uzbekistan. Growing demand for limited water resources may threaten the stability of the region and hinder economic development (although more efficient water use would be ameliorative). The main sources of water for Uzbekistan, Turkmenistan, and part of Kazakhstan are the Amu Darya and Syr Darya Rivers that flow from Kyrgyzstan and Tajikistan. During the Soviet period, dozens of dams and reservoirs and thousands of irrigation canals and pumping stations were built region-wide to maximize cotton production. After the Soviet breakup, the Central Asian states wrangled over operating and maintaining the inter-dependent facilities they inherited. Since Kyrgyzstan and Tajikistan were poor in oil and gas but possessed ample water resources, they reached an agreement with Uzbekistan in 1998 to exchange oil and gas for water. However, the agreement foundered, in part because no oversight body was created, and relations between the upstream and downstream states have suffered. Profligate wasting of water because of ill-designed and deteriorating irrigation canals, lack of water meters, and efforts to boost cotton production drained the Amu and Syr Darya Rivers so that ever-smaller amounts of water reached the Aral Sea bordering Uzbekistan and Kazakhstan. Also, Kyrgyzstan endeavored to maximize its hydro-electricity generation, which contributed to downstream water shortages in the summer and floods in the winter. Population growth in downstream countries is a looming problem. The shrinking of the Aral Sea has exacerbated region-wide environmental problems. Kazakhstan has built a dam between the northern and southern parts of the Aral Sea, which has resulted in rising water levels in the northern part and the partial recovery of the local ecosystem. The dam has stopped water inflow into the previously much larger Southern Aral Sea, however, and it may dry up within a few more years. The lack of regional cooperation is illustrated by Tajikistan's ongoing efforts to complete the construction of the Rogun hydro-electric power dam on the Vakhsh River (an upstream tributory of the Amu Darya River). Uzbekistan alleges that the dam will limit water flows to its territory. Perhaps in retaliation for Tajikistan's efforts to finish the dam, Uzbekistan in late December 2008 cut off the transmission of electricity from Turkmenistan across its territory, contributing to a power crisis in Tajikistan. The Tajik government protested against a statement by Russian President Medvedev on January 23, 2009, that all the Central Asian states should agree before dams are built on trans-border rivers, viewing the statement as support for Uzbekistan and against Tajikistan's dam building. In late 2009, Uzbekistan accused Tajikistan of stealing electricity and withdrew from the Unified (electrical) Energy System of Central Asia, an accusation that Tajikistan denied. Tajikistan stated that the withdrawal mooted regional agreements to exchange electricity for water, and announced that it would be forced to release more water in the winter for power generation, which would mean that there would be less water in the summer for downstream countries. Uzbekistan similarly opposes Turkmenistan's planned diversion of water from the Amu Darya to create a new 150 billion cubic meter lake (currently under construction), which could threaten Uzbek cotton production. In 2003, Uzbekistan seized a part of the Karshinskiy Canal in Turkmenistan, the only source of water for Uzbekistan's Kashkardarya oblast, after bilateral water-sharing talks broke down. The need for even wider discussion of water resources is illustrated by China's efforts to divert waters of the Ili and Irtysh Rivers to its Xinjiang region, reducing such resources for the downstream countries of Kazakhstan and Russia. Kazakhstan's concerns led to the creation of a China-Kazakhstan commission for trans-border rivers in 1999, but China deflected discussion of water-sharing and only agreed to the exchange of information on pollution. A European Parliament hearing in mid-2008 warned that China's water diversion could reduce water flows by these rivers to Kazakhstan by up to 40% by 2050, and could result in damage to Lake Balkhash in western Kazakhstan. Wider discussion of water sharing also must include Afghanistan, which in the future might divert a larger share of water from the Amu Darya River for economic development. The Caspian region is emerging as a notable source of oil and gas for world markets, although many experts emphasize that regional exports will constitute only a small fraction of world supplies. According to the U.S. Department of Energy (DOE), the region's proven natural gas reserves are estimated at 232 trillion cubic feet (tcf), comparable to Saudi Arabia. The region's proven oil reserves are estimated to be between 17-49 billion barrels, comparable to Qatar on the low end and Libya on the high end. Kazakhstan possesses the region's largest proven oil reserves at 9-40 billion barrels, according to DOE, and also possesses 100tcf of natural gas. Kazakhstan's oil exports are about 1.2 million barrels per day (bpd). Some U.S. energy firms and other private foreign investors have become discouraged in recent years by harsher Kazakh government terms, taxes, and fines that some allege reflect corruption within the ruling elite. Despite these concerns, some foreign direct investment has continued. Turkmenistan possesses about 100tcf and Uzbekistan about 65tcf of proven gas reserves, according to DOE. Russia's temporary cutoffs of gas to Ukraine in January 2006 and January 2009 and a brief slowdown of oil shipments to Belarus in January 2010 (Belarus and Ukraine are transit states for oil and gas pipelines to other European states) have highlighted Europe's energy insecurity. The United States has supported EU efforts to reduce its overall reliance on Russian oil and gas by increasing the number of possible alternative suppliers. Part of this policy has involved encouraging Central Asian countries to transport their energy exports to Europe through pipelines that cross the Caspian Sea, thereby bypassing Russian (and Iranian) territory, although these amounts are expected at most to satisfy only a small fraction of EU needs. The Central Asian states long were pressured by Russia to yield large portions of their energy wealth to Russia at prices below world norms, in part because Russia controlled most existing export pipelines. Russia attempted to strengthen this control over export routes for Central Asian energy in May 2007 when visiting former President Putin reached agreement in Kazakhstan on supplying more Kazakh oil to Russia. Putin also reached agreement with the presidents of Turkmenistan and Kazakhstan on the construction of a new pipeline to transport Turkmen and Kazakh gas to Russia. The first agreement appeared to compete with U.S. and Turkish efforts to foster more oil exports through the BTC. The latter agreement appeared to compete with U.S. and EU efforts to foster building a trans-Caspian gas pipeline to link to the SCP to Turkey. The latter also appeared to compete with U.S. and EU efforts to foster building a pipeline from Turkey through Greece, Bulgaria, Romania, and Hungary to Austria (the so-called Nabucco pipeline). Seeming to indicate a direct challenge to these plans by Russia and the West, China signed an agreement in August 2007 with Kazakhstan on completing the last section of an oil pipeline from the Caspian seacoast to China, and signed an agreement with Turkmenistan on building a gas pipeline to China (see also below). In March 2008, the heads of the national gas companies of Kazakhstan, Uzbekistan and Turkmenistan announced that their countries would raise the gas export price to the European level in future years. They signed a memorandum of understanding on the price with Russia's Gazprom state-controlled gas firm, which controls most export pipelines. According to analyst Martha Olcott, "the increased bargaining power of the Central Asian states owes more to the entry of China into the market than to the opening of [the BTC pipeline and the SCP]. Russia's offer to pay higher purchase prices for Central Asian gas in 2008 and 2009 came only after China signed a long-term purchase agreement for Turkmen gas at a base price that was higher than what Moscow was offering." Tajikistan, Turkmenistan, Uzbekistan, and Iran export electricity to Afghanistan. Major foci of the U.S. Trade and Development Agency's (TDA's) Central Asian Infrastructure Integration Initiative (launched in 2005) and USAID's Regional Energy Market Assistance Program (launched in 2006) include encouraging energy, transportation, and communications projects, including the development of electrical power infrastructure and power sharing between Central Asia, Afghanistan, and eventually Pakistan and India. In 2006, the Asian Development Bank (ADB) approved $3 million for feasibility and project design studies of the potential for Afghanistan and Pakistan to import electricity from Kyrgyzstan and Tajikistan. In August 2008, an inter-governmental agreement was signed by the four countries to build a 500-kilovolt electric power transmission line. The first phase is the construction of a 170-mile line from hydropower plants on the River Vakhsh in Tajikistan to the Afghan border town of Sher Khan Bandar. The project cost when all phases are completed is estimated to be $935 million to be provided by the World Bank, the Islamic Development Bank, and the International Finance Corporation. About two-thirds of the electricity would be provided to Pakistan and one-third to Afghanistan. Due diligence work including environmental impacts is expected to be completed in 2010 and the power line is planned to be completed by 2013. The ADB withdrew from the project in 2009, however, because of concerns about the lack of cooperation among the Central Asian countries on water-sharing, among other issues. The ADB still is funding smaller electricity projects. Among these, the ADB financed a 220-kilovolt transmission line from Uzbekistan to Kabul, Afghanistan, that was completed in May 2009. Dissension among the Central Asian states on electric power transmission and hydro-electric projects has increased. During 2009, Kazakhstan and Uzbekistan accused Tajikistan of illicitly siphoning electricity from the Soviet-era Central Asian Unified Energy System grid (until recently, members included these three states and Kyrgyzstan). Kazakhstan twice cut off energy flows to the regional grid in 2009 in retaliation, but has not yet decided to withdraw completely from the grid. Tajik officials have denied the Uzbek charges and accused Uzbekistan of illicitly siphoning electricity. Uzbekistan cut itself off from the regional grid on December 1, 2009. The cutoff severed the supply of electricity to Kyrgyzstan's southern regions (since the lines cross Uzbekistan) and to some parts of Tajikistan, and prevented Tajikistan from importing electricity from Turkmenistan to address winter weather. One Tajik analyst called for the country to retaliate against Uzbekistan by reducing cooperation in water-sharing. Another analyst warned that another Tajik winter without adequate power supplies could further erode popular trust in the Rahmon government. Tajikistan's construction of the Roghun hydro-electric power dam on a tributary of the Amu Darya River also has clouded its relations with Uzbekistan. The latter claims that the dam will limit water flows downstream to its territory, while Tajikistan is spurred to complete the power plant by Uzbekistan's energy policies. Kazakhstan. The main oil export route from Kazakhstan has been a 930-mile pipeline completed in 2001—owned by the Caspian Pipeline Consortium (CPC), in which Russian shareholders have a controlling interest—that carries 265 million barrels per year of oil from Kazakhstan to Russia's Black Sea port of Novorossiysk. Lengthy Russian resistance to increasing the pumping capacity of the pipeline and demands for higher transit and other fees, along with the necessity of offloading the oil into tankers at Novorossiysk to transit the clogged Turkish Straits, spurred President Nazarbayev to sign a treaty with visiting Azerbaijani President Ilkham Aliyev in June 2006 to barge Kazakh oil across the Caspian Sea to Baku to the BTC pipeline. Kazakhstan began shipping about 70,000 bpd of oil through the BTC pipeline at the end of October 2008. Another accord resulted from a visit by President Nazarbayev to Azerbaijan in September 2009 that provides that up to 500,000 bpd of oil will be barged across the Caspian to enter the BTC or the Baku-Supsa pipeline. When the volumes exceed 500,000 bpd, a trans-Caspian pipeline may be built. Apparently to counter Kazakh's export plans via Azerbaijan, then-President Putin's May 2007 agreement with Nazarbayev (see above) envisaged boosting the capacity of the CPC pipeline. Despite this Russian pledge to increase the capacity of the CPC, Kazakhstan has proceeded to upgrade its Caspian Sea port facilities and in May 2008, the Kazakh legislature ratified the 2006 treaty. Kazakhstan also barges some oil to Baku to ship by rail to Georgia's Black Sea oil terminal at Batumi, of which Kazakhstan became the sole owner in early 2008. Kazakhstan began barging oil from Batumi to the Romanian port of Constantsa in late 2008 for processing at two refineries it purchased. Some Kazakh oil arriving in Baku also could be transported through small pipelines to Georgia's Black Sea port of Supsa or to Russia's Black Sea port of Novorossiisk, although in the latter case Kazakhstan might be faced with high transit charges by Russia. In December 2009, the CPC finalized expansion plans for the pipeline, to approximately double its capacity by 2014. In addition to these oil export routes to Europe not controlled by Russia, Kazakhstan and China have completed an oil pipeline from Atasu in central Kazakhstan to the Xinjiang region of China (a distance of about 597 miles). Kazakhstan began delivering oil through the pipeline in mid-2006. As of the end of 2008, the pipeline reportedly had delivered about 92 million barrels (well below initial capacity of 146.6 million barrels per year). At Atasu, it links to another pipeline from the town of Kumkol, also in central Kazakhstan. On Kazakhstan's Caspian Sea border, China has finished construction of an oil pipeline from the port city of Atyrau eastward to the town of Kerkiyak. The last section of the route from the Caspian Sea to China, a link between the towns of Kerkiyak and Kumkol, was completed in October 2009. Now that all sections of the pipeline have been completed, it is expected to carry 200,000 bpd to China. In November 2007, Russia and Kazakhstan signed an agreement permitting Russia to export 10.6 million barrels of oil per year from Atasu through the pipeline to China. According to Chinese sources, Russia exported about 5.5 million barrels of oil through this pipeline in 2008. This is the first Russian oil to be transported by pipeline to China. At the end of October 2008, China and Kazakhstan signed a framework agreement on constructing a gas pipeline from western Kazakhstan (near the Caspian Sea) to China that is planned initially to supply 176.6 bcf to southern Kazakhstan and 176.6 bcf to China. Plans call for pipeline construction to begin in 2010 and to be completed by 2015. Kazakh officials have appeared to make contradictory statements about providing gas for the prospective Nabucco pipeline. Kazakhstan's Deputy Energy and Mineral Resources Minister Aset Magaulov stated at a Euro-Atlantic Partnership Council Security Forum in June 2009 that Kazakhstan would not have a surplus of gas that it could send through the Nabucco pipeline. President Nazarbayev appeared to support the possible transit of Kazakh gas through Turkey when he stated on October 22, 2009, during a visit to Turkey, that "Turkey ... will become a transit country. And if Kazakhstan's oil and gas are transported via this corridor then this will be advantageous to both Turkey and Kazakhstan." In late October 2009, however, the Kazakh Ministry of Energy reiterated that "the main problem for our country [regarding the supply of natural gas to Nabucco] is the limited availability of gas" because of existing contracts for projected gas production. It suggested that Kazakhstan might be a potential supplier for Nabucco if gas production exceeds expectations, but that Kazakhstan could not transport any gas via Nabucco until the legal status of the Caspian Sea was resolved, which would permit building a connection to Nabucco. Turkmenistan. The late President Niyazov signed a 25-year accord with then-President Putin in 2003 on supplying Russia up to 211.9 billion cubic feet (bcf) of gas in 2004 (about 12% of production), rising up to 2.83 trillion cubic feet (tcf) in 2009-2028 (perhaps then constituting an even larger percentage of production). Turkmenistan halted gas shipments to Russia at the end of 2004 in an attempt to get a higher gas price but settled for all-cash rather than partial barter payments. Turkmenistan and Russia continued to clash in subsequent years over gas prices and finally agreed in late 2007 that gas prices based on "market principles" would be established in 2009. Turkmenistan, Kazakhstan, and Russia signed accords in May and December 2007 on building a new gas pipeline that was planned to carry 353 bcf of Turkmen and 353 bcf of Kazakh gas to Russia. The Turkmen government appeared to have reservations about building another pipeline to Russia, however. This stance may have changed by late 2009, when Turkmenistan indicated some willingness to build this pipeline during negotiations with Russia on the renewal of Turkmen gas exports (see below). Seeking alternatives to pipeline routes through Russia, in December 1997 Turkmenistan opened the first pipeline from Central Asia to the outside world beyond Russia, a 125-mile gas pipeline linkage to Iran. Turkmenistan provided 282.5 bcf of gas to Iran in 2006 and reportedly a larger amount in 2007. At the end of 2007, however, Turkmenistan suddenly suspended gas shipments, causing hardship in northern Iran. Turkmen demands for higher payments were the main reason for the cut-off. Gas shipments resumed in late April 2008 after Iran agreed to a price boost. In mid-2009, Turkmenistan reportedly agreed to increase gas supplies to up to 706 bcf per year. At the end of 2009, a second gas pipeline to Iran was completed—from a field that until April 2009 had supplied gas to Russia (see below)—to more than double Turkmenistan's export capacity to Iran. As another alternative to pipelines through Russia, in April 2006, Turkmenistan and China signed a framework agreement calling for Chinese investment in developing gas fields in Turkmenistan and in building a gas pipeline with a capacity of about 1.0 tcf per year through Uzbekistan and Kazakhstan to China. Construction of the pipeline began in August 2007 and gas began to be delivered through the pipeline to Xinjiang and beyond in December 2009. Perhaps an additional attempt to diversify gas export routes, Berdimuhammedow first signaled in 2007 that Turkmenistan was interested in building a trans-Caspian gas pipeline. Turkmenistan signed a memorandum of understanding in April 2008 with the EU to supply 353.1 bcf of gas per year starting in 2009, presumably through a trans-Caspian pipeline that might at first link to the SCP and later to the proposed Nabucco pipeline. Berdimuhammedow also revived Niyazov's proposal to build a gas pipeline through Afghanistan to Pakistan and India, but investment remains elusive. On the night of April 8-9, 2009, a section of a gas pipeline from Turkmenistan to Russia exploded, halting Turkmen gas shipments. Russia claimed that it had notified Turkmenistan that it was reducing its gas imports because European demand for gas had declined, but Turkmenistan denied that it had been properly informed. After extended talks, visiting President Medvedev and President Berdimuhamedow agreed on December 22, 2009 that Turkmen gas exports to Russia would be resumed, and that the existing supply contract had been altered to reduce Turkmen gas exports to up to 1 tcf per year and to increase the price paid for the gas. Turkmenistan announced on January 9, 2010, that its gas exports to Russia had resumed. The incident appeared to further validate Turkmenistan's policy of diversifying its gas export routes. At a late April 2009 Turkmen energy conference, U.S. Deputy Assistant Secretary of State George Krol reportedly stressed that Turkmenistan and other states should continue to diversify their energy export routes. Turkmen President Berdimuhamedow pledged to continue such diversification. At an EU energy summit in Prague in early May 2009, U.S. Special Envoy for Eurasian Energy Richard Morningstar endorsed further development of the "southern corridor" for the shipment of gas and oil to Western markets. However, Kazakhstan, Turkmenistan, and Uzbekistan balked at signing a communique pledging the states to back the Nabucco pipeline. Despite this move, Berdimuhamedow asserted on July 10, 2009, that there are "immense volumes of natural gas in Turkmenistan [that] make it possible for us to carry out certain work related to the implementation of various [gas export] projects, including the Nabucco project." In September 2009, he further suggested that Turkmenistan could provide even more gas than previously mentioned in 2008 for Nabucco—1.1 tcf per year—because an audit indicated that the South Yoloten-Osman and Yaslar gas fields held vast reserves. Russia and Iran remain opposed to trans-Caspian pipelines, ostensibly on the grounds that they could pose environmental hazards to the littoral states. Some observers argue that Turkmenistan's construction of gas pipelines to Iran and China indicate that it does not envisage a trans-Caspian pipeline to supply gas to Nabucco. Even in the event that Iran eventually becomes a supplier to Nabucco, these observers maintain, it might resist permitting Turkmenistan to have direct access to European customers via its pipelines. International concerns over the proliferation risks posed by Central Asia's nuclear research and power reactors, uranium mines, milling facilities, and associated personnel have been heightened by Western, Russian, and Central Asian media reports of attempted diversions of nuclear materials to terrorist states or criminal groups. Upon the collapse of the Soviet Union, nuclear fuel cycle facilities in the region often were only minimally guarded, and personnel were poorly paid, creating targets of opportunity. Kazakhstan is reported to possess one-fourth of the world's uranium reserves, and Kazakhstan and Uzbekistan are among the world's top producers of yellow cake (low enriched uranium). Major customers for Kazakhstan's yellow cake have included the United States and Europe. Kazakhstan had a fast breeder reactor at its Caspian port of Aktau, the world's only nuclear desalinization facility. Decommissioned in April 1999, it has nearly 300 metric tons of enriched uranium and plutonium spent fuel in ill-kept storage pools. Kazakhstan's Ulba metallurgical factory in Ust Kamenogorsk provides nuclear fuel pellets to Russia and other countries with Soviet-type reactors, and is planning to expand production for other types of reactors. In 2009, Kazakhstan offered some of its Ulba facilities to house a low-enriched uranium "fuel bank" under the control of the International Atomic Energy Agency (IAEA) to provide assurance of supply to commercial reactor customers. Uzbek's Navoi mining and milling facility exports yellow cake through the U.S. firm Nukem. Kyrgyzstan's Kara Balta milling facility ships low-enriched uranium to Ulba and to Russia. Kazakhstan and Uzbekistan also hosted major chemical and biological warfare (CBW) facilities during the Soviet era, raising major concerns about possible proliferation dangers posed by remaining materials and personnel. The trafficking and use of illegal narcotics in Central Asia endanger the security, independence, and development of the states by stunting economic and political reforms and exacerbating terrorism, crime, corruption, and health problems. As a conduit, the region has been used as a transit route by criminal groups smuggling narcotics from Afghanistan, mainly to markets in Russia and Europe, although drug use within the region also is accelerating. The increased use of shared needles for drug injection has contributed to rising rates of HIV/AIDS in the region. Although the bulk of opiates from Afghanistan continue to be transported through Pakistan and Iran, rising quantities—currently estimated at between 19%-25%—are trafficked through Central Asia, mainly through Tajikistan. In February 2010, President Berdimuhamedow stated that drug trafficking and drug addiction rates had become "alarming" in Turkmenistan, and called for an "uncompromising" war on drugs. Despite this call for a punitive war, however, the State Department reports that although "drug addiction is a prosecutable crime [in Turkmenistan] and persons convicted are subject to jail sentences ... judicial officials usually sentence addicts to treatment." According to the U.N. Office of Drugs and Crime (UNODC), drug trafficking in Central Asia appears to involve many crime groups and drugs change hands several times before delivery to Russian markets. In this sense, the trafficking is less organized than that involving Central American drug trafficking to the United States. In the case of Central Asia, some organized crime groups based in producer countries have been able to expand their influence into the region because of poorly patrolled borders, lack of cooperation among the states, lawlessness, and corruption among officials, police, and border guards. Also, ethnic Tajiks residing in northern Afghanistan can more easily smuggle drugs into Tajikistan. Problems with traditional export routes for Asian drugs have encouraged the use of Central Asia as a trans-shipment route. Nigerian organized crime groups reportedly transport some Pakistani heroin through Central Asia to Russian markets, and sell some in Central Asia. Even Latin American crime groups have reportedly smuggled drugs into Central Asia destined for Russia, such as cocaine from Brazil. These and other international organized crime groups are integrating smaller Central Asian crime groups into their operations. The Taliban, IMU, and other Islamic terrorist groups allegedly are also involved in trafficking drugs in order to finance their operations. According to some observers, the IMU has been a major smuggler of heroin through Central Asia, although U.S.-led coalition operations in Afghanistan in late 2001 at least temporarily disrupted IMU trafficking. Some Tajik border troops along the Tajik-Afghan border allegedly gain revenues from bribes from drug smugglers from Afghanistan. In Kazakhstan, some police and security personnel reportedly vie to offer their services to drug traffickers. In October 2009, Kyrgyzstan abolished its Drug Control Agency, raising concerns among some observers about the government's resolve to combat drug trafficking. Counter-narcotics agencies in the Central Asian states are hampered by inadequate budgets, personnel training, and equipment, but most have registered ever greater drug seizures. According to the State Department's International Narcotics Control Strategy Report : The Kazakh government's "DEA-like" Committee on Combating and Controlling Narcotics within the Ministry of the Interior, established in 2004, contributed to "considerable progress" by Kazakhstan in counter-narcotics efforts, including drug seizures and tightening drug trafficking penalties. Kazakh security agents reportedly cracked down on two new drug trafficking routes from Afghanistan through Kazakhstan to end-users in Australia and Japan. Nonetheless, Kazakhstan remains an "important transit country, especially for drugs coming out of Afghanistan." Some of the isolated mountain passes along Kyrgyzstan's borders with Tajikistan and China do not have guard posts that are manned throughout the year and these passes are major drug routes. The State Department also reports that "the city of Osh, in particular, is the main crossroads for road and air traffic and a primary transfer point for narcotics into Uzbekistan and Kazakhstan and on to markets in Russia, Western Europe and the United States." Tajikistan is "a major center for domestic and international drug trafficking organizations." Tajikistan claimed to seize more illicit drugs in 2007 than the previous year, but the amounts smuggled also had increased. Turkmenistan is centrally located for smuggling opiates from Afghanistan and Iran northward and westward. In 2008, the government created the State Counter-Narcotics Service to more effectively combat drug trafficking. Although Turkmenistan directs most of its efforts to combating drug-smuggling across its shared border with Afghanistan, drugs also enter the country through Iran and Uzbekistan. From Turkmenistan, illicit drugs often are smuggled by Caspian Sea ships into Russia and Azerbaijan. In Uzbekistan, the National Center for Drug Control attempts to coordinate anti-drug efforts carried out by police, security, customs, and defense personnel, but has difficulty accomplishing this goal. Drug addiction has increased in the country. Drug smuggling into Uzbekistan often involves families or small groups rather than national rings. After the terrorist attacks on the United States on September 11, 2001, the former Bush Administration stated that U.S. policy toward Central Asia focused on three inter-related activities: the promotion of security, domestic reforms, and energy development. The September 11, 2001, attacks led the Bush Administration to realize that "it was critical to the national interests of the United States that we greatly enhance our relations with the five Central Asian countries" to prevent them from becoming harbors for terrorism, according to former Deputy Assistant Secretary of State B. Lynn Pascoe in testimony in June 2002. According to this thinking, the instability that is characteristic of "failed states"—where central institutions of governance and security are unable to function throughout a state's territory—can make these states attractive to terrorist groups as bases to threaten U.S. interests. Although then-U.S. Caspian emissary Elizabeth Jones in April 2001 carefully elucidated that the United States would not intervene militarily to halt incursions by Islamic terrorists into Central Asia, this stance was effectively reversed after September 11, 2001. U.S.-led counter-terrorism efforts were undertaken in Afghanistan, including against terrorists harbored in Afghanistan who aimed to overthrow Central Asian governments and who were assisting the Taliban in fighting against the coalition. Added security training and equipment were provided to the Central Asian states, supplemented by more aid to promote democratization, human rights, and economic reforms, because the latter aid addressed "root causes of terrorism," according to Jones in testimony in December 2001. She averred that "we rely on [Central Asian] governments for the security and well-being of our troops, and for vital intelligence," and that the United States "will not abandon Central Asia" after peace is achieved in Afghanistan. In October 2003, then-Assistant Secretary Jones in testimony stressed that "our big strategic interests [in Central Asia] are not temporary" and that the United States and its international partners have no alternative but to "be a force for change in the region." Then-Defense Secretary Donald Rumsfeld similarly stressed in February 2004 that "it is Caspian security ... that is important for [the United States] and it is important to the world that security be assured in that area." The 2004 Final Report of the National Commission on Terrorist Attacks Upon the United States (The 9/11 Commission) and the President's 2003 National Strategy for Combating Terrorism call for the United States to work with Central Asian and other countries to deny sponsorship, support, and sanctuary to terrorists. The Report and Strategy also call for assisting the states to democratize, respect human rights, and develop free markets to reduce underlying vulnerabilities that terrorists seek to exploit. Participating with Members on November 18, 2009 in launching the Congressional Caucasus on Central Asia, Assistant Secretary of State Robert Blake, Jr. stated that the Obama Administration "has placed a high priority on building partnerships and enhancing our political engagement in Central Asia." Signs of this enhanced engagement include the establishment of high-level annual bilateral consultations with each of the regional states on counter-narcotics, counter- terrorism, democratic reform, rule of law, human rights, relations with NGOs, trade and investment, health, and education, he stated. Other initiatives include the creation of a working group within the State Department to encourage the regional states to work out water-sharing arrangements, including the possibly bolstered supply of water from Tajikistan to Afghanistan and from Tajikistan to Pakistan. In testimony on December 15, 2009, Deputy Assistant Secretary of State George Krol listed five objectives of U.S. policy in Central Asia: to maximize the cooperation of the regional states with coalition counter-terrorism efforts in Afghanistan and Pakistan; to increase the development and diversification of the region's energy resources and supply routes; to promote the eventual emergence of good governance and respect for human rights; to foster competitive market economies; and to prevent state failure in Tajikistan and Kyrgyzstan, including by enhancing food security assistance. The State Department in 2006 included Central Asia in a revamped Bureau of South and Central Asian Affairs. According to former Principal Deputy Assistant Secretary of State Steven Mann, "institutions such as NATO and the OSCE will continue to draw the nations of Central Asia closer to Europe and the United States," but the United States also will encourage the states to develop "new ties and synergies with nations to the south," such as Afghanistan, India, and Pakistan. In May 2007, Defense Secretary Robert Gates urged Asian countries to provide Central Asia with road and rail, telecommunications, and electricity generation and distribution aid to link the region with Asia; to help it combat terrorism and narcotics trafficking; to send technical advisors to ministries to promote political and economic reforms; to offer more military trainers, peacekeepers, and advisors for defense reforms; and to more actively integrate the regional states into "the Asian security structure." Director of National Intelligence Dennis Blair warned in testimony on February 3, 2010, that although the Central Asian states generally have been stable so far, "The region's autocratic leadership, highly personalized politics, weak institutions, and social inequality make predicting succession politics difficult and increase the possibility that the process could lead to violence or an increase in anti-US sentiment." He also raised concerns about the ability of Kyrgyzstan, Tajikistan, and Turkmenistan to combat Islamic extremist influences from Afghanistan and Pakistan. The potential for instability in the region, he stated, is heightened by "competition over water, cultivable land, and ethnic tensions," by the global economic crisis, which has resulted in reduced migrant worker remittances to the region, and by perennial food and energy shortages in some parts of the region. U.S. ties to the Central Asian states appeared generally sound in the immediate wake of U.S.-led coalition operations in Iraq in March-April 2003 to eliminate state-sponsored terrorism and weapons of mass destruction. Initial responses in the region ranged from support by Uzbekistan to some expressions of concern by Kyrgyzstan and Turkmenistan that diplomacy had not been given enough of a chance. Alleged incidents where civilians have been killed during U.S. operations have been criticized by some Islamic groups and others in Central Asia. Uzbekistan was the only Central Asian state to join the "coalition of the willing" that supported upcoming operations in Iraq (Kazakhstan joined later). Uzbek President Islam Karimov on March 6, 2003, stated that the Iraq operation was a continuation of "efforts to break the back of terrorism." On May 8, his National Security Council endorsed sending medical and other humanitarian and rebuilding aid to Iraq, but on August 30, Karimov indicated that plans to send medics to Iraq had been dropped. He has argued for greater U.S. attention to terrorist actions in Afghanistan that threaten stability in Central Asia. The Kazakh foreign minister on March 28, 2003, voiced general support for disarming Iraq but not for military action. However, on April 24 Kazakh President Nursultan Nazarbayev stated that Saddam's removal in Iraq enhanced Central Asian and world security. Reportedly after a U.S. appeal, Nazarbayev proposed and the legislature in late May approved sending military personnel to Iraq. About two dozen Kazakh combat engineers were deployed to Iraq in late August 2003 and served with Polish and Ukrainian units until pulling out in late 2008. Tajik President Emomaliy Rakhman reportedly on March 13, 2003, refused Russia's request to denounce coalition actions in Iraq. Tajik political analyst Suhrob Sharipov stated on April 3 that Tajikistan was neutral regarding U.S.-led coalition actions in Iraq because Tajikistan had benefitted from U.S. aid to rebuild the country and from the improved security climate following U.S.-led actions against terrorism in Afghanistan. The Kyrgyz foreign minister on March 20, 2003, expressed "deep regret" that diplomacy had failed to resolve the Iraq dispute, raised concerns that an Iraq conflict could destabilize Central Asia, and proclaimed that the Manas airbase could not be used for Iraq operations. During a June 2003 U.S. visit, however, he reportedly told then-Vice President Cheney that Kyrgyzstan was ready to send peacekeepers to Iraq (and Afghanistan). The Kyrgyz defense minister in April 2004 announced that Kyrgyzstan would not send troops to Iraq, because of the increased violence there. Turkmenistan's late President Saparmurad Niyazov on March 12, 2003, stated that he was against military action in Iraq and, on April 11, called for the U.N. to head up the creation of a democratic Iraq and for aid for ethnic Turkmen in Iraq displaced by the fighting. The U.S. government has moved to classify various groups in the region as terrorist organizations, making them subject to various sanctions. In September 2000, the State Department designated the IMU, led by Yuldash, as a Foreign Terrorist Organization, stating that the IMU resorts to terrorism, actively threatens U.S. interests, and attacks American citizens. The "main goal of the IMU is to topple the current government in Uzbekistan," it warned, linking the IMU to bombings and attacks on Uzbekistan in 1999-2000. The IMU is being aided by Afghanistan's Taliban and by terrorist bin Laden, according to the State Department, and it stressed that the "United States supports the right of Uzbekistan to defend its sovereignty and territorial integrity from the violent actions of the IMU." At the same time, the United States has stressed that efforts to combat terrorism cannot include widespread human rights violations. The designation made it illegal for U.S. entities to provide funds or resources to the IMU; made it possible to deport IMU representatives from, or to forbid their admission to, the United States; and permitted the seizure of its U.S. assets. It also permitted the United States to increase intelligence sharing and other security assistance to Uzbekistan. On September 20, 2001, then-President Bush in his address to a Joint Session of Congress stressed that the IMU was linked to Al Qaeda and demanded that the Taliban hand over all such terrorists, or they would be targeted by U.S.-led military forces. According to most observers, the President was stressing that Uzbekistan should actively support the United States in the Afghan operation. Among other terrorist groups, then-CIA Director Porter Goss testified to the Senate Armed Services Committee on March 17, 2005, that the IJG/IJU "has become a more virulent threat to U.S. interests and local governments." On May 25, 2005, the State Department designated IJG/IJU as a global terrorist group, and on June 1, 2005, the U.N. Security Council added IJG/IJU to its terrorism list. Officials in Germany arrested several individuals on September 5, 2007, on charges of planning explosions at the U.S. airbase at Ramstein, at U.S. and Uzbek diplomatic offices, and other targets in Germany. The IJU claimed responsibility and stated that it was targeting U.S. and Uzbek interests because of these countries' "brutal policies towards Muslims," and targeting Germany because it has a small military base in Termez, Uzbekistan, which is used to support NATO operations in Afghanistan. Reportedly, the suspects had received training at IMU and al Qaeda terrorist training camps in Pakistan. In U.S. Congressional testimony on September 10, 2007, John Redd, then-director of the National Counterterrorism Center, and Mike Mcconnell, then-Director of National Intelligence, stated that U.S. communications intercepts shared with Germany had facilitated foiling the plot. In August 2002, the United States announced that it was freezing any U.S. assets of the East Turkestan Islamic Movement (ETIM), a Uighur group operating in Central Asia, since the group had committed numerous terrorist acts in China and elsewhere and posed a threat to Americans and U.S. interests. In September 2002, the United States, China, and other nations asked the U.N. to add ETIM to its terrorism list. China reported that its military exercises with Kyrgyzstan in November 2002 were aimed at helping Kyrgyzstan to eliminate the group. On the other hand, the United States has not yet classified Hizb ut-Tahrir (HT) as a terrorist group. According to the State Department's Country Reports on Terrorism 2006 , "radical extremist groups such as HT may also present a danger to the region. HT [is] an extremist political movement advocating the establishment of a borderless, theocratic Islamic state throughout the entire Muslim world.... The United States has no evidence that HT has committed any acts of international terrorism, but the group's radical anti-American and anti-Semitic ideology is sympathetic to acts of violence against the United States and its allies. HT has publicly called on Muslims to travel to Iraq and Afghanistan to fight Coalition Forces." Nonetheless, U.S. officials have criticized Central Asian governments for imprisoning HT members who are not proven to be actively engaged in terrorist activities, and for imprisoning other political and religious dissidents under false accusations that they are HT members. According to a November 2002 State Department factsheet, HT has not advocated the violent overthrow of Central Asian governments, so the United States has not designated it a Foreign Terrorist Organization. The factsheet also urges Central Asian government to "prosecute their citizens for illegal acts, not for their beliefs." Among other Western countries, Germany outlawed HT activities in January 2003, declaring that HT was a terrorist organization that advocates violence against Israel and Jews. The United States and the Central Asian states signed defense cooperation accords prior to September 11, 2001, that provided frameworks for aid and joint staff and working group contacts and facilitated enhanced cooperation after September 11, 2001. According to the 9/11 Commission, such pre-September 11, 2001, ties included Uzbek permission for U.S. clandestine efforts against Al Qaeda in Afghanistan. According to former Assistant Secretary of Defense Crouch in testimony in June 2002, "our military relationships with each [Central Asian] nation have matured on a scale not imaginable prior to September 11 th ." Kyrgyzstan, he relates, is a "critical regional partner" in Operation Enduring Freedom (OEF; military actions in Afghanistan), providing basing for combat and combat support units at Manas Airport for U.S. and other coalition forces. Uzbekistan provided a base for U.S. operations at Karshi-Khanabad and a base for German units at Termez, and a land corridor to Afghanistan for humanitarian aid via the Friendship Bridge at Termez. It also leased to the coalition IL-76 transport airlift for forces and equipment. Kazakhstan provided overflight rights and expedited rail transhipment of supplies. Turkmenistan permitted blanket overflight and refueling privileges for humanitarian flights in support of OEF. Tajikistan permitted use of its international airport in Dushanbe for U.S., British, and French refueling and basing. While the former Bush Administration rejected the idea of permanent military bases in these states, Crouch stated in June 2002 that "for the foreseeable future, U.S. defense and security cooperation in Central Asia must continue to support actions to deter or defeat terrorist threats" and to build effective armed forces under civilian control. According to a late November 2002 State Department fact sheet, the United States does not intend to establish permanent military bases in Central Asia but does seek long-term security ties and access to military facilities in the region for the foreseeable future to deter or defeat terrorist threats. The fact sheet also emphasizes that the U.S. military presence in the region likely will remain as long as operations continue in Afghanistan. In mid-2004, tents at the Manas airbase reportedly were being replaced with metal buildings. U.S. officers allegedly denied that the buildings were permanent but averred that there was no end yet in sight for operations in Afghanistan. The Overseas Basing Commission (OBC), in its May 2005 Report, concurred with the former Bush Administration that existing bases in Kyrgyzstan and Uzbekistan had been useful for supporting OEF. The OBC considered that there could be some possible merit in establishing cooperative security locations in the region but urged Congress to seek further inter-agency vetting of "what constitutes vital U.S. interests in the area that would require [a] long-term U.S. presence." Prior to September 11, 2001, the United States fostered military-to-military cooperation through NATO's PFP, which all the Central Asian states except Tajikistan had joined by mid-1994. With encouragement from the U.S. Central Command (USCENTCOM), Tajikistan indicated in mid-2001 that it would join PFP, and it signed accords on admission in February 2002. At the signing, a NATO press release hailed Tajikistan's support to the coalition as "of key importance" to combating international terrorism. Central Asian officers and troops have participated in PFP exercises in the United States since 1995, and U.S. troops have participated in exercises in Central Asia since 1997. Many in Central Asia viewed these exercises as "sending a message" to Islamic extremists and others in Afghanistan, Iran, and elsewhere against fostering regional instability. Kazakhstan and Uzbekistan appeared to vie to gain services from NATO. U.S. security accords were concluded with several Central Asian states after September 11, 2001. These include a U.S.-Uzbekistan Declaration on the Strategic Partnership signed on March 12, 2002, that included a nonspecific security guarantee. The United States affirmed that "it would regard with grave concern any external threat" to Uzbekistan's security and would consult with Uzbekistan "on an urgent basis" regarding a response. The two states pledged to intensify military cooperation, including "re-equipping the Armed Forces" of Uzbekistan. Similarly, then-Kyrgyz President Askar Akayev and then-President Bush issued a joint statement on September 23, 2002, pledging to deepen the strategic partnership, including cooperation in counter-terrorism, and the United States highlighted its aid for Kyrgyzstan's border security and military capabilities. USCENTCOM in 1999 became responsible for U.S. military engagement activities, planning, and operations in Central Asia (the region was previously under the aegis of European Command). It states that its peacetime strategy focuses on ties between the regional military forces and U.S. and NATO forces, and to foster "apolitical, professional militaries capable of responding to regional peacekeeping and humanitarian needs" in the region. USCENTCOM Commanders visited the region regularly, setting the stage for more extensive military ties post-September 11, 2001. Besides these continuing visits by USCENTCOM Commanders, other U.S. military officials regularly have toured the region. A U.S.-Uzbek Status of Forces Agreement (SOFA) was signed on October 7, 2001, and the air campaign against Afghanistan began an hour later. The SOFA provided for use of Uzbek airspace and for up to 1,500 U.S. troops to use a Soviet-era airbase (termed Karshi-Khanabad or K2) 90 miles north of the Afghan border near the towns of Karshi and Khanabad. In exchange, the United States provided security guarantees and agreed that terrorists belonging to the Islamic Movement of Uzbekistan (IMU) who were fighting alongside Taliban and Al Qaeda forces would be targeted. According to some reports, the problems in negotiating the U.S.-Uzbek SOFA further spurred the United States to seek airfield access at the Manas International Airport in Kyrgyztan, which in early 2002 became the primary hub for operations in Afghanistan. U.S. military engineers upgraded runways at the Manas airfield and built an encampment next to the airport, unofficially naming it the Peter J. Ganci airbase, in honor of a U.S. fireman killed in New York on September 11, 2001. Besides these airbases, Uzbekistan also has provided a base for about 300 German troops at Termez and a land corridor to Afghanistan for humanitarian aid via the Friendship Bridge at Termez. Over 100 French troops have used the Dushanbe airport in Tajikistan for refueling and humanitarian shipments. Kazakhstan has allowed overflight and transhipment rights, and U.S.-Kazakh accords were signed in 2002 on the emergency use of Kazakhstan's Almaty airport and on military-to-military relations. Turkmenistan, which has sought to remain neutral, allowed the use of its bases for refueling and humanitarian trans-shipments. Kazakhstan, Kyrgyzstan, and Uzbekistan have sent several military liaison officers to USCENTCOM. On July 5, 2005, the presidents of Uzbekistan, Kyrgyzstan, and Tajikistan signed a declaration at an SCO summit that stated that "as large-scale military operations against terrorism have come to an end in Afghanistan, the SCO member states maintain that the relevant parties to the anti-terrorist coalition should set a deadline for the temporary use of ... infrastructure facilities of the SCO member states and for their military presence in these countries." Despite this declaration, none of the Central Asian leaders immediately called for closing the coalition bases. However, after the United States and others interceded so that refugees who fled from Andijon to Kyrgyzstan could fly to Romania, Uzbekistan on July 29 demanded that the United States vacate K2 within six months. On November 21, 2005, the United States officially ceased operations to support Afghanistan at K2. Perhaps indicative of the reversal of U.S. military-to-military and other ties, former pro-U.S. defense minister Qodir Gulomov was convicted of treason and received seven years in prison, later suspended. Many K2 activities shifted to the Manas airbase in Kyrgyzstan. Some observers viewed the closure of K2 and souring U.S.-Uzbek relations as setbacks to U.S. influence in the region and as gains for Russian and Chinese influence. Others suggested that U.S. ties with other regional states provided continuing influence and that U.S. criticism of human rights abuses might pay future dividends among regional populations. With the closure of K2 and the cooling of U.S.-Uzbek relations, the United States appeared to shift more of its regional emphasis to Kazakhstan. In a joint statement issued at the close of Nazarbayev's September 2006 U.S. visit, the two countries hailed progress in "advancing our strategic partnership." The two presidents called for "deepen[ing] our cooperation in fighting international terrorism and the proliferation of WMD,... strengthen[ing] our cooperation to enhance regional security and economic integration,... expand[ing] our joint activities to ensure the development of energy resources,... supporting economic diversification and reform,... [and] accelerating Kazakhstan's efforts to strengthen representative institutions." In a speech on U.S.-Kazakh relations in August 2006, then-Deputy Assistant Secretary of State Evan Feigenbaum affirmed that the United States firmly supported Kazakhstan's efforts to become the economic powerhouse in the region. Defense analyst Roger McDermott has warned that these apparently closer U.S.-Kazakh relations mask tightening Russian military influence over Kazakhstan. He has argued that the United States needs to match the rhetoric of partnership with increases in defense aid to Kazakhstan that are closely monitored to cut down on corruption within Kazakhstan's armed forces. In early 2006, Kyrgyz President Bakiyev reportedly requested that lease payments for use of the Manas airbase be increased to more than $200 million per year and at the same time re-affirmed Russia's free use of its nearby base. After reportedly drawn-out negotiations, the United States and Kyrgyzstan issued a joint statement on July 14, 2006, that they had resolved the issue of the continued U.S. use of airbase facilities at Manas. Although not specifically mentioning U.S. basing payments, it was announced that the United States would provide $150 million in "total assistance and compensation over the next year," subject to congressional approval (some reports indicated that the "rent" portion of this amount would be $17-$20 million). Kyrgyz Security Council Secretary Miroslav Niyazov and former U.S. Deputy Assistant Defense Secretary James MacDougall also signed a Protocol of Intentions affirming that the United States would compensate the Kyrgyz government and businesses for goods, services, and support of coalition operations. Some observers suggested that increased terrorist activities in Afghanistan and a May 2006 terrorist incursion from Tajikistan into Kyrgyzstan may have contributed to a Kyrgyz evaluation that the U.S. coalition presence was still necessary. Visiting Central Asia in late July 2006, USCENTCOM's then-head Gen. John Abizaid stated that the United States probably would eventually reduce its military presence in the region while increasing its military-to-military cooperation. Following the shooting death of a civilian by a U.S. serviceman at the U.S.-leased Manas airbase in Kyrgyzstan on December 6, 2006, President Kurmanbek Bakiyev the next day reportedly ordered his foreign ministry to re-examine provisions of a late 2001 status of forces agreement precluding U.S. soldiers serving in Kyrgyzstan from prosecution in local courts. Although Kyrgyz authorities insisted that the U.S. serviceman stand trial in Kyrgyz courts, he was rotated back to the United States. During a February 3, 2009, meeting in Moscow with Russian President Dmitriy Medvedev, Kyrgyz President Kurmanbek Bakiyev announced that the U.S. Manas airbase would be closed. Bakiyev claimed that U.S. compensation for use of the base had been inadequate and that the Kyrgyz public wanted the base to be closed. He also argued that counter-terrorism operations in Afghanistan had been concluded, which had been the main reason for keeping the airbase open. At the meeting, Medvedev had offered a $1.7 billion loan to Kyrgyzstan for building a dam and hydroelectric power station and a $300 million loan and a $150 million grant for budget stabilization. Russia also agreed to cancel a $180 million debt owed by Kyrgyzstan in exchange for some properties. Many observers suggested that the assistance was a quid pro quo for Krygyzstan's agreement to close the base, but both Russian and Kyrgyz officials denied the link. Responding to Bakiyev's announcement of the base closure, Medvedev stated that "our states will continue to support regional operations of the anti-terrorist coalition." As outlined subsequently, such support ostensibly was to include the provision of transit privileges for nonlethal supplies for operations of the International Security Assistance Force in Afghanistan (see below) and protection by the CSTO from terrorism emanating from Afghanistan. On February 19, the Kyrgyz legislature overwhelmingly approved a government request to cancel the status of forces agreement (SOFA) with the United States on using the airbase. The next day, President Bakiyev signed the bill into law. The SOFA between the United States and Kyrgyzstan calls for the airbase to be vacated within 180 days upon notification that the agreement is cancelled. The Defense Department announced on June 24, 2009, that an agreement of "mutual benefit" had been concluded with the Kyrgyz government "to continu[e] to work, with them, to supply our troops in Afghanistan, so that we can help with the overall security situation in the region." The agreement was approved by the legislature and signed into law by President Bakiyev, to take effect on July 14, 2009. According to Kyrgyz Foreign Minister Kadyrbek Sarbayev, the government decided to conclude the annually renewable "intergovernmental agreement with the United States on cooperation and the formation of a transit center at Manas airport," because of growing alarm about "the worrying situation in Afghanistan and Pakistan." A yearly rent payment for use of land and facilities at the Manas airport would be increased from $17.4 million to $60 million per year and the United States had pledged more than $36 million for infrastructure improvements and $30 million for air traffic control system upgrades for the airport. Sarbayev also stated that the United States had pledged $20 million dollars for a U.S.-Kyrgyz Joint Development Fund for economic projects, $21 million for counter-narcotics efforts, and $10 million for counter-terrorism efforts. All except the increased rent had already been appropriated or requested (see below, Congressional Concerns ). The agreement also reportedly includes stricter host-country conditions on U.S. military personnel. One Kyrgyz legislator claimed that the agreement was not a volte-face for Kyrgyzstan because Russia and other Central Asian states had signed agreements with NATO to permit the transit of supplies to Afghanistan (see below). Undersecretary William Burns visited Kyrgyzstan in early July 2009 and reportedly stated that "we welcome a new decision of President Bakiyev regarding the set up of a transport and logistics hub in Manas Airport.... [The agreement] is an important contribution into our common goals in Afghanistan." He also stated that "the new administration believes that we should expand and deepen the level and scope of our bilateral relations" with Kyrgyzstan, and he announced that a U.S.-Kyrgyzstan bilateral commission on trade and investment would be set up. In early 2010, it was reported that more facilities were being constructed at the "transit center" to handle the increased numbers of U.S. troops deployed to Afghanistan. Kyrgyzstan had also requested that French and Spanish troops who were deployed at Manas had to leave, and they had pulled out by October 2009. The French detachment (reportedly 35 troops and a tanker aircraft) moved temporarily to Dushanbe. The Spanish unit (reportedly 60 troops and two transport aircraft) moved temporarily to Herat, west Afghanistan, and Dushanbe is being used temporarily as a stopover for troop relief flights. France and Spain are negotiating with Kyrgyzstan on their return to Manas. Because U.S.-coalition and NATO supplies transiting Pakistan to Afghanistan frequently were subject to attacks, the Central Asian region has become an important alternative transit route. Gen. David Petraeus, the Commander of the U.S. Central Command, visited Kazakhstan and Tajikistan in late January 2009 to negotiate alternative air, rail, road, and water routes for the commercial shipping of supplies to support NATO and U.S. operations in Afghanistan (he also visited Kyrgyzstan to discuss airbase issues). To encourage a positive response, the U.S. embassies in the region announced that the United States planned to purchase many non-military goods locally to transport to the troops in Afghanistan. Kazakhstan and Tajikistan agreed in principle to such transit in February 2009 (although technicalities were not worked out with Kazakhstan until 2010), Uzbekistan permitted it in April 2009, and Kyrgyzstan permitted it in July 2009 (Georgia had given such permission in 2005, Russia in 2008, and Azerbaijan in March 2009). A first rail shipment of non-lethal supplies entered Afghanistan in late March 2009 after transiting Russia, Kazakhstan, and Uzbekistan. Uzbekistan's Navoi airport also is being used to transport supplies to Afghanistan. Besides this commercial shipping, U.S. military aircraft have been given overflight privileges for the transport of weapons to Afghanistan. In testimony on December 15, 2009, Deputy Assistant Secretary of Defense David Sedney reported that 4,769 containers had been moved through Central Asia to Afghanistan as of the end of November, by some estimates up to one-third of U.S. military shipments to Afghanistan. Most of the containers had entered Afghanistan from Uzbekistan, with a fewer number entering from Tajikistan. Some containers transited the Caucasus countries, the Caspian Sea, Kazakhstan, and Uzbekistan, while others transited Russia and Kazakhstan, and thence either through Uzbekistan or (far less frequently) through Kyrgyzstan and Tajikistan. He also stated that the United States supported the building of a railroad to run from Uzbekistan's border town of Hairaton across the Friendship Bridge over the Amu Darya to Mazar-i-Sharif in Afghanistan. Richard Holbrooke, the State Department's Special Representative for Afghanistan and Pakistan, visited Central Asia in February 2010 to discuss the NDN and other regional assistance to U.S. and NATO stabilization operations in Afghanistan. In Kyrgyzstan, he discussed issues involving U.S. use of the Manas "transit center," including the upcoming annual renewal of some leasing provisions. Some observers have raised concerns that greater reliance on the NDN might make the United States less willing to criticize participating governments for democracy and human rights abuses. Concerns also have been raised that that Taliban forces and other terrorists may begin to target the NDN and destabilize Central Asia. In early September 2009, two tanker trucks from Tajikistan that were delivering fuel to NATO forces were hijacked by Taliban insurgents in Kunduz Province in Afghanistan, which borders Tajikistan. After the hijacked trucks had stalled while crossing the Kunduz River, German forces called in a U.S. airstrike, which reportedly resulted in dozens of civilian and insurgent casualties. In recent months, there have been several battles between Taliban insurgents in Kunduz Province and U.S., NATO, and Afghan government forces. In January 2010, a battle took place in a small town in Kunduz Province just a few miles from the Tajik border. U.S. peace and security Assistance amounted to $1.5 billion in cumulative budgeted funds through FY2008, of which the largest quantity went to Kazakhstan for Comprehensive Threat Reduction (CTR) programs (see Table A-1 , Table A-2 , and Table A-3 , below). U.S. security assistance to the region declined somewhat in absolute terms for several years after reaching $198 million in FY2002, reaching low points of $105 million in FY2003 and FY2006. In FY2007, however, budgeted peace and security assistance was boosted to its highest ever level, $203 million, with increases in Defense Department funding for coalition and stability operations aid and proliferation prevention in Kazakhstan; Department of Energy funding for global threat reduction in Kazakhstan; and Department of State law enforcement aid for Tajikistan. Also in FY2007, the Defense Department boosted counter-narcotics aid to Kazakhstan, Kyrgyzstan, and Tajikistan. In FY2008, peace and security assistance was boosted further to $213 million, with increases in Defense and Energy Department funding for Global Threat Reduction in Kazakhstan and Uzbekistan, Defense Department Sec. 1206 funding for Caspian Sea security training and equipping in Kazakhstan, Defense Department Sec. 1206 funding for counter-terrorism training and equipping in Kyrgyzstan, and Defense Department Sec. 1207 funding for stabilization operations and security sector reform in Tajikistan. In percentage terms, peace and security assistance has become an increasingly prominent aid sector. Budgeted peace and security aid to Central Asia in FY2002 was 34% of all aid to the region. Budgeted peace and security assistance increased to 78% of all aid to the region in FY2007, and was 66% in FY2008. After the breakup of the Soviet Union, U.S. fears of nuclear proliferation were focused on nuclear-armed Kazakhstan, and it has received the bulk of regional CTR and Department of Energy (DOE) aid for de-nuclearization, enhancing the "chain of custody," and demilitarization. Some CTR and DOE aid also has gone to Uzbekistan. Material physical protection aid provided to Kazakhstan's Ulba Metallurgical Plant includes alarms, computers for inventory control, and hardening of doors. Aid was provided to help decommission and secure Kazakhstan's Aktau reactor. Agreements were signed at the November 1997 meeting of the U.S.-Kazakh Joint Commission to study how to safely and securely store over 300 metric tons of highly-enriched uranium and plutonium spent fuel from the Aktau reactor, some of which had become inundated by the rising Caspian Sea and was highly vulnerable to theft. Enhanced aid for export controls and customs and border security for Kazakhstan followed after reports of conventional arms smuggling, including a 1999 attempted shipment of Soviet-era Migs to North Korea. Kazakhstan has received CTR funds for dismantling equipment and for environmental monitoring at several Soviet-era chemical and biological warfare (CBW) facilities. On May 19, 2009, the U.S. National Nuclear Security Administration announced that CTR funds had been used to remove 162.5 lb. of highly enriched uranium "spent" fuel from Kazakhstan. The material originally had been provided by Russia to Kazakhstan, and was returned to Russia by rail for storage in a series of four shipments between December 2008 and May 2009. At the U.S.-Uzbek Joint Commission meeting in May 1999, the two sides signed a CTR Implementation Agreement on securing, dismantling, and de-contaminating the Soviet-era Nukus chemical research facility. Other aid helped keep Uzbek weapons scientists employed in peaceful research. On June 5, 2001, then-Secretary of State Colin Powell signed his first international agreement, extending new CTR assistance to Uzbekistan. The United States assisted in cleaning up a Soviet-era CBW testing site and dump on an island in the Aral Sea belonging to Kazakhstan and Uzbekistan, where Western media in June 1999 had reported the alarming discovery of live anthrax spores. Other prominent CTR-supported activities in Uzbekistan include the transfer of eleven kilograms of enriched uranium fuel, including highly enriched uranium, to Russia in September 2004 and the transfer of 63 kilograms of uranium from Uzbekistan to Russia in April 2006. The National Defense Authorization Act for FY2003 ( P.L. 107-314 , Sec. 1306) provided for the president to waive prohibitions on CTR aid (as contained in Sec. 1203 of P.L. 103-160 ) to a state of the former Soviet Union if he certified that the waiver was necessary for national security and submitted a report outlining why the waiver was necessary and how he planned to promote future compliance with the restrictions on CTR aid. Although Russian arms control compliance appeared to be the main reason for the restrictions, on December 30, 2003 (for FY2004), and on December 14, 2004 (for FY2005), the President explained that Uzbekistan's human rights problems necessitated a waiver. The waiver authority under this act, exercisable each fiscal year, expired at the end of FY2005, but the National Defense Authorization Act for FY2006 ( P.L. 109-163 ; Sec. 1303) amended the language to eliminate an expiration date for the exercise of yearly waivers. In the 110 th Congress, Senator Sam Nunn introduced S. 198 on January 8, 2007, to amend P.L. 103-160 to eliminate the restrictions on CTR aid, including respect for human rights. Although waivers can be and are exercised when the conditions are not met, he stated, the lengthy process of making determinations and exercising waivers threatens the primary U.S. national security goal of combating WMD. Language similar to S. 198 was included in H.R. 1 , Implementing the 9/11 Commission Recommendations Act of 2007, signed into law on August 3, 2007 ( P.L. 110-53 ). According to the State Department and U.S. Drug Enforcement Agency (DEA), drugs produced in or transiting Central Asia have not yet reached the United States in major quantities. However, there is rising U.S. concern, since Latin American and other international organized groups have become involved in the Central Asian drug trade, and European governments have begun to focus on combating drug trafficking through this new route. U.S. policy also emphasizes the threat of rising terrorism, crime, corruption, and instability posed by illegal narcotics production, use, and trafficking in Central Asia. The FBI, DEA, and Customs have given training in counter-narcotics to police, customs, and border control personnel in Central Asia as part of the Anti-Crime Training and Technical Assistance Program sponsored by the State Department's Bureau of International Narcotics and Law Enforcement Affairs (INL). Some Central Asian drug officials have received training at the International Law Enforcement Academy in Budapest and by the U.S. Coast Guard. DEA has provided training at the International Counter-Narcotics Training Center at the Russian Advanced Police Academy in Domodedovo. U.S. aid to the U.N. Office on Drugs and Crime (UNODC) has supported the establishment of the Central Asian Regional Information and Coordination Center (CARICC; members include Azerbaijan and Russia as well as the Central Asian states) in Almaty to share narcotics trafficking intelligence among law enforcement agencies. Since the bulk of opiates enter Central Asia from Afghanistan, where they are produced, U.S. assistance for drug control efforts in Afghanistan can have an effect on trafficking in Central Asia. The United States provided $3.8 million (over one-third of all international funding) for the establishment of the Central Asian Regional Information and Coordination Center (CARICC; members include Azerbaijan, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, Turkmenistan, and Uzbekistan), which began operations in Almaty in late 2009 (a pilot project had begun in 2007). CARICC aims to enhance regional cooperation in information-sharing and other measures to combat drug trafficking. Among bilateral programs undertaken in Central Asia: A U.S. agreement went into force with Kazakhstan in 2003 to provide counter-narcotics training and equipment for police and border guards. With U.S. assistance, Kyrgyzstan in 2004 set up a Drug Control Agency, and the United States and UNODC have provided guidance for hiring police and staff. In 2007, USCENTCOM, the Nebraska National Guard, U.S. Customs, DEA ,and INL trained and equipped Kyrgyz police, Customs Service, and Border Guards to form the first of four planned Mobile Interdiction Teams (MOBITS). The effectiveness of the MOBITS did not meet expectations, so in 2008 two retired DEA officers were assigned to the MOBITS headquarters to provide guidance, mentoring and technical assistance. In Tajikistan, an agreement on cooperation on narcotics control and law enforcement was signed in 2003. The DEA Dushanbe Country Office was set up in 2007 and has regional responsibility for Central Asia. USCENTCOM partially funds the budget and otherwise supports Tajikistan's Drug Control Agency. In May 2009, the U.S. Embassy signed an amendment to the 2003 agreement that provides an extra $9.43 million in assistance for narcotics control, law enforcement, and justice sector reform. The INL Office provides financial support to the Drug Control Agency Mobile Team operating in Tajikistan's Gorno Badakhshan region to assist in detecting, investigating, interdicting, and reporting on the trafficking of narcotics and pre-cursor chemicals in the inadequately patrolled region. Since 2007, the DEA Dushanbe Country Office has worked with UNODC to manage and fund an office of the Drug Control Agency in the town of Taloqan in northern Afghanistan. The State Department warns that "it is unlikely that the Government of Tajikistan will take on the costs of sustaining follow-on to INL programs in the near future," so that continued funding is necessary. In Uzbekistan, U.S. assistance was provided under the aegis of a 2001 U.S.-Uzbek Agreement on Narcotics Control and Law Enforcement Assistance. Training was provided to facilitate investigating and prosecuting narcotics trafficking cases. The State Department reported that U.S. counter-narcotics cooperation with Uzbekistan greatly declined after 2005. Remaining programs included USAID's Drug Demand Reduction Project and the provision of customs and border control equipment funded by the State Department. Uzbek cooperation with USCENTCOM on counter-narcotics began to revive in FY2008. To help counter burgeoning drug trafficking from Afghanistan, the conference report on the emergency supplemental for FY2006 ( P.L. 109-234 ; H.Rept. 109-494 ) recommended about $150.5 million for Central Asia and Afghanistan, of which about $30 million was recommended for Central Asia. The conference report on the emergency supplemental for FY2009 ( P.L. 111-32 ; H.Rept. 111-151 ) recommended $120.4 million for Central Asia and Afghanistan, of which about $52.9 million was recommended for Central Asia. The principal components of U.S. military assistance to Central Asia are Foreign Military Financing (FMF), International Military Education and Training (IMET), the Regional Defense Counter-Terrorism Fellowship Program (CTFP), the Regional Centers for Security Studies (RCSS), and transfers of Excess Defense Articles (EDA). FMF aid supports military interoperability with NATO and participation in PFP exercises, and has included communications equipment, computers, medical items, and English language and NCO training. In February 2000, the United States transferred sixteen military transport vehicles to the Uzbek military to enhance interoperability with NATO forces, the first sizeable military equipment to be provided under the FMF program to Central Asia. FMF aid to the region was boosted after September 11, 2001, to $55.7 million in FY2002 (over $36 million of which went to Uzbekistan). FMF aid dropped to $16.1 million in FY2003 and continued to decline to $2.55 million in FY2008. Some of this reduction since FY2004 was due to conditions placed on assistance to Uzbekistan (see below). The IMET program supports PFP by providing English language training to military officers and exposure to democratic civil-military relations and respect for human rights. The CTFP, a Defense Department program, complements IMET but focuses on special operations training for officers. Central Asian officers also receive training at the Marshall European Center for Security Studies in Germany to enhance security, foster bilateral and multilateral partnerships, improve defense-related decision-making, and strengthen cooperation, according to the Defense Department. The State and Defense Departments reported that 784 personnel from Central Asia received IMET, CTFP, RCSS, or other training in FY2004, 1,118 personnel in FY2005, 391 in FY2006, and 501 in FY2007. Conditions on assistance blocked IMET assistance to Uzbekistan beginning in FY2004, but eligibility was restored in FY2010 (see below). The National Defense Authorization Act for FY2010 ( P.L. 111-84 ; signed into law on October 28, 2009), Sec. 801 permits the Secretary of Defense to procure "products and services produced in countries along a major route of supply to Afghanistan" to support stability operations in Afghanistan, to reduce U.S. transportation costs and risks, or "to encourage countries along a major route of supply to Afghanistan to cooperate in expanding supply routes through their territory." The countries covered include the Central Asian and South Caucasian states and Pakistan, and the exercise of authority is granted for three years. In addition, Section 1223 of the Act expands earlier legislation to authorize reimbursement to key cooperating nations that provide logistical, military, and other support, including access for U.S. military operations in Afghanistan or Iraq, and legislates up to $1.6 billion in FY2010 for such reimbursements. According to some observers, such procurement of products and services and reimbursements for access might represent a major new form of U.S. assistance to Central Asia. A few observers warn that large-scale U.S. purchases of goods and services along the NDN could exacerbate corruption in Central Asia. Supplemental appropriations for FY2002 ( H.R. 4775 ; P.L. 107-206 ), signed into law on August 2, 2002, called for FMF aid to Uzbekistan to be conditioned on a report by the Secretary of State confirming that it was making progress in meeting its human rights commitments under the Declaration on Strategic Partnership and Cooperation signed in March 2002 by former Uzbek Foreign Minister Abdulaziz Komilov and former Secretary of State Colin Powell. The Secretary of State reported that Uzbekistan was making progress in human rights. Foreign operations appropriations bills in subsequent years have retained similar language limiting assistance to Uzbekistan, and in FY2003 added similar language limiting assistance to Kazakhstan (but with a national security waiver provision). In May 2003, the Secretary of State reported that Uzbekistan was making progress in democratization and respect for human rights. At about the same time, however, international media widely reported the torture death of a prisoner in Uzbekistan. In July 2003, the Secretary reported that Kazakhstan was making progress. The next year, the State Department reported again that Kazakhstan was making progress in respecting human rights, but announced that, despite some "encouraging progress" in respecting human rights, up to $18 million in aid to Uzbekistan might be withheld because of "lack of progress on democratic reform and restrictions put on U.S. assistance partners on the ground." This determination potentially affected IMET and FMF programs among others, since legislative provisions condition IMET and FMF on respect for human rights. The State Department reprogrammed or used notwithstanding authority (after consultation with Congress) to expend some of the funds, so that about $8.5 million was ultimately withheld. During an August 2004 visit to Uzbekistan, Gen. Richard Myers, the then-chairman of the Joint Chiefs of Staff, criticized the cutoff of IMET and FMF programs as "shortsighted" and not "productive," since it reduced U.S. military influence. In May 2005, then-Secretary of State Rice reported to Congress for the first time that Kazakhstan had failed to significantly improve its human rights record, but that she had waived aid restrictions on national security grounds. The Secretary of State in FY2005 did not determine and report to Congress that Uzbekistan was making significant progress in respecting human rights, so aid restrictions remained in place. For FY2006, the language of H.R. 3057 (Foreign Operations Appropriations; P.L. 109-102 ), reported in the Senate in the nature of a substitute, introduced a condition that the Uzbek government should permit an international investigation of violence against civilians in Andijon. Secretary of State Rice reported to Congress in May 2006 that Kazakhstan had failed to significantly improve its human rights record but that she had waived aid restrictions on national security grounds. She did not determine and report to Congress that Uzbekistan was making significant progress in respecting human rights, so aid restrictions remained in place. The Secretary of State made the same findings in FY2007. In FY2008, conferees added language ( P.L. 110-161 ) conditioning U.S. assistance to Kazakhstan on its meeting human rights and civil liberties commitments made at the late 2007 Madrid Meeting of the OSCE. The Senate added another condition that if the Secretary of State had credible evidence that Uzbek officials might be linked to the deliberate killings of civilians in Andijon ... or for other gross violations of human rights, these individuals would be ineligible for admission to the United States. The Secretary was permitted to waive this ineligibility if admission was necessary to attend the United Nations or to further U.S. law enforcement. In FY2008 and FY2009, the State Department again issued waivers for Kazakhstan but conditions remained in place for Uzbekistan that limited U.S. military-to-military ties. Consolidated Appropriations for FY2010 ( P.L. 111-117 ) retained the provisions for Kazakhstan and Uzbekistan, but added language excluding IMET from the restrictions on assistance. Provisions for IMET had been included in a proposed action plan for U.S.-Uzbekistan cooperation for 2010 that had been developed following an October 2009 visit to Tashkent by Assistant Secretary of State Robert Blake. The cooperation plan was finalized during U.S.-Uzbekistan bilateral consultations in December 2010. Reportedly, the action plan calls for the provision of FMF and EDA, which appear subject to restrictions on assistance. The U.S. State Department advises U.S. citizens and firms that there are dangers of terrorism in the region, including from ETIM, IMU, and Al Qaeda. Groups such as Hizb ut Tahrir (HT) also foment anti-Americanism. The Peace Corps pulled personnel out of Kyrgyzstan, Turkmenistan, and Uzbekistan after September 11, 2001, but in a policy aimed at fostering pro-U.S. views among Islamic peoples, personnel were re-deployed by mid-2002 (Uzbekistan declined Peace Corps services in 2005). U.S. military personnel in the region mostly stay on base, and travel in groups off base to maximize their safety. In the wake of the November 2002 coup attempt in Turkmenistan, the State Department advised U.S. citizens to carefully consider travel to Turkmenistan because of the heightened security tensions. One U.S. citizen was held for several weeks in connection with the coup attempt. Uzbekistan had no known incidents of damage to Western firms or politically-motivated violence against U.S. personnel until the bombing of the U.S. embassy in July 2004. The risks of political violence and kidnapping are high in Tajikistan, and the State Department advises U.S. citizens to avoid travel to areas near the Afghan and Kyrgyz borders and in the Karategin Valley and Tavildara region. In June 2001, members of an international humanitarian group that included one U.S. citizen were taken hostage in Tajikistan, but were soon released. Kazakhstan, though viewed as low risk for political violence, including insurrections, has had economic protests that potentially could involve Western firms. Some observers have suggested that U.S. policies regarded with disfavor by many Muslims in the region, such as the 2003 invasion of Iraq, and subsequent problems in Iraq, could harm the U.S. image and perhaps increase dangers to the safety of U.S. citizens and property. Among reported plots against U.S. military targets, an Uzbek court in November 2004 sentenced sixteen people to 12-17 years in prison for planning to bomb the U.S. coalition airbase at Karshi-Khanabad. Kyrgyz officials announced in November 2003 that individuals trained in Afghanistan and Pakistan had been arrested for planning to bomb the U.S. Manas airbase. Kyrgyz media reported in July 2004 that the outgoing U.S. Manas base commander thanked Kyrgyz authorities for helping to thwart three planned terrorist attacks on the base. In all the Central Asian states, widespread corruption is an obstacle to U.S. firms seeking to invest. In Kazakhstan and Turkmenistan, U.S. firms have reported that corruption is pervasive throughout the central and regional governments and most sectors of the economy, and is an obstacle to U.S. investment. In terms of crime, the State Department warns that Western investment property and personnel are not safe in Tajikistan, and that crime rates are increasing in all the states (though rates are lower than in many other countries). Immediately after September 11, 2001, U.S. embassies in the region were placed on heightened alert because of the danger of terrorism. They have remained on alert because of the ongoing threat of terrorism in the region. The IMU explained that the suicide bombing of the U.S. embassy in Tashkent, Uzbekistan, in July 2004 was motivated by U.S. support for Karimov and U.S. opposition to Islam. No embassy personnel were injured. Embassy personnel also may have faced greater danger to their personal safety after Uzbek officials accused the embassy of orchestrating and financing the May 2005 uprising in Andijon. Since late 2002, the U.S. Embassy in Kyrgyzstan has restricted official travel to areas south and west of Osh because of the threat of terrorism and presence of land mines along the Kyrgyz-Uzbek border and in the Batken region. During the Tajik civil war, U.S. personnel faced various threats and some embassy personnel were evacuated during flare-ups of fighting. Two U.S. Embassy guards were killed in Dushanbe in February 1997 while off-site but in uniform. After the bombing of U.S. embassies in Tanzania and Kenya in August 1998, and intense fighting in Dushanbe, U.S. embassy facilities in Dushanbe were deemed to be vulnerable and diplomatic staff were moved to Almaty in Kazakhstan. Some operations were resumed in 2000 and more were resumed in the wake of September 11, 2001. U.S. government personnel in Tajikistan often must travel in the embassy's armored cars with bodyguards, and are occasionally restricted from travel to certain areas because of safety concerns. U.S. officials have judged the embassy to be highly vulnerable to terrorism, including threats from the IMU and Al Qaeda. The 2007 Crime and Safety Report warns that U.S. commercial interests could become potential targets of opportunity in Tajikistan, in part because the U.S. embassy in Tajikistan had become more secure (see below). Pakistani police in June 2002 reported the apprehension of three Uighurs with photographs and plans of U.S. embassies in Kazakhstan and Kyrgyzstan. The U.S. Embassy in Beijing accused ETIM of working with Al Qaeda to plan the attack against the U.S. Embassy in Kyrgyzstan. In July 2005, the U.S. Embassy in Kyrgyzstan issued a Warden Message announcing that it had bolstered its security posture, and in October 2005 the State Department's Bureau of Consular Affairs warned that there continued to be indications that terrorist groups might be planning possible future attacks against U.S. interests in Kyrgyzstan, so the U.S. Embassy in Bishkek continued to maintain a heightened security posture. In September 2006, a U.S. military officer serving at the Manas airbase in Kyrgyzstan allegedly was kidnapped but was eventually released. The 2007 Crime and Safety Report for Kazakhstan warns that increasing numbers of U.S. diplomats and other official personnel, including several Peace Corps volunteers, have been victims of crime. Conferees on H.R. 4775 (Emergency Supplemental Appropriations for FY2002; P.L. 107-206 ) approved $20.3 million for opening and securing diplomatic posts in Dushanbe, Tajikistan and Kabul, Afghanistan. Among other diplomatic premises in the region, Congress approved State Department requests for FY2002 and for FY2003 for designing and building secure embassy facilities in Tashkent, Uzbekistan and in Kazakhstan's new capital of Astana. The new embassy compound in Tashkent opened in February 2006 and that in Astana was dedicated in November 2006. Most in Congress have supported U.S. assistance to bolster independence and reforms in Central Asia and other NIS. Attention has included several hearings and legislation, the latter including conditions on aid to Kazakhstan and Uzbekistan, sense of Congress provisions on U.S. policy toward Central Asia, statements and resolutions concerning violations of human rights in the region, and endorsements of aid for energy development. (For details, see CRS Report RL32866, U.S. Assistance to the Former Soviet Union , by [author name scrubbed].) Many policymakers have argued that the United States should emphasize ties with the Central Asian states. They maintain that U.S. interests do not perfectly coincide with those of its coalition partners and friends, that Turkey and other actors possess limited aid resources, and that the United States is in the strongest position as a superpower to influence democratization and respect for human rights in these new states. They stress that U.S. leadership in world efforts to provide humanitarian and economic reform aid will help alleviate the high levels of social distress that are exploited by anti-Western Islamic extremist groups seeking new members. They emphasize that U.S. and other Western aid and investment strengthen the independence of the states and their openness to the West and forestall Russian or Chinese attempts to (re-)subjugate the region. They also underline that the Central Asian "front line" states provide basing and access for U.S. and NATO operations in Afghanistan. Those who object to a more forward U.S. policy toward Central Asia argue that the United States has historically had few interests in this region, and that if peace is established in Afghanistan, the region again will be less important to U.S. interests. They advocate limited U.S. involvement undertaken along with Turkey and other friends and coalition partners to ensure general U.S. goals of preventing strife, fostering democratization and regional cooperation, and improving human rights and the quality of life. Some objections to a forward U.S. policy might appear less salient since the United States undertook counter-terrorism operations in Afghanistan in late 2001. For instance, it no longer seems possible to argue that anti-Western Islamic extremism will never threaten secular regimes or otherwise harm U.S. interests. Although a consensus appears to exist among most U.S. policymakers and others on the general desirability of fostering such objectives in Central Asia as democratization, the creation of free markets, trade and investment, integration with the West, and responsible security policies, there are varying views on the levels and types of U.S. involvement. Uzbekistan's decision in mid-2005 to ask the United States to vacate K2 and Kyrgyzstan's periodic threats to close Manas have spurred the debate over what role the United States should play in the region. Some analysts argue that the region is "strategically tangential" to U.S. concerns for the stability of Afghanistan, Pakistan, Russia, China, Turkey, and the Persian Gulf, and for combating global human rights abuses, nuclear proliferation, and drug trafficking. They point to the dangers of civil and ethnic conflict and terrorism in the region as reasons for the United States to eschew major involvement that might place U.S. personnel and citizens at risk. These analysts call for withdrawing U.S. military personnel from the region and depending on U.S. rapid deployments from other bases outside the region. Many of those who endorse continued or enhanced U.S. support for Central Asia argue that the United States has a vital interest in preventing the region from becoming an Afghanistan-like hotbed of terrorism aimed against U.S. interests. They argue that political instability in Central Asia can produce spillover effects in important nearby states, including Afghanistan, Pakistan, Turkey, and other U.S. allies and friends. U.S. and NATO efforts to stabilize Afghanistan and U.S. support for stability in Pakistan are partly dependent on supply routes through Central Asia and on energy and other commodities from Central Asia. These analysts also assert that the United States has a major interest in preventing outside terrorist regimes or groups from illicitly acquiring nuclear weapons-related materials and technology from the region. They also advocate the greater diversification of world energy supplies as a U.S. national security interest (see below, " How Significant Are Regional Energy Resources to U.S. Interests? "). Calling for greater U.S. policy attention to Central Asia and South Caucusus, Senator Sam Brownback introduced "Silk Road" legislation in the 105 th and 106 th Congresses. Similar legislation was sponsored in the House by Representative Benjamin Gilman (105 th ) and Representative Doug Bereuter (106 th ). In introducing the Silk Road Act in the 106 th Congress, Senator Brownback pointed out that the Central Asian and South Caucasian states are "caught between world global forces that seek to have them under their control." To counter such forces, he argued, the United States should emphasize democratization, the creation of free markets, and the development of energy and trade with the region to bolster its independence and pro-Western orientations. The Silk Road language was eventually enacted by reference in H.R. 3194 (Istook), Consolidated Appropriations Act for FY2000, and signed into law on November 29, 1999 ( P.L. 106-113 ). The Silk Road language calls for enhanced policy and aid to support conflict amelioration, humanitarian needs, economic development, transport (including energy pipelines) and communications, border controls, democracy, and the creation of civil societies in the South Caucasian and Central Asian states. Many U.S. policymakers argue that U.S. and other Western aid and investment strengthen the independence of the states and forestall Russian, Iranian, and Chinese attempts to dominate the region. Some observers warn that a more authoritarian Russia might seek to reabsorb Central Asia into a new empire. Others, however, discount such plans by a Russia facing immense internal economic, political, ethnic, and military disorder, but nonetheless endorse close monitoring of Russian activities that might infringe on the independence of the Soviet successor states. Some appear to acquiesce to Russia's argument of historic rights to a "sphere of influence" in Central Asia that provides a reduced scope for U.S. involvement. According to some observers, U.S. policy should focus more clearly on refereeing Russian, Iranian, and Chinese influence in the region, since these states are bound to play roles in the region, with the aim of maximizing the independence of the Central Asian states and protecting U.S. interests. U.S. interests may correspond to other outside states' interests in political and economic stability and improved transport in the region, so that the coordination of some activities in the region becomes possible. Alternatively, U.S. interests might conflict with those of Russia, Iran, or China, leading to compromises, tradeoffs, or deadlock. The U.S. interest in restricting Iran's financial ability to sponsor international terrorism, for instance, may conflict with Central Asian-Iranian energy cooperation. U.S.-Iranian rapprochement might contribute to a less hostile Iranian attitude toward U.S. regional investment. Poor U.S.-Iranian relations and questions about Russia's role contributed to U.S. support for the BTC pipeline and the SCP. While successive U.S. administrations have supported a role for Turkey in the region, others argue that its disagreements in 2003 with U.S. policy toward Iraq indicate that it may not always serve optimally as a proxy for U.S. interests in Central Asia. The United States and Russia agreed to set up a working group on Afghanistan in June 2000 that assumed greater importance in the Bush Administration, particularly after September 11, 2001. Headed on the U.S. side by then-First Deputy Secretary of State Richard Armitage and on the Russian side by Vyacheslav Trubnikov, it was central to obtaining Russian acquiescence to the U.S. use of military facilities in Central Asia, with Armitage visiting Moscow just days after September 11, 2001. In May 2002, the group's mandate reportedly was expanded to more broadly cover counter-terrorism in Central Asia, the South Caucasus, and South Asia. A joint statement issued at the June 2008 meeting of the Working Group listed nine accomplishments, including an agreement in principle to provide Russian military materiel to the Afghanistan National Army; a commitment to support and contribute to the NATO-Russia Council Counternarcotics project, including joint training at the Russian Advanced Police Academy in Domodedovo for Afghan and Central Asian police; continued support for OSCE projects to provide training and mentoring of customs and borders officials in Afghanistan and Central Asia; and an agreement to expedite the approval of framework documents for the Central Asia Regional Information Coordination Center. Some of this cooperation was set back by the August 2008 Russia-Georgia conflict. The Counter-Terrorism Working Group was retained by the Obama Administration as part of the U.S.-Russia Bilateral Presidential Commission. The Administration reported that the State Department Coordinator for Counterterrorism, Daniel Benjamin, met with Special Presidential Representative Anatoliy Safonov in November 2009 in Berlin and agreed to work together "in the multilateral arena" to strengthen international counterterrorism norms and increase capacity building; counter the ideological dimension of violent extremism; improve transportation security; and discuss Afghanistan. Oil exports from Kazakhstan, Turkmenistan, and Uzbekistan might have constituted about 2.1% of world oil exports and gas exports might have constituted about 7.4%, according to 2007-2008 data in The World Factbook . Oil and gas exports from these countries are projected to increase in coming years, making these countries of incremental significance as world suppliers, according to this view. The May and November 2002 U.S.-Russia summit statements on energy cooperation appeared to mark a U.S. policy of cooperation with Russia in the development of Caspian oil resources. However, the United States backed the construction of the BTC oil pipeline and the SCP for gas in part as hedges against a possibly uncooperative Russia. Successive U.S. Administrations have argued that the economic benefits gained by the region by developing its energy resources would be accompanied by contractual and other rule of law developments, which could foster regional stability and conflict resolution. In January 2010, Richard Morningstar, the State Department's Special Envoy for Eurasian Energy, stressed that the three main goals of the Administration's Eurasian energy strategy are to encourage the development of oil and gas resources in the Caspian region; to support energy security in Europe by advocating the development of multiple sources of energy supplies and multiple routes to market; and to assist the Caspian countries in expanding their export routes. He averred that the United States plays "a supporting, not leading, role" in implementing these goals by "listen[ing], identify[ing] common interests and priorities and play[ing] a facilitating role where we can." Such efforts include the creation of a ministerial-level consultative U.S.-EU Energy Council and an Energy Working Group within the U.S.-Russia Bi-national Presidential Commission. To diversify supply routes to Europe, the Administration supports the completion of the Turkey-Greece-Italy (TGI) gas pipeline, the building of the Nabucco gas pipeline, and Kazakhstan's expansion of oil shipments through the South Caucasus. He urged that Turkey and Azerbaijan agree on the transit of the latter's gas to Europe and that Turkmenistan and Iraq (but not Iran) also agree to supply gas through "South Corridor" pipelines. The United States also calls for European energy integration and the development of other sources of supply for Europe, such as gas from North Africa and LNG from Qatar and Nigeria. He stated that the Administration's focus on diversified sources and routes means that it is not opposed to Russia's pipeline projects, such as Nord Stream or South Stream—since Europe must decide which pipeline routes best serve their interests—or Russia's decision to expand the capacity of the Caspian Pipeline Consortium's oil pipeline. Critics of U.S. policy question the economic viability of the BTC, SCP, Nabucco, TGI, and trans-Caspian pipeline routes given uncertainties about regional stability, ownership of Caspian Sea fields, and sources of supply. They question whether the oil and gas and other natural resources in these new states are vital to U.S. security and point out that they are, in any event, unlikely to constitute more than a small fraction of Western energy imports. Analyst Amy Jaffe has argued that Caspian energy "hardly seems worth the risks" of an enhanced U.S. presence. Some of those who oppose U.S. policy also juxtapose an emphasis on energy development in these states to what they term the neglect of broader-based economic reforms that they argue would better serve the population of the region. Other critics argue that U.S. policy opposition to energy routes and projects involving Iran makes it more likely that the Central Asian states will have to rely to a major extent on existing or proposed transit routes through neighboring Russia and China. The events of September 11, 2001, transformed the U.S. security relationship with Central Asia, as the region actively supported U.S.-led coalition anti-terrorism efforts in Afghanistan. These efforts were a top U.S. national security concern, but a major question is how the region may be regarded if Afghanistan becomes more stable. Some observers advocate maintaining the U.S. security relationship even if Afghanistan becomes more stable and the threat of Al Qaeda and other terrorism based in the area recedes. They stress that Central Asia was host to Soviet-era weapons of mass destruction and associated research and development facilities, and that residual technologies, materials, and personnel might fall prey to terrorist states or groups. They view military education and training programs as fostering the creation of a professional, Western-style military and democratic civil-military relations, and reducing chances of military coups. Training that these militaries receive through PFP is multinational in scope, involving cooperation among regional militaries, with the purpose of spurring these states to continue to work together. They also argue that as Iran increases its military capabilities, including missiles and possibly nuclear weapons, the Central Asian states may necessarily seek closer countervailing ties with the United States. They argue that a major dilemma of U.S. policy has been that while the United States proclaimed vital interests in the region, it also averred that military basing arrangements in the region (as well as the military deployments in Afghanistan) were temporary. This made the U.S. commitment appear uncertain and spurred the Central Asian states to look elsewhere for long-term security ties, these analysts warn. The question of who the United States should partner with in Central Asia is also topical. Before Uzbekistan requested in mid-2005 that the United States vacate K2, it seemed that some in the former Bush Administration emphasized the strategic importance of building ties with Uzbekistan. Others emphasized ties with Kazakhstan. In the case of Uzbekistan, its central location in the region and sizeable population and other resources (including energy) were stressed. Energy and other resources were also stressed in the case of Kazakhstan, as well as its huge territory and lengthy borders. Some observers argued that Uzbekistan was more likely to become unstable because of its more authoritarian government, so was a less suitable U.S. strategic partner. Post-Andijon, it appeared that the former Bush Administration emphasized security ties with Kazakhstan. Some observers argue that Kazakhstan's long border with Russia makes it likely to continue close security ties with Russia. Critics of greater U.S. security involvement in the region argue that the United States should primarily seek to assist the states in bolstering their counter-terrorism capabilities. They oppose providing formal security guarantees to regional states and urge the pullout of U.S. bases once the Taliban threat has abated and Al Qaeda has been rousted out of Afghanistan. Some analysts warn that increased U.S. engagement in the region is unlikely to soon turn the countries into free market democracies, and risks linking the United States to the regimes in the eyes of the local populations. This may exacerbate anti-American Islamic extremism, place U.S. personnel in danger, and antagonize China and Russia. Although Central Asia's leaders have appeared to weigh stability against democratization and to opt for stability, many policymakers have viewed the two concepts as complementary, particularly in the long term. The former Bush Administration appeared to place greater diplomatic emphasis on democratization in the region, in parallel with policy toward Iraq and the wider Middle East. To some degree, this emphasis tracked with increased congressional concerns over human rights conditions in Central Asia. According to some critics, the former Bush Administration's protests over human rights abuses at Andijon contributed to the loss of U.S. military access to K2 and other security ties with Uzbekistan. These critics argued that simultaneous emphases on democratization and security ties proved corrosive to both goals, and that the United States instead should have carefully engaged with the Central Asian states to maintain important security relationships and cautiously encouraged them to eventually emulate the positive features of Turkish or other Islamic democracies. Supporters of the former Bush Administration's reaction to the events at Andijon argued that the alternative policy—a stress on working with Central Asian regimes with the hope of fostering gradual political change—connoted support for the stability of the sitting authoritarian leaders in the region. They warned that the populations of these states would come to view the United States as propping up these leaders and that such authoritarianism encouraged the countervailing rise of Islamic fundamentalism as an alternative channel of dissent. Some of these observers supported reducing or cutting off most aid to repressive governments that widely violated human rights and rejected arguments that U.S. interests in anti-terrorism, nonproliferation, regional cooperation, trade, and investment outweighed concerns over democratization and human rights. These observers urged greater U.S. assistance to grass-roots democracy and human rights organizations in Central Asia and more educational exchanges. Russia For the Central Asian states, the challenge is to maintain useful ties with Russia without allowing it undue influence. This concern is most evident in Kazakhstan and Uzbekistan. Kazakhstan, because of its shared 4,200 mile border with Russia and its relatively large ethnic Russian population, is highly vulnerable to Russian influence. Uzbekistan is interested in asserting its own regional power. Alternatively, Tajikistan's President Rakhman has relied to some extent on Russian security and economic assistance to stay in power. Russia's behavior in Central Asia partly depends on alternative futures of Russian domestic politics, though regardless of scenario, Russia will retain some economic and other influence in the region as a legacy of the political and transport links developed during Tsarist and Soviet times. Prior to September 11, 2001, the Putin Administration had tried to strengthen Russia's interests in the region while opposing the growth of U.S. and other influence. After September 11, 2001, Uzbekistan reaffirmed its more assertive policy of lessening its security dependence on Russia by granting conditional overflight rights and other support to the U.S.-led coalition, nudging a reluctant Putin regime to accede to a coalition presence in the region in keeping with Russia's own support to the Northern Alliance to combat the Taliban. Russia's other reasons for permitting the increased coalition presence included its interests in boosting some economic and other ties to the West and its hope of regaining influence in a post-Taliban Afghanistan. On September 19, 2001, Russian Foreign Minister Igor Ivanov indicated that the nature of support given by the Central Asian states to the U.S.-led coalition was up to each state, and President Putin reiterated this point on September 24, 2001, giving Russia's accedence to cooperation between these states and the United States. Russia initially cooperated with Central Asia in supporting U.S. and coalition efforts, including by quickly sending military equipment and advisors to assist the Northern Alliance in attacks on the Taliban. Russian officials have emphasized interests in strategic security and economic ties with Central Asia, and concerns over the treatment of ethnic Russians. Strategic concerns have focused on drug trafficking and regional conflict, and the region's role as a buffer to Islamic extremism. Russia's economic decline in the 1990s and demands by Central Asia caused Russia to reduce its security presence. Former President Putin and current President Medvedev may have reversed this trend, although the picture is mixed. About 11,000 Russian Border Troops (mostly ethnic Tajiks under Russian command) formerly defended "CIS borders" in Tajikistan. Russia announced on June 14, 2005, that it had handed over the last guard-house along the Afghan-Tajik border to Tajik troops. Russian border forces were largely phased out in Kyrgyzstan in 1999. In late 1999, the last Russian military advisors left Turkmenistan. In 1999, Uzbekistan withdrew temporarily from the CSTO, citing its ineffectiveness and obtrusiveness. Russia justified a 1999 military base accord with Tajikistan by citing the Islamic extremist threat to the CIS. In an apparent shift toward a more activist Russian role in Central Asia, in January 2000, then-Acting President Putin approved a "national security concept" that termed foreign efforts to "weaken" Russia's "position" in Central Asia a security threat. In April 2000, Russia called for the members of the CSTO to approve the creation of rapid reaction forces in Central Asia to combat terrorism emanating from Afghanistan. Russian officials suggested that such a force might launch pre-emptive strikes on Afghan terrorist bases (see also below). A May 2001 CSTO summit approved the creation of a Central Asian Rapid Deployment Force composed (at least on paper) of nine Russian, Kazakh, Kyrgyz, and Tajik country-based battalions of 4,000 troops and a headquarters in Bishkek. This initiative seemed in part aimed to protect Russian regional influence in the face of nascent U.S. and NATO anti-terrorism moves in the region. This force remained a paper exercise and was later abolished (see below). A regional branch of the CIS Anti-Terrorism Center, composed of intelligence agencies, opened in Bishkek, Kyrgyzstan, in January 2002 (this organization reportedly has proven ineffective in sharing intelligence data). Russia's threats of pre-emptive strikes against the Taliban prompted the Taliban in May 2000 to threaten reprisals against the Central Asian states if they permitted Russia to use their bases for strikes. At the June 2000 U.S.-Russia summit, the two presidents agreed to set up a working group to examine Afghan-related terrorism, and the group held two meetings prior to September 11, 2001. These events prior to September 11, 2001, helped to ease the way for Russian and Central Asian assistance to the U.S.-led coalition in Afghanistan. Soon after September 11, 2001, Russia seemed to reverse the policy of drawing down its military presence in Central Asia by increasing its troop presence in Tajikistan by a reported 1,500. In mid-June 2002, Russia also signed military accords with Kyrgyzstan extending leases on military facilities to fifteen years (including, amazingly, a naval test base), opening shuttered Kyrgyz defense industries, and training Kyrgyz troops. Most significantly, Kyrgyzstan also agreed that its Kant airfield outside its capital of Bishkek could be used as a base for the Central Asian Rapid Deployment Force, marking a major re-deployment of Russian forces into the country. In signing the accords, Russian Defense Minister Sergey Ivanov declared that they marked Russia's help—along with the U.S.-led coalition and China—in combating terrorism, were necessary for Russia to monitor the proliferation of weapons of mass destruction, and marked Russia's intention to maintain a military presence in the region. Attack jets, transports, jet trainers, helicopters, and Russian personnel began to be deployed at Kant at the end of 2002. Russia's military deployments at Kant appeared at least partially intended to check and monitor U.S. regional military influence, and these intentions also were reflected in support for the 2005 SCO communique calling for the closure of U.S.-led coalition bases in Central Asia. Taking advantage of Uzbekistan's souring relations with many Western countries, Russia signed a Treaty on Allied Relations with Uzbekistan in November 2005 that contains provisions similar to those in the CSTO that call for mutual defense consultations in the event of a threat to either party. In 2006, Uzbekistan rejoined the CSTO. During a February 3, 2009, meeting in Moscow with Russian President Dmitriy Medvedev, Kyrgyz President Bakiyev announced that the U.S. Manas airbase would be closed. Bakiyev claimed that U.S. compensation for use of the base had been inadequate and that the Kyrgyz public wanted the base to be closed. He also argued that counter-terrorism operations in Afghanistan had been concluded, which had been the main reason for keeping the airbase open. At the meeting, Medvedev had offered a $1.7 billion loan to Kyrgyzstan for building a dam and hydroelectric power station and a $300 million loan and a $150 million grant for budget stabilization. Russia also agreed to cancel a $180 million debt owed by Kyrgyzstan in exchange for some properties. Many observers suggested that the assistance was a quid pro quo for Krygyzstan's agreement to close the base. The next day at a meeting of the CSTO, President Medvedev proposed setting up CSTO Collective Operational Reaction Forces (CORF) under a single command and based in Russia. In 2010, it was announced that the Central Asian rapid reaction force would be retained as separate from CORF as a regional force to combat terrorism and drug trafficking emanating from Afghanistan. Russian economic policy in Central Asia has been contradictory, involving pressures to both cooperate with and to oppose US and Western interests. Russia has cut off economic subsidies to Central Asia and presses demands for the repayment of energy and other debts the states owe Russia. Russia increasingly has swapped this debt for equity in strategic and profitable energy and military industries throughout Central Asia. Its opposition to U.S. and Western private investment in the region initially led it to demand that Caspian Sea oil and gas resources be shared in common among littoral states and to insist that oil pipeline routes transit Russian territory to Russian Black Sea ports. Russia's oil discoveries in the Caspian Sea, however, contributed to its decision to sign accords with Kazakhstan in 1998 and with Azerbaijan in 2001 on seabed borders. Russian energy firms have become partners with U.S. and Western firms in several regional oil and gas development consortiums. Nonetheless, Russia continues to lobby for pipeline routes through its territory. Former President Putin in 2002 called for the Central Asian states to form a Eurasian Gas Alliance to "export through a single channel," which Russian media speculated meant that Putin aimed to counter U.S. energy influence in the region. Kazakhstan is an observer state in the International Gas Exporter Organization, formed in 2008 with Russia's leadership. Instead of opposing U.S. and Western private investment and business in the region, some Russians argue that enhanced cooperation would best serve Russian national interests and its oil and other companies. Russia has been wary of growing Chinese economic influence in the region. The region's continuing economic ties with Russia are encouraged by the existence of myriad Moscow-bound transport routes, the difficulty of trade through war-torn Afghanistan, and U.S. opposition to ties with Iran. Also, there are still many inter-enterprise and equipment supply links between Russia and these states. While seeking ties with Russia to provide for some security and economic needs, at least in the short term, the Central Asian states have tried with varying success to resist or modify various Russian policies viewed as diluting their sovereignty, such as Russian calls for dual citizenship and closer CIS economic and security ties. Karimov and Nazarbayev have been critics of what they have viewed as Russian tendencies to treat Central Asia as an "unequal partner." The safety of Russians in Central Asia is a populist concern in Russia, but has in practice mainly served as a political stalking horse for those in Russia advocating the "reintegration" of former "Russian lands." Ethnic Russians residing in Central Asia have had rising concerns about employment, language, and other policies or practices they deem discriminatory and many have emigrated, contributing to their decline from 20 million in 1989 to 6.6 million in 2001. They now constitute 12% of the population of Central Asia, according to the CIS Statistics Agency. Remaining Russians tend to be elderly or low-skilled. In Kazakhstan, ethnic Kazakhs have again become a majority. Afghanistan The stability of Afghanistan is of central concern to Central Asia, China, and Russia. Particular concerns of Central Asia in recent years have focused on the export of drugs and Islamic extremism from Afghanistan. Historical trade routes facilitate the smuggling of drugs and other contraband through the region to Russian and European markets. Central Asia's leaders do not want Islamic extremists to use bases in Afghanistan, as the Tajik opposition once did. They objected to the refuge the Taliban provided for the IMU and for terrorist Osama Bin Laden, who allegedly contributed financing and training for Islamic extremists throughout Central Asia who endeavored to overthrow governments in that region. Several Central Asian ethnic groups reside in northern Afghanistan, raising concerns in Central Asia about their fates. Tajikistan has been concerned about the fate of 6.2 million ethnic Tajiks residing in Afghanistan. Uzbekistan, likewise, has concerns about 1.5 million ethnic Uzbeks in Afghanistan. Karimov has supported ethnic Uzbek paramilitary leader Abdul-ul-Rashid Dostum in Afghanistan. Dostum lost to Taliban forces in August 1998 and exited Afghanistan, but returned to help lead Northern Alliance forces to victory post-September 11, 2001. Iran and Tajikistan supported ethnic Tajik Ahmad Shah Masood, who was killed on September 9, 2001, allegedly by Al Qaeda operatives. Iran's massing of troops on the Afghan border in August 1998 in response to the Taliban's takeover of Mazar-e-Sharif and killing of Iranian diplomats and Shiite civilians also gave support to Masood. Turkmenistan's concerns about the status of half a million ethnic Turkmen residing in Afghanistan, and its hopes for possible energy pipelines through Afghanistan, led it to stress workable relations with both the Taliban and the successor government. Tajikistan was especially challenged by the Taliban's growing power. A Taliban victory in Afghanistan threatened to present it with regimes in both the north (Uzbekistan) and south (Afghanistan) that pressed for undue influence. Iran and Uzbekistan backed different sides in the Tajik civil war, but both opposed the Taliban in Afghanistan. Tajik opposition ties with Iran provided friction with the Taliban. Tajikistan's instability and regional concerns caused the Rakhman government to rely more on Russia and, by granting formal basing rights to Russia, antagonized Uzbekistan and the Taliban. If Afghanistan stabilizes, Central Asian states will be able to establish more trade ties, including with Pakistan. Hopes for the construction of a gas pipeline from Turkmenistan to Pakistan were evidenced by the signing of a framework agreement in December 2002 by the late President Niyazov, Afghan President Hamed Karzai, and Pakistan's Prime Minister Mir Zafarullah Khan. The problems of drug production in Afghanistan and trafficking through Central Asia have increased, however, in part because the Afghan government remains weak. Interest in regional stability led Afghanistan, Tajikistan, Turkmenistan, Uzbekistan, China, Iran, and Pakistan to sign a "Declaration of Good Neighborly Relations" in Kabul in December 2002 pledging mutual respect for sovereignty and territorial integrity. Russia's attempts to influence developments in Afghanistan are facilitated by its basing arrangement with Tajikistan, but its favored warlords were largely excluded in December 2004 from the new Karzai government. (See also CRS Report RL30588, Afghanistan: Post-Taliban Governance, Security, and U.S. Policy , by [author name scrubbed].) China China's objectives in Central Asia include ensuring border security, non-belligerent neighbors, and access to trade and natural resources. In April 1996, the presidents of Kazakhstan, Kyrgyzstan, Russia, and Tajikistan traveled to Shanghai to sign a treaty with Chinese President Jiang Zemin pledging the sanctity and substantial demilitarization of borders. They signed protocols that they would not harbor or support separatists, aimed at China's efforts to quash separatism in its Uighur Autonomous Region of Xinjiang Province, which borders Central Asia. According to the U.S. State Department, China continues to commit human rights abuses against the Uighurs, an Islamic and Turkic people. In April 1997, the five presidents met again in Moscow to sign a follow-on treaty demilitarizing the 4,000 mile former Soviet border with China. In May 2001, the parties admitted Uzbekistan as a member and formed the Shanghai Cooperation Organization (SCO), and agreed to pursue common antiterrorist actions through a center established in the region. In theory, China could send troops into Central Asia at the request of one of the states. The states signed a Shanghai Convention on joint fighting against terrorism, extremism and separatism, viewed by some observers as Russia's and China's effort to gain greater support by the Central Asian states for combat against extremists and regime opponents of the two major powers. China's goals in the SCO echo its general regional goals noted above, as well as containing U.S. influence. After September 11, 2001, SCO members did not respond collectively to U.S. overtures but mainly as individual states. China encouraged Pakistan to cooperate with the United States. China benefitted from the U.S.-led coalition actions in Afghanistan against the IMU and the Taliban, since these groups had been providing training and sustenance to Uighur extremists. Nonetheless, the U.S. presence in Central Asia poses a challenge to China's aspirations to become the dominant Asian power. Most analysts do not anticipate Chinese territorial expansion into Central Asia, though China is seeking greater economic influence. China is a major trading partner for the Central Asian states and may become the dominant economic influence in the region. In comparison, Turkey's trade with the region is much less than China's. Central Asia's China trade exceeded $1 billion annually by the late 1990s. Kazakhstan and Kyrgyzstan have been deft in building relations with China. They have cooperated with China in delineating borders, building roads, and increasing trade ties. The construction of oil and gas pipelines from Kazakhstan and Turkmenistan to China's Xinjiang region mark China's growing economic influence in the region (see below). However, officials in these states also have been concerned about Chinese intentions and the spillover effects of tensions in Xinjiang. Some have raised concerns about growing numbers of Chinese "suitcase" traders and immigrants, and there are tensions over issues like water resources. China's crackdown on dissidence in Xinjiang creates particular concern in Kazakhstan, because over one million ethnic Kazakhs reside in Xinjiang and many Uighurs reside in Kazakhstan. Some ethnic Kyrgyz also reside in Xinjiang. On the other hand, Kazakhstan fears that Uighur separatism in Xinjiang could spread among Uighurs residing in Kazakhstan, who may demand an alteration of Kazakh borders to create a unified Uighur "East Turkestan." China's relations with Tajikistan improved with the signing of a major agreement in May 2002 delineating a final section of borders in the Pamir Mountains shared by the two states. In 1993, China abandoned its policy of energy self-sufficiency, making Central Asia's energy resources attractive. In September 1997, Kazakhstan granted China's National Petroleum Corporation (CNPC) production rights to develop major oil fields, including the Aktyubinsk Region of northwestern Kazakhstan. China pledged to build a 1,900 mile trans-Kazakh pipeline to Xinjiang within five years (and a shorter pipeline to the Turkmen border). China was unable to interest international investors in the pipeline, and decided to finance the construction. In 2005, CNPC purchased the Canadian-based company PetroKazakhstan, giving it ownership of refineries and control over production licenses for twelve oilfields and exploration licenses for five blocks. Responding to the sale, the Kazakh legislature quickly passed a law giving the government the right to preempt such transfers. In order to complete the sale, CNPC reportedly had to transfer about one-third of the PetroKazakhstan shares to KazMunaigaz (Kazakhstan's state-owned oil and gas firm), and yield effective control over the Shymkent refinery, which Kazakhstan wanted to control to ensure domestic supplies. Kazakhstan and China completed construction in mid-2006 of a 600 mile oil pipeline from Atasu in central Kazakhstan to Xinjiang. At Atasu, the pipeline links to another pipeline from Kumkol, also in central Kazakhstan, and will be linked to Atyrau on Kazakhstan's Caspian Sea coast in 2010. Xinjiang officials reported in early 2009 that about 92 million barrels of oil had been imported through the pipeline in its first two years of operation (other oil continued to be imported by rail). Perhaps as part of an effort to gain greater access to Kazakh oil to help fill the pipeline—particularly the large reserves of oil in western Kazakhstan—China's state-owned CITIC Group investment firm acquired the Kazakh oil assets of Canada's Nations Energy Company for $1.91 billion at the end of 2006. This acquisition gave China the rights to develop the Karajanbas oil and gas field, near Aqtau on the Caspian Sea, until 2020. This pending sale reportedly raised concerns in the Kazakh legislature and in the Energy Ministry that China was obtaining too many national energy assets. These concerns may have led to a concession by CITIC to give KazMunaiGaz a 50% stake in the operating company. Although Turkmen-Chinese energy relations were minor compared to Turkmen-Russian ties, China reportedly provided a $12 million loan in the late 1990s to Turkmenistan's state-owned Turkmennebit oil firm and Turkmengaz gas firm to purchase Chinese drilling and hoist equipment and spare parts. In 2003, China provided a $1.875 million grant and a $3.6 million loan (for 20 years with no interest) to develop Turkmenistan's gas industry. Indicative of stepped-up relations, then-President Niyazov visited China in April 2006 and the two countries signed general accords to construct a gas pipeline for the export of 30 billion cubic meters of Turkmen gas to China. China also pledged new preferential loans. CNPC signed a $150 million service contract with Turkmenistan in May 2007 for drilling and exploration work at the Gunorta Eloten oil and gas field. According to some estimates, the Gunorta Eloten oil and gas field may contain massive reserves of 247 trillion cubic feet of natural gas. In July 2007, visiting Turkmen President Berdymuhammedow and President Hu Jintao witnessed the signing of a gas sales and purchase agreement between CNPC and the Turkmen State Agency for the Management And Use Of Hydrocarbon for the supply of 1.1 trillion cubic feet of gas per year for the period 2009-2038. The two sides also signed a production sharing agreement to develop the Bagtyyarlyk area in eastern Turkmenistan, near the Uzbek border. CNPC has been the only foreign firm to be permitted to develop an on-shore gas field. Iran Iran has pursued limited economic interests in Central Asia and has not fomented the violent overthrow of the region's secular regimes. Its economic problems and technological backwardness have prevented it from playing a major investment role in the region. Iran's support for the Northern Alliance against the Taliban placed it on the same side as most of the Central Asian states and Russia. Iran has had good ties with Turkmenistan, having established rail and pipeline links. Iran's relations with other Central Asian states are more problematic. Kazakhstan's ties with Iran have improved in recent years with a visit by Iran's then-president Mohammad Khatami to Astana in April 2002, during which a declaration on friendly relations was signed. Nazarbayav continues to urge Iran to agree to a median-line delineation of Caspian Sea borders rather than demand territorial concessions (Kazakhstan claims the largest area of seabed), and dangles prospects for energy pipelines through Iran and enhanced trade as incentives. Uzbek-Iranian relations have been mercurial. Iran allegedly harbored some elements of the IMU, creating Uzbek-Iranian tensions. Relations appeared somewhat improved after 2003 as both states cooperated on rebuilding projects in Afghanistan and as Uzbekistan attempted to develop trade and transport links to Middle Eastern markets. The establishment of the U.S. military presence in Central Asia and Afghanistan after September 11, 2001, has directly challenged Iran's security and interests in the region by surrounding Iran with U.S. friends and allies, although Iran also has gained from the U.S.-led defeat of the Taliban and coalition operations in Iraq. Iran views the U.S.-backed BTC pipeline and its regional military presence as part of U.S. efforts to make Central Asia part of an anti-Iranian bloc. During the 1990s, Iran and Russia shared similar interests in retaining their influence in the Caspian region by hindering the growth of U.S. and Western influence. They also opposed U.S. encouragement of Turkey's role in the region. They used the issue of the status of the Caspian Sea to hinder Western oil development efforts. After Russia concluded agreements with Kazakhstan and Azerbaijan on oil and gas development on the Caspian seabed, Iran in 2001 became isolated in still calling for the Sea to be held in common, or alternatively for each of the littoral states to control 20% of the Sea (and perhaps, any assets). This ongoing stance and U.S. opposition have restrained Kazakhstan's interest in building pipelines through Iran to the Persian Gulf. (See also CRS Report RL32048, Iran: U.S. Concerns and Policy Responses , by [author name scrubbed].) Turkey Turkey's strategic interests have included enhancing its economic and security relations with both the South Caucasian and Central Asian states along the "Silk Road" to bolster its access to regional oil and gas. Turkey's role as an energy conduit also would enhance its influence and appeal as a prospective member of the EU, according to some Turkish views. Turkey desires the abatement of ethnic conflict in the Caspian region that threatens energy development. While Turkey plays a significant and U.S.-supported role in trade and cultural affairs in Central Asia among the region's mainly Turkic peoples, it has been hampered by its own political struggles between secularists and Islamic forces and has been obsessed with its own economic and ethnic problems. Also, the authoritarian leaders in Central Asia have been reluctant to embrace the "Turkish model" of relatively free markets and democracy. Perhaps a sign of greater interest in forging ties, Turkey revived meetings of Turkic heads of state in 2006 (the last meeting was in 2001), which was attended by the presidents of Kazakhstan and Kyrgyzstan, and by Turkmenistan's ambassador to Turkey. At the most recent meeting in October 2009 in Nakhchevan, Azerbaijan, the Kazakh and Kyrgyz presidents attended as well as an emissary from Turkmenistan. The attendees agreed to set up a Turkic-speaking Countries Cooperation Council that is envisaged to be similar to the CIS, the Council or Europe, or the Arab League. Sub-groups include a Foreign Ministers Council, a Senior Officials Council, and a Wise Men Delegation. The attendees also agreed to establish a secretariat in İstanbul, a Turkic academy in Kazakhstan, and a parliamentary liaison headquarters in Baku. Until recent years, Russia opposed growing Turkish influence in Central Asia and the Caspian region, including Turkey's building of gas and oil pipelines (the BTC oil pipeline from Azerbaijan's Caspian Sea fields to Turkey's Mediterranean Sea port at Ceyhan has provided Kazakhstan with another oil export route circumventing Russia). Perhaps marking improved Turkish-Russian ties, Prime Minister Putin visited Istanbul in August 2009 and agreed to consider a proposal by Prime Minister Recep Tayyip Erdogan to set up a bilateral strategic cooperation council like ones that Turkey had formed with Iraq and with Syria. Turkey agreed to permit the off-shore construction of Russia's proposed South Stream gas pipeline to Europe. The formation of a strategic council was further discussed during Prime Minister Erdogan's January 2010 visit to Moscow, and the council may be established during a mid-2010 visit to Istanbul by President Medvedev. During Erdogan's visit, Prime Minister Putin urged Turkey not to link the settlement of the Armenia-Azerbaijan conflict over Nagorno Karabakh to the implementation of protocols signed (but not ratified) by Armenia and Turkey on the establishment of diplomatic relations and the opening of borders. The South Caucasus Central Asia is linked with the South Caucasus region as an historic and re-emerging transport corridor. Construction and plans for major pipeline and transport routes from Central Asia through the South Caucasus region to Europe make Central Asia's economic security somewhat dependent on the stability of the South Caucasus. At the same time, the authoritarian Central Asian leaders have been concerned that democratization in Georgia could inspire dissension against their rule. | The Central Asian states (Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan) face common security challenges from crime, corruption, terrorism, and faltering commitments to economic and democratic reforms. However, cooperation among them remains halting, so security in the region is likely in the near term to vary by country. Kyrgyzstan's and Tajikistan's futures are most clouded by ethnic and territorial tensions, and corruption in Kazakhstan and Turkmenistan could spoil benefits from the development of their ample energy resources. Authoritarianism and poverty in Uzbekistan could contribute to a succession crisis. On the other hand, Kyrgyzstan's beleaguered civil society might eventually help the relatively small nation safeguard its independence. Kazakhstan and Uzbekistan might become regional powers able to champion policy solutions to common Central Asian problems and to resist undue influence from more powerful outside powers, because of their large territories and populations and energy and other resources. Internal political developments in several bordering or close-by states may have a large impact on Central Asian security. These developments include a more authoritarian and globalist Russia, an economically growing China, instability in Iran and the South Caucasus region, and re-surging drug production and Islamic extremism in Afghanistan. After the September 11, 2001, terrorist attacks on the United States, the former Bush Administration established bases and other military access in the region to support U.S.-led coalition operations in Afghanistan. The Obama Administration has highlighted U.S. interests in such continued access as well as the long-term security and stability of the region. U.S. interests in Central Asia include combating terrorism, drug production, and trafficking; assisting the development of oil and other resources; and fostering democratization, human rights, free markets, and trade. The United States also seeks to thwart dangers posed to its security by the illicit transfer of strategic missile, nuclear, biological, and chemical weapons technologies, materials, and expertise to terrorist states or groups, and to address threats posed to regional independence by Iran. Some critics counter that the United States has historically had few interests in this region, and advocate only limited U.S. contacts undertaken with Turkey and other friends and allies to ensure U.S. goals. They also urge these friends and allies to enhance their energy security by taking the lead in the development of diverse export routes for Central Asia's energy resources. Most in Congress have supported U.S. assistance to bolster independence and reforms in Central Asia. The 106th Congress authorized a "Silk Road" initiative for greater policy attention and aid for democratization, market reforms, humanitarian needs, conflict resolution, transport infrastructure (including energy pipelines), and border controls. The 108th and subsequent Congresses have imposed conditions on foreign assistance to Kazakhstan and Uzbekistan, based on their human rights records. Congress has continued to debate the balance between U.S. security interests in the region and interests in democratization and the protection of human rights. |
Concern about shareholder value, corporate governance, and the economic and social impact of escalating pay for corporate executives has led to a controversy regarding the practices of paying these executives. In a stated attempt "to provide investors with a clearer and more complete picture of compensation to principal executive officers, principal financial officers [and] the other highest paid executive officers and directors," the Securities and Exchange Commission (SEC or Commission) issued rules in 2006 concerning the disclosure of executive compensation. The rules, however, have created a controversy of their own. Separate from the SEC, Congress has also examined ways to address concerns relating to executive compensation. On July 26, 2006, the SEC voted to adopt revisions to its rules concerning disclosure of executive compensation. These compensation disclosure rules were particularly focused upon companies' providing investors with details about executives' stock-option grants and corporate stock-option programs. The rules required companies to prepare a principles-based Compensation Discussion and Analysis section in their proxy statements, annual reports, and registration statements. In these July 26 rules, the Commission required companies "to make tabular and narrative disclosure about all aspects of stock option grants and ... provid[e] additional guidance about the disclosure of company stock-option practices." The tables would have to contain such information as the grant date fair value, the Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards Rule No. 123 (FAS 123R) grant date, the closing market price on the grant date if the closing market price is greater than the exercise price of the award, and the date on which the board of directors or the compensation committee took action to grant the award if the action date is different from the grant date. On December 22, 2006, the Commission announced that it had adopted changes in its July 26 executive and director compensation disclosure rules "to more closely conform the reporting of stock and option awards to Financial Accounting Standards Board Statement of Financial Accounting Standards No. 123 (revised 2004) Share-Based Payment (FAS 123R)." The amendment was made in the form of interim final rules that would become effective upon publication in the Federal Register. The Commission went on to state that FAS 123R requires recognition of the costs of equity awards over the period in which an employee is required to provide service in exchange for the award. Using this same approach in the executive compensation disclosure will give investors a better idea of the compensation earned by an executive or director during a particular reporting period, consistent with the principles underlying the financial disclosure statement. The SEC briefly summarized some of the important provisions of the amendment as follows: The dollar values required to be reported in the Stock Awards and Option Awards columns of the Summary Compensation Table and the Director Compensation Table are revised to disclose the compensation cost of those awards, before reflecting forfeitures, over the requisite service period, as described in FAS 123R. Forfeitures are required to be described in accompanying footnotes. The Grants of Plan-Based Awards Table is revised to require disclosure of the grant date fair value of each individual equity award, computed in accordance with FAS 123R, and the Director Compensation Table required under Item 402 of Regulation S-K is revised to require footnote disclosure of the same information. The Grants of Plan-Based Awards Table is revised to require disclosure of any option or stock appreciation right that was re-priced or otherwise materially modified during the last completed fiscal year, including the incremental fair value, computed as of the re-pricing or modification date in accordance with FAS 123R, and the Director Compensation Table required under Item 402 of Regulation S-K is revised to require footnote disclosure of the same incremental fair value information. These December 22 amendments have resulted in criticism by some investor groups. Investor groups' criticism has focused on what they believe to be the obfuscation of executive pay packages. An example given is the following: Say the Chief executive of American Widget gets a $24 million option grant on December 1 of this year, with the options vesting—meaning they may be exercised—over four years. He is not eligible for retirement, perhaps because he joined the company only a few years ago, or perhaps because he has not reached the company's minimum retirement age of 60. In the summary table, the value of that option will be shown as $500,000. That is because he has worked just one month of the 48 months needed for the option to become fully exercisable. Over at National Widget, American's main competitor, the chief executive gets an inferior options package on the same day. It is worth $5 million, with the same four-year schedule. But that executive is eligible to retire, although he has no intention of doing so. The compensation summary will show he got a $5 million option. The reality is that one man received options worth nearly five times what the other one was awarded. The appearance is very different. On the other hand, some business groups claimed that the executive compensation disclosure requirements as originally proposed by the SEC needed to be revised because they did not provide a completely accurate picture of actual annual executive compensation. On December 16, 2009, the SEC adopted rule changes titled "Proxy Disclosure Enhancements." The provisions addressing disclosures of executive compensation require a discussion of overall employee compensation policies and practices if risks arise that are reasonably likely to have a material adverse effect upon the company. Congressional proposals concerning executive compensation may be classified into two broad categories: additional disclosure of executive compensation to shareholders and limiting for tax purposes the amounts deferred under a nonqualified deferred compensation plan. An example of additional disclosure is H.R. 4291 , 109 th Congress. This bill would have amended Section 16 of the Securities Exchange Act of 1934 to require that each reporting issuer must include in the annual report and in any proxy solicitation a comprehensive statement of the issuer's compensation plan for the principal executive officers, including any type of compensation, the short- and long-term performance measures that the issuer uses for determining compensation, and the policy of the issuer concerning other specified measures of compensation. The proxy solicitation materials would have been required to have a separate shareholder vote to approve the compensation plan. The bill would also have required the disclosure of golden parachute compensation in any proxy solicitation material concerning an acquisition, merger, consolidation, or proposed sale. In the 110 th Congress, H.R. 1257 , the Shareholder Vote on Executive Compensation Act, referred to the House Committee on Financial Services, would have amended Section 14 of the Securities Exchange Act of 1934 to add a new subsection which would have required a separate, nonbinding shareholder vote in any proxy or consent or authorization for an annual meeting to approve the compensation of executives as disclosed in accordance with the SEC's compensation disclosure rules. Also in the 110 th Congress there was a proposal which would have affected the tax consequences of executive compensation. Section 206 of S. 349 would have added an additional requirement to rules governing income inclusion of amounts deferred under a nonqualified deferred compensation plan. Also in the 110 th Congress, S. 2866 would have amended the Internal Revenue Code to place an annual limitation on aggregate amounts that could be deferred under nonqualified deferred compensation arrangements. It would have amended Section 304 of the Sarbanes-Oxley Act of 2002 to provide for a longer look-back period for reimbursement of compensation for misconduct by an executive to the issuer. It would have amended the Securities Exchange Act of 1934 to provide during an annual meeting for a nonbinding shareholder vote on executive compensation. It would have also amended the Federal Property and Administrative Services Act of 1949 to require federal contractors to disclose their executive compensation structures. In the 110 th Congress, two laws containing executive compensation provisions applicable to executives of specific types of businesses were enacted: P.L. 110-289 , the Housing and Economic Recovery Act of 2008, and P.L. 110-343 , the Emergency Economic Stabilization Act of 2008. Sections of P.L. 110-289 concern restrictions on compensation for executives of federal home loan banks, Fannie Mae, and Freddie Mac. Section 1117 allows the Secretary of the Treasury, in exercising temporary authority to purchase obligations issued by any federal home loan bank, Fannie Mae, and Freddie Mac, to consider limitations on the payment of executive compensation. Sections 1113 and 1114 allow the Director of the Federal Housing Finance Agency to prohibit and withhold executive compensation from executives of federal home loan banks, Fannie Mae, and Freddie Mac if wrongdoing has occurred. There is also authority for limiting golden parachute payments to these executives. Section 302 of P.L. 110-343 prohibits the tax deduction of excessive employee remuneration. Section 111 of P.L. 110-343 allowed the Secretary of the Treasury to require that financial institutions whose troubled assets are purchased met appropriate standards for executive compensation. These standards were required to include limits on incentive-based compensation for unnecessary and excessive risks, recovery of bonuses and incentive compensation based on criteria later proven to be materially inaccurate, and a prohibition on golden parachutes. Bills concerning executive compensation limits have been introduced in the 111 th Congress. Among these bills are H.R. 851 , which would require any institution provided with assistance under the Emergency Economic Stabilization Act of 2008 to meet standards for executive compensation and corporate governance, and H.R. 857 and S. 360 , which would prohibit any officer or employee of an entity receiving funds under TARP from being compensated more than the President of the United States. In the 111 th Congress, Title VII of P.L. 111-5 , the American Recovery and Reinvestment Act of 2009 (ARRA), amended Section 111 of P.L. 110-343 to set forth somewhat different and more detailed restrictions on the compensation of executives of companies during the period in which any obligation arising from financial assistance provided under the Troubled Assets Relief Program (TARP) remains outstanding. The Secretary of the Treasury is required to develop appropriate standards for executive compensation. The standards must include the following: Limits on compensation that exclude incentives for the five highest paid executives of the TARP recipient to take unnecessary and excessive risks. A provision for the recovery by the TARP recipient of any bonus, retention award, or incentive compensation paid to the five highest paid executives and the next 20 most highly compensated employees of the TARP recipient, based upon criteria that are later found to be materially inaccurate. A prohibition on the TARP recipient's making any golden parachute payment to the five highest paid executives or any of the next five highest paid employees of the TARP recipient. A prohibition on a TARP recipient's paying a bonus, retention award, or incentive compensation, except that the prohibition shall not apply to paying long-term restricted stock, so long as this stock does not fully vest during the period in which the TARP recipient has outstanding financial assistance, has a value not greater than one-third of the total amount of the annual compensation of the employee receiving the stock, and is subject to other conditions that the Secretary of the Treasury may determine to be in the public interest. The prohibition is not to be construed to apply to a bonus payment required to be paid according to a written employment contract executed on or before February 11, 2009. The prohibition applies to the highest paid person of a financial institution receiving $25 million or less in financial assistance, to at least the five highest paid employees of a financial institution receiving between $25 million and $250 million in financial assistance, to the five highest paid executive officers and at least the next 10 highest paid employees of a financial institution receiving between $250 million and $500 million, and for a financial institution receiving financial assistance of $500 million or more to the five highest paid officers and at least the next 20 highest paid employees. A prohibition on any compensation plan encouraging manipulation of the reported earnings of a TARP recipient to enhance the compensation of any of its employees. A requirement for the establishment of a Board Compensation Committee. The chief executive officer and the chief financial officer of each TARP recipient must certify that the TARP recipient has complied with the standards issued by the Secretary of the Treasury and file the certification with the SEC if the company's securities are publicly traded or with the Secretary of the Treasury if the company's securities are not publicly traded. The Board Compensation Committee which each TARP recipient is required to establish must be made up of independent directors and must review employee compensation plans. The Board must meet at least semiannually to discuss and evaluate employee compensation plans. If the TARP recipient's stock is not registered with the SEC and it has received $25 million or less of TARP assistance, the Board Compensation Committee's duties shall be performed by the recipient's board of directors. The board of directors of each TARP recipient must have a policy concerning excessive or luxury expenses, including entertainment, office renovations, transportation services, and other unreasonable expenditures. Any annual or other meeting of the shareholders of a TARP recipient must permit a separate shareholder vote to approve the compensation of executives. The vote shall be nonbinding and cannot be construed to overrule a decision by the board of directors. The Secretary of the Treasury is required to review bonuses, retention awards, and other compensation paid to the five highest paid executives and the next 20 highest paid employees of each company that received TARP assistance before February 17, 2009 (the act's date of enactment), to determine whether any payments were inconsistent with the purposes of TARP or contrary to the public interest. Payments determined to be excessive shall be reimbursed to the federal government. In consultation with the appropriate federal banking agency, the Secretary of the Treasury shall permit a TARP recipient to repay any assistance provided to the financial institution, without regard to whether the financial institution has replaced the funds from any other source or to any waiting period. When the assistance is repaid, the Secretary of the Treasury shall liquidate warrants associated with the assistance at the current market price. On June 10, 2009, the Treasury Department issued a rule concerning executive compensation for firms that have received assistance under TARP. Bonuses and golden parachute payments are limited to executives of all entities which have received bailout funds, not just to financial firms. Along with the rule, Treasury has appointed a special master responsible for reviewing any compensation paid to top executives and highly paid employees of companies which have received exceptional assistance from the federal government. On June 9, 2009, Treasury and the SEC issued two broad proposals that would provide the SEC with more authority over executive compensation at all publicly traded companies. These proposals would give to the SEC the authority to require nonbinding shareholder votes on executive compensation and authority to ensure that corporate compensation committees are more independent. With the acknowledgment by AIG of the payment of bonuses to a number of its employees, bills have been introduced to recover at least some of the bonuses paid. These bills would use different ways in recovering the bonuses. For example, H.R. 1575 would authorize the Attorney General to recover excessive compensation paid by entities which have received federal financial assistance on or after September 1, 2008. Other bills would impose a high rate of taxation upon the bonuses paid. For example, H.R. 1586 , passed by the House, would impose a 90% tax on many bonuses paid by businesses receiving TARP assistance. S. 651 would impose an excise tax on some bonuses paid by companies receiving federal emergency economic assistance and would limit nonqualified deferred compensation that employees of companies receiving federal emergency economic assistance may defer from taxation. H.R. 1664 , passed by the House, would amend the Emergency Economic Stabilization Act of 2008 to prohibit unreasonable and excessive compensation and compensation not based on performance standards paid by companies receiving direct capital investments of taxpayer money. Bills introduced in the 111 th Congress more generally on executive compensation include S. 1074 , which would apply a say-on-pay rule to all publicly traded companies, and S. 1006 , which would require 60% of shareholders to give their approval to pay packages larger than 100 times the average annual compensation of a company's employees. The House Committee on Financial Services circulated a discussion draft of H.R. 3269 , the Corporate and Financial Institution Compensation Fairness Act of 2009. The draft had four major parts: Say-on-Pay, Independent Compensation Committee, Incentive Based Compensation Disclosure, and Compensation Standards for Financial Institutions. On July 31, 2009, the House passed an amended version of the bill. The bill is included as Title II of H.R. 4173 , passed by the House on December 11, 2009. Section 2002 of the House-passed bill, concerning shareholder votes on executive compensation disclosures, would amend Section 14 of the Securities Exchange Act by adding subsection (i), which would require every annual shareholder meeting to have a separate shareholder vote to approve the compensation of executives. The shareholder vote would not be binding and could not be construed as overruling a decision made by the board of directors. In addition, any proxy or consent solicitation material in which shareholders are asked to approve an acquisition, merger, consolidation, or proposed sale of an issuer would have to disclose any agreements or understandings that executive officers have concerning compensation based upon the acquisition, merger, consolidation, or sale of the issuer, so-called golden parachute agreements. There would have to be a nonbinding shareholder vote on this compensation. Every institutional investment manager would be required to disclose how it voted on executive compensation and golden parachutes. The SEC could exempt certain categories of issuers from the shareholder vote requirements and, in determining these exemptions, would need to take into account the potential impact upon smaller companies. Section 2003 of the House-passed bill would require that every national securities exchange or association prohibit the listing of equity securities of an issuer not having a compensation committee of the board of directors. Every member of the compensation committee would have to be independent, meaning that he or she could not accept any consulting, advisory, or other compensatory fee from the issuer. A compensation committee would have the authority to retain a compensation consultant and independent counsel. A compensation consultant or other adviser to an issuer's compensation committee would have to meet the independence standards established by the SEC by regulation. Section 2004 of the House-passed bill would require federal regulators to issue regulations requiring covered financial institutions to disclose the structures of all incentive-based compensation arrangements offered by the institutions so as to determine whether the structures are aligned with sound risk management, structured to consider risks over time, and meet other criteria to reduce unreasonable incentives offered to employees to take excessive risks that could threaten the safety and soundness of financial institutions or could have adverse effects upon economic conditions or financial stability. The federal regulators covered are the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Board of Directors of the Federal Deposit Insurance Corporation, the Director of the Office of Thrift Supervision, the National Credit Union Administration Board, the Securities and Exchange Commission, and the Federal Housing Finance Agency. Covered financial institutions are a depository institution or depository institution holding company, a broker-dealer, a credit union, an investment adviser, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, and any other financial institution that the federal regulators determine should be treated as a covered financial institution. The Comptroller General would be required to carry out a study to determine whether there is a connection between compensation structures and excessive risk taking. Subtitle E of Title IX of the Chairman's Mark on financial regulatory reform of the Senate Committee on Banking, Housing, and Urban Affairs concerns executive compensation. The proposal requires that, in a proxy for a shareholder meeting, there be a separate resolution to approve executive compensation. The vote shall not be binding and may not be construed as overruling a decision by the board of directors. The proposal requires that the SEC prohibit the listing of any security of an issuer that does not comply with the rules of the SEC concerning an issuer's compensation committee. The proposal's provision on executive compensation disclosures mandates the SEC to require by rule that each issuer disclose in the annual proxy statement a clear description of disclosed compensation, including information showing the relationship between executive compensation and the financial performance of the issuer. In the event of an accounting restatement due to material noncompliance of the issuer with financial reporting requirements, the issuer will recover incentive-based compensation. The proposal requires each issuer to disclose in the annual proxy statement whether employees are allowed to purchase hedging instruments related to equity securities granted to employees as part of employee compensation. With respect to compensation standards for holding companies of depository institutions, there are prohibitions on excessive compensation and compensation that could lead to material financial loss. As part of their financial regulatory reform legislation, both the House and the Senate passed bills with provisions applying to executive compensation. The House- and Senate-passed executive compensation provisions differed, in some cases significantly. The House and Senate conferees on Wall Street reform passed an executive compensation subtitle. On June 30, 2010, the House agreed to the conference report for H.R. 4173 , now referred to as the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). The Senate agreed to the conference report on July 15, 2010. The President signed the bill into law as P.L. 111-203 on July 21, 2010. In the 112 th Congress, H.R. 3606 , eventually a combination of several House bills, passed both the House and the Senate and is titled the Jumpstart Our Business Startups Act (JOBS Act). The bill's Section 102(a) exempts for up to five years certain companies with annual gross revenues of less than $1 billion, called emerging growth companies, from complying with the requirement of Dodd-Frank concerning the nonbinding shareholder vote on the approval of executive compensation. The President signed the bill on April 5, 2012. On March 3, 2009, the United States Supreme Court granted certiorari in Jones v. Harris Associates . In this case shareholders in a mutual fund brought suit against a fund's investment advisers for charging excessive fees in violation of Section 36(b) of the Investment Company Act of 1940. This provision in part states that an investment adviser of a registered investment company has a fiduciary relationship concerning compensation for services and that fund shareholders can bring a claim for breach of that fiduciary duty. The lower court decision stated that "[s]ection 36(b) does not say that fees must be 'reasonable' in relation to a judicially created standard. It says instead that the adviser has a fiduciary duty." The lower court held that the fees in this instance were not excessive because they were roughly in line with fees that other funds of similar size and investment goals paid their advisers and because the shareholders could not show that the adviser misled the fund's directors. The question before the Supreme Court is whether the lower court erred in holding that a shareholder's claim of excessive fees under Section 36(b) cannot be recognized unless the shareholder can show that the adviser misled the fund's directors. Interest in this case from the executive compensation angle centers on the possibility that the decision may provide a hint as to what the Court could consider excessive executive compensation if it has before it a case concerning, for example, government actions limiting executive compensation. On November 2, 2009, the Court heard oral argument in this case. On March 30, 2010, the Court held that, in order to be successful in holding that an adviser misled the fund's directors and thereby violated his fiduciary duty, investors must show that an investment adviser has charged a "fee that is so disproportionately large that it bears no reasonable relationship to the services rendered and could not have been the product of arm's length bargaining." | Concern about shareholder value, corporate governance, and the economic and social impact of escalating pay for corporate executives has led to a controversy regarding the practices of paying these executives. Proposals have been made in the current and recent Congresses to limit executive compensation and the amount of deferred compensation for tax purposes. In the 110th Congress, two laws containing executive compensation provisions were enacted: P.L. 110-289, the Housing and Economic Recovery Act of 2008, and P.L. 110-343, the Emergency Economic Stabilization Act of 2008. Bills have also been introduced in the 111th Congress concerning limiting executive compensation. In the 111th Congress, Title VII of P.L. 111-5, the American Recovery and Reinvestment Act of 2009 (ARRA), sets forth restrictions on the compensation of executives of companies during the period in which any obligation arising from financial assistance provided under the Troubled Assets Relief Program (TARP) remains outstanding. In July 2009 the House Committee on Financial Services circulated a discussion draft of H.R. 3269, the Corporate and Financial Institution Compensation Fairness Act of 2009. On July 31, 2009, the House passed an amended version of H.R. 3269, which is included as Title II of H.R. 4173, passed by the House on December 11, 2009. The Senate considered a proposal of a financial regulatory reform bill, of which Subtitle E of Title IX concerned executive compensation. Both the House and the Senate passed bills with provisions applying to executive compensation. The House- and Senate-passed executive compensation provisions differed, in some cases significantly. The House and Senate conferees on Wall Street reform passed an executive compensation subtitle. On June 30, 2010, the House agreed to the conference report for H.R. 4173, now referred to as the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). The Senate agreed to the conference report on July 15, 2010. The President signed the bill into law as P.L. 111-203 on July 21, 2010. In the 112th Congress, H.R. 3606, eventually a combination of several House bills, passed both the House and the Senate and is titled the Jumpstart Our Business Startups Act (JOBS Act). The bill has a provision which would exempt certain companies with annual gross revenues of less than $1 billion from complying with many of the executive compensation provisions of Dodd-Frank for up to five years. The President signed the bill on April 5, 2012. On March 3, 2009, the United States Supreme Court granted certiorari in Jones v. Harris Associates, a case which challenged the fees charged by a mutual fund's investment advisers as excessive and a breach of fiduciary duty. Interest in this case from the executive compensation angle centered on the possibility that the decision might provide a hint as to what the Court could consider excessive executive compensation. On November 2, 2009, the Court heard oral argument in this case. On March 30, 2010, the Court held that, in order to be successful in holding that an adviser misled the fund's directors and thereby violated his fiduciary duty, investors must show that an investment adviser has charged a "fee that is so disproportionately large that it bears no reasonable relationship to the services rendered and could not have been the product of arm's length bargaining." |
The Small Business Innovation Research (SBIR) program was established by Congress in 1982 to expand the role of small businesses in federal research and development (R&D). In establishing the program, Congress found that technological innovation plays an important role in job creation, productivity improvements, and U.S. competitiveness; that small businesses are among the most cost-effective performers of R&D and particularly capable of bringing R&D results to market in the form of new products; and that despite the role of small businesses as "the principal source of significant innovations in the Nation," the vast majority of federally funded R&D is performed by large businesses, universities, and federal laboratories. With this in mind, Congress established the SBIR program to advance four objectives: to stimulate innovation, to use small businesses to meet federal R&D needs, to foster and encourage the participation of minority and disadvantaged persons in technological innovation, and to increase private sector commercialization of innovations derived from federally-funded R&D. In 1992, Congress established the Small Business Technology Transfer (STTR) program. Similar in design to the SBIR program, STTR was created to facilitate the commercialization of university and federal R&D by small companies. The SBIR and STTR programs have been reauthorized on multiple occasions, most recently by the SBIR/STTR Reauthorization Act of 2011 ( P.L. 112-81 ), which authorizes both programs through FY2017. Highlights of this law are provided in " SBIR/STTR Reauthorization Act of 2011 " later in this report. Execution of the SBIR and STTR programs is decentralized. Both the SBIR and STTR statutes require that federal agencies with extramural R&D budgets in excess of specified amounts set aside a percentage of such funds to conduct their own SBIR and STTR programs. Currently, 11 federal departments and agencies operate SBIR programs and 5 operate STTR programs. The Small Business Administration (SBA) helps to coordinate the SBIR and STTR programs, establishes overall policy guidance, reviews agencies' progress, and reports annually to Congress on the operation of the programs. Through FY2011, federal agencies had made more than 133,000 SBIR and STTR awards to small businesses to develop and commercialize innovative technologies. The total amount awarded was $33.7 billion. Figure 1 shows SBIR and STTR funding for FY2000-FY2011. This report provides information on the legislative foundations, structure, operation, and current and historical funding levels of the SBIR and STTR programs; summarizes the most recent legislative changes to the programs; provides highlights of external reviews of the program; and identifies and discusses selected policy issues. The SBA, through its SBIR.gov website, makes available certain data on SBIR and STTR awards through FY2013 (and some awards data for FY2014). However, the SBA has communicated to CRS that the data for FY2012 and later years have not been cleared by the Office of Management and Budget. For this report, CRS has relied on the SBIR.gov website for data from the inception of the SBIR and STTR programs through FY2010. For FY2011, this report relies on data provided directly to CRS by the SBA. However, the FY2011 data set has some inconsistencies; in several cases, the sum of individual agency amounts does not correspond to the stated total. The SBA informed CRS that some agency numbers were modified prior to publication of the FY2011 figures, but that the totals for each row were inadvertently not recalculated. Accordingly, for this report CRS uses the sum of the individual agency amounts rather than the totals provided by the SBA. The Small Business Innovation Research program was established under the Small Business Innovation Development Act of 1982 ( P.L. 97-219 ) and subsequently reauthorized or extended multiple times, most recently in 2011 when the program was reauthorized through September 30, 2017. Under the program, each federal agency with an extramural R&D budget greater than $100 million is required to allocate a portion of that funding to conduct a multi-phase R&D grant program for small businesses. The objectives of the SBIR program include stimulating technological innovation; increasing the use of the small business community to meet federal R&D needs; fostering and encouraging participation in innovation and entrepreneurship by socially and economically disadvantaged individuals; and expanding private-sector commercialization of innovations resulting from federally funded R&D. Currently, 11 federal agencies participate in the SBIR program: the Departments of Agriculture (USDA), Commerce (DOC), Defense (DOD), Education (ED), Energy (DOE), Health and Human Services (HHS), Homeland Security (DHS), and Transportation (DOT); the Environmental Protection Agency (EPA); the National Aeronautics and Space Administration (NASA); and the National Science Foundation (NSF). Under the 2011 reauthorization, the minimum percentage of extramural R&D funds that agencies are required to set aside for the SBIR program increases 0.1% per year for five years, from 2.5% in FY2011 to 3.0% in FY2016, then increases to 3.2% for FY2017 and each fiscal year thereafter. Agencies may opt to exceed these minimum percentages. In FY2011, the aggregate level of SBIR funding for all federal agencies was $2.119 billion, approximately 2.6% of the participating agencies' aggregate extramural R&D funding. However, a recent report by the Government Accountability Office (GAO) found that some agencies did not comply with the SBIR and STTR spending requirements. This issue is addressed in greater detail in " Agency Compliance with Mandatory Minimum Expenditure Levels ." Each participating agency operates its own SBIR program under the provisions of the law and regulations, as well as with the policy directive issued by the U.S. Small Business Administration (SBA) in its Small Business Innovation Research Program Policy Directive (referred to hereinafter as the SBIR Program Policy Directive ). According to some analysts, this approach allows for general consistency across SBIR programs, while allowing each agency a substantial degree of control and flexibility in the execution of its program in alignment with its overall mission and priorities. (See " Improving Technology Commercialization, Trade-Offs Among Program Objectives " for related discussion.) The SBIR program is a three-phase program. The purposes and parameters of each phase are discussed below. In Phase I, an agency solicits contract proposals or grant applications to conduct feasibility-related experimental or theoretical research or research and development (R/R&D) related to agency requirements. The scope of the topic(s) in the solicitation may be broad or narrow, depending on the needs of the agency. Phase I grants are intended to determine "the scientific and technical merit and feasibility of ideas that appear to have commercial potential." Generally, SBIR Phase I awards are not to exceed $150,000, though the law provides agencies with the authority to issue awards that exceed this amount (the Phase I award guideline) by as much as 50%. In addition, agencies may request a waiver from the SBA to exceed the award guideline by more than 50% for a specific topic. In general, the period of performance for Phase I awards is up to six months, though agencies may allow for a longer performance period for a particular project. Phase II grants are intended to further R/R&D efforts initiated in Phase I that meet particular program needs and that exhibit potential for commercial application. In general, only Phase I grant recipients are eligible for Phase II grants. There are two exceptions to this guideline: (1) a federal agency may issue an SBIR Phase II award to a Small Business Technology Transfer (STTR) Phase I awardee to further develop the work performed under the STTR Phase I award; and (2) through FY2017, the National Institutes of Health (NIH), DOD, and ED are authorized to make Phase II grants to small businesses that did not receive Phase I awards. Exercise of this authority requires a written determination from the agency head that the small business has demonstrated the scientific and technical merit and feasibility of the ideas and that the ideas appear to have commercial potential. Phase II awards are to be based on the results achieved in Phase I (when applicable) and the scientific and technical merit and commercial potential of the project proposed in Phase II as evidenced by: the small business concern's record of successfully commercializing SBIR or other research; the existence of second phase funding commitments from private sector or non-SBIR funding sources; the existence of third phase, follow-on commitments for the subject of the research; and the presence of other indicators of the commercial potential of the idea. The SBIR Program Policy Directive generally limits SBIR Phase II awards to $1 million (the Phase II award guideline), though the directive provides agencies with the authority to issue an award that exceeds this amount by as much as 50% (for an amount up to $1.5 million). As with Phase I grants, agencies may request a waiver from the SBA to exceed the Phase II award guideline by more than 50% for a specific topic. In general, the period of performance for Phase II awards is not to exceed two years, though agencies may allow for a longer performance period for a particular project. Agencies may make a sequential Phase II award to continue the work of an initial Phase II award. This sequential Phase II award is also subject to the $1 million Phase II guideline and agencies' authority to exceed the guideline by up to 50%. Thus, agencies may award up to $3 million in Phase II awards for a particular project to a single recipient at the agency's discretion, and potentially more if the agency requests and receives a waiver from the SBA. For sequential Phase II awards, some agencies require third party matching of the SBIR funds. Phase III of the SBIR program is focused on the commercialization of the results achieved with Phase I and Phase II SBIR funding. The SBIR program does not provide funding in Phase III. Phase III funding is expected, generally, to be generated in the private sector. However, some agencies may use non-SBIR funds for Phase III funding to support additional R&D or contracts for products, processes, or services intended for use by the federal government. In addition, the 2011 reauthorization act directs agencies and prime contractors "to the greatest extent practicable," to facilitate the commercialization of SBIR and STTR through the use of Phase III awards, including sole source awards. In addition to funding provided in Phases I-III, the 2011 reauthorization act also allows agencies to award SBIR Phase I and Phase II award recipients up to $5,000 per year for technical assistance, in addition to the amount of the award, or to provide such assistance through an agency-selected vendor. This funding is intended to provide SBIR recipients with technical assistance services, such as access to a network of scientists and engineers engaged in a wide range of technologies or access to technical and business literature available through online databases. These services are provided to help SBIR awardees make better technical decisions, solve technical problems, minimize technical risks, and develop and commercialize new commercial products and processes. A small business' eligibility for the SBIR program is contingent on its location, number of employees, ownership characteristics, and other factors. Eligibility to participate in the SBIR program is limited to for-profit U.S. businesses with a location in the United States. Eligible companies must have 500 or fewer employees, including employees of affiliates. The small business must be: (1) more than 50% directly owned and controlled by one or more citizens or permanent resident aliens of the United States, other small business concerns (each of which is more than 50% directly owned and controlled by individuals who are citizens or permanent resident aliens of the United States), or any combination of these; or (2) more than 50% owned by multiple venture capital operating companies, hedge funds, private equity firms, or any combination of these, with no single such firm owning more than 50% of the small business; or (3) a joint venture in which each entity to the joint venture meets the requirements in paragraphs (1) and (2) above. Agencies are restricted on how much of their SBIR funds they can make available for awards to small businesses that are more than 50% owned by venture capital operating companies, hedge funds, or private equity firms. The NIH, DOE, and NSF may award no more than 25% of the agency's SBIR funds to such small businesses; all other SBIR agency programs are limited to using 15% of their SBIR funds for such awards. Small businesses that have received multiple prior SBIR/STTR awards must meet certain bench-mark requirements for progress toward commercialization to be eligible for a new Phase I award. For both Phase I and Phase II, the principal investigator's primary employment must be with the small business applicant at the time of award and during the conduct of the proposed project. Generally, R/R&D work under the STTR must be performed in the United States, though agencies may allow a portion of the work to be performed or obtained outside of the United States under "rare and unique" circumstances. In FY2011, the latest year for which the SBA has published data on SBIR awards, agencies made awards for $2.222 billion, including 3,739 Phase I awards totaling $525.4 million and 1,759 Phase II awards totaling $1.696 billion. The success rate was 15% for Phase I SBIR proposers and 49% for Phase II proposers. While more than two-thirds of SBIR grants made in FY2011 were Phase I awards (68.0%), more than three-fourths of SBIR funding went to Phase II awards (76.4%). Between FY2000 and FY2011, funding for both Phase I and Phase II has generally increased. See Figure 2 . Two agencies accounted for more than three-fourths of total SBIR funding in FY2011: DOD ($1,080.8 million, 49%) and HHS ($623.8 million, 28%). The next three highest SBIR funding agencies (NASA, DOE, NSF) together accounted for 20%. The remaining agencies accounted for less than 4% of the total. See Figure 3 . The allocation of SBIR funding between Phase I and Phase II awards varies among agencies. Agencies that allocated the largest share of their SBIR funding to Phase I awards in FY2011 were EPA (45%), NSF (36%), and DOC (35%). Agencies that allocated the largest share of their SBIR funding to Phase II awards in FY2011 were DOT (84%), DOD (81%), and DOE (81%). Figure 4 illustrates each SBIR agency's FY2011 distribution of SBIR funding between phases. Agency shares of aggregate Phase I and Phase II SBIR funding are as shown in Figure 5 . The agencies with the highest share of total Phase I funding in FY2011 were DOD (40%), HHS (35%), and NASA (9%). The agencies with the highest share of total Phase II funding in FY2011 were also DOD (51%), HHS (26%), and NASA (8%). In FY2011, minority or disadvantaged businesses received 238 Phase I awards (about 6.4% of all Phase I SBIR awards) totaling $31.3 million (about 6.0% of total Phase I funding), and 107 Phase II SBIR awards (6.1%) totaling $90.8 million (8.5%). Companies in Historically Underutilized Business Zones (HUBZones) received 87 Phase I awards (about 2.3% of all Phase I awards) totaling $11.5 million (about 2.2% of total Phase I funding) and 45 Phase II awards (2.6%) totaling $29.8 million (2.8%). Figure 6 shows the aggregate funding level and number of SBIR awards by state for FY2006-2010 (the latest five-year period for which award data by state are available). Although every state, the District of Columbia, and Puerto Rico received awards during this period, SBIR funding was concentrated among certain states. The four states that received the largest number and amount of SBIR awards during this period—California (5,467 awards totaling $1.826 billion), Massachusetts (3,570 awards totaling $1.235 billion), Virginia (1,786 awards totaling $561.8 million), and Maryland (1,404 awards totaling $492.8 million)—accounted for 38% of the total number of SBIR awards and 43% of the total funding for this period. These four states also received the largest overall amounts of federal R&D funding in FY2010, accounting for a total of 44%. The top ten states accounted for more than two-thirds of SBIR awards and funding. This concentration mirrors overall federal R&D funding as well. Nine of the top 10 states in SBIR funding are also among the top 10 states in overall federal R&D funding (which account for 66% of total federal R&D funding). In contrast, the ten states with the fewest number of SBIR awards and lowest aggregate award amounts accounted for about 1% of awards and total funding during this period. The ten states with the least federal R&D funding in FY2010 also accounted for about 1% of total federal R&D funding. Table 1 provides information on overall agency SBIR obligations for FY2011, as well as the number and aggregate amounts of Phase I and Phase II SBIR awards. Table 2 provides historical data on the number and amount of Phase I and Phase II SBIR awards from the program's inception through FY2011. The Small Business Technology Transfer (STTR) program was created by the Small Business Research and Development Enhancement Act of 1992 ( P.L. 102-564 ) and has been reauthorized several times, most recently by the SBIR/STTR Reauthorization Act of 2011 ( P.L. 112-81 ) which reauthorized the program through September 30, 2017. Modeled largely after the SBIR program, the STTR program seeks to facilitate the commercialization of university and federal R&D by small companies. Under the program, each federal agency with extramural R&D budgets of $1 billion or more is required to allocate a portion of its R&D funding to conduct a multi-phase R&D grant program for small businesses. The STTR program provides funding for research proposals that are developed and executed cooperatively between a small firm and a scientist in an eligible research institution and that are aligned with the mission requirements of the federal funding agency. Currently, five agencies participate in the STTR program: DOD, DOE, HHS, NASA, and NSF. Under the 2011 reauthorization act, the minimum percentage of funds to be set aside for the program is to increase from 0.30% in FY2011 to 0.35% in FY2012 and FY2013; to 0.40% in FY2014 and FY2015; and to 0.45% in FY2016 and beyond. In FY2011, total STTR award funding among all STTR-participating federal agencies was $238.1 million, accounting for 0.31% of the agencies' aggregate extramural R&D funding. The SBA emphasizes three principal differences between the STTR and SBIR programs: Under STTR, the small business and its partnering research institution must establish an intellectual property agreement detailing the allocation of intellectual property rights and rights to carry out follow-on research, development or commercialization activities. Under STTR, the small business partner must perform at least 40% of the R&D and the research institution partner must perform at least 30% of the R&D. The STTR program does not require the principal investigator to be primarily employed by the small business, a requirement of the SBIR program. As with the SBIR program, each participating agency operates its own STTR program under the provisions of the law and regulations, as well as with the policy directive issued by the U.S. Small Business Administration (SBA) in its Small Business Technology Transfer Program Policy Directive (referred to hereinafter as the STTR Program Policy Directive ). According to some analysts, this approach allows for general consistency across STTR programs, while allowing each agency a substantial degree of control and flexibility in the execution of its program in alignment with its overall mission and priorities. (See " Improving Technology Commercialization, Trade-Offs Among Program Objectives " for related discussion.) Like the SBIR program, the STTR program has three phases. The purposes and parameters of each phase are discussed below. In Phase I, an agency solicits contract proposals or grant applications to conduct feasibility-related experimental or theoretical research or research and development (R/R&D) related to agency requirements. The scope of the topic(s) in the solicitation may be broad or narrow, depending on the needs of the agency. Phase I grants are intended to determine "the scientific and technical merit and feasibility of the proposed effort and the quality of performance of the [small business] with a relatively small agency investment before consideration of further Federal support in Phase II." Generally, STTR Phase I awards are limited to $150,000 (the Phase I award guideline), though law provides agencies with the authority to issue awards that exceed this guideline by as much as 50%. In addition, agencies may request a waiver from the SBA to exceed the award guideline by more than 50% for a specific topic. In general, the period of performance for Phase I awards is not to exceed one year, though agencies may allow for a longer performance period for a particular project. Phase II grants are intended to further R/R&D efforts initiated in Phase I that meet particular program needs and that exhibit potential for commercial application. In general, only Phase I grant recipients are eligible for Phase II grants. Awards are to be based on the results achieved in Phase I and the scientific and technical merit and commercial potential of the project proposed in Phase II. The STTR Program Policy Directive generally limits STTR Phase II awards to $1 million (the Phase II award guideline), though the directive provides agencies with the authority to issue awards that exceed this guideline by as much as 50% (for an amount up to $1.5 million). As with Phase I grants, agencies may request a waiver from the SBA to exceed the Phase II award guideline by more than 50% for a specific topic. In general, the period of performance for Phase II awards is not to exceed two years, though agencies may allow for a longer performance period for a particular project. Agencies may make a sequential Phase II award to continue the work of an initial Phase II award. This sequential Phase II award is also subject to the $1 million Phase II guideline and agencies' authority to exceed the guideline by up to 50%. Thus, agencies may award up to $3 million in Phase II awards for a particular project to a single recipient at the agency's discretion, and potentially more if the agency requests and receives a waiver from the SBA. For sequential Phase II awards, some agencies require third-party matching of the STTR funds. Phase III of the STTR program is focused on the commercialization of the results achieved through Phase I and Phase II STTR funding. The STTR program does not provide funding in Phase III. Phase III funding is expected, generally, to be generated in the private sector. However, some agencies may use non-STTR funds for Phase III funding to support additional R&D or contracts for products, processes, or services intended for use by the federal government. In addition, the 2011 reauthorization act directs agencies and prime contractors "to the greatest extent practicable," to facilitate the commercialization of SBIR and STTR through the use of Phase III awards, including sole source awards. The 2011 reauthorization act also allows agencies to award STTR Phase I and Phase II award recipients up to $5,000 per year for technical assistance, in addition to the amount of the award, or to provide such assistance through a vendor. This funding is intended to provide STTR recipients with technical assistance services, such as access to a network of scientists and engineers engaged in a wide range of technologies or access to technical and business literature available through online databases. These services are provided to help STTR awardees make better technical decisions, solve technical problems, minimize technical risks, and develop and commercialize new commercial products and processes. A small business' eligibility for the STTR program is contingent on its location, number of employees, ownership characteristics, and other factors. The partnering research institution must meet eligibility qualifications as well. Eligibility to participate in the STTR program is limited to for-profit U.S. businesses with a location in the United States. Eligible companies must have 500 or fewer employees, including employees of affiliates. The small business must be: (1) more than 50% directly owned and controlled by one or more citizens or permanent resident aliens of the United States, other small business concerns (each of which is more than 50% directly owned and controlled by individuals who are citizens or permanent resident aliens of the United States), or any combination of these; or (2) a joint venture in which each entity to the joint venture meets the requirements in paragraph (1) above. Unlike the SBIR program, the STTR does not have authority to make awards to small businesses that are more than 50% owned by multiple venture capital operating companies, hedge funds, private equity firms, or any combination of these. However, as with SBIR, the STTR program may make awards to companies that are majority-venture capital backed if the VC firm is itself more than 50% directly owned and controlled by one or more individuals who are citizens or permanent resident aliens of the United States. In such a case, that VC is allowed to have majority ownership and control of the awardee; however, the VC and the awardee, and all other affiliates, must have a total of 500 employees or less. In addition, small businesses that have received multiple prior SBIR/STTR awards must meet certain benchmark requirements for progress toward commercialization to be eligible for a new Phase I award. For both Phase I and Phase II, the principal investigator's primary employment must be with either the small business or the partnering research institution at the time of award and during the conduct of the proposed project. Generally, R/R&D work under the STTR must be performed in the United States, though agencies may allow a portion of the work to be performed or obtained outside of the United States under "rare and unique" circumstances. The partnering research institution must be located in the United States, and be either a nonprofit college or university, a domestic nonprofit research organization, or a federally funded research and development center (FFRDC). For both Phase I and Phase II, not less than 40% of the R/R&D work must be performed by the small business, and not less than 30% of the R/R&D work must be performed by the single, partnering research institution. Agencies can choose whether to determine these percentages using either contract dollars or labor hours, but must explain this in the solicitation. In FY2011, the most recent year for which the SBA has published data on STTR awards, agencies made awards for $251.2 million, including 482 Phase I STTR awards totaling $59.6 million and 238 Phase II STTR awards totaling $191.6 million. The success rate for Phase I STTR proposers was 22% and for Phase II proposers was 44%. While 67% of STTR grants made in FY2011 were for Phase I awards, more than 76% of STTR funding went to Phase II awards. In FY2004, the STTR set-aside doubled from 0.15% to 0.30%. In the first year (FY2004), aggregate funding for Phase I and aggregate funding for Phase II approximately doubled. However, from FY2004 to FY2011, Phase I aggregate funding fell by about 25% while Phase II aggregate funding increased by about 74%. The proportional change in funding between the phases may reflect an increased focus on commercialization by the STTR agencies. See Figure 7 for Phase I and Phase II STTR funding for FY2000-2011. Like SBIR funding, STTR funding is highly concentrated. Two agencies—DOD ($120.9 million, 48%) and HHS ($77.5 million, 31%)—accounted for nearly four-fifths of STTR funding in FY2011. NASA accounted for 8%, DOE for 7%, and NSF for 5%. See Figure 8 . The allocation of STTR funding to Phase I and Phase II awards varies among agencies, but the differences are smaller than for SBIR funding. Among STTR agencies, HHS allocated the largest share (29%) of its STTR funding to Phase I awards in FY2011; NSF allocated the largest share (95%) to Phase II awards. See Figure 9 . The agencies with the highest share of total Phase I funding in FY2011 were DOD (50%) and HHS (37%). The agencies with the highest share of total Phase II funding in FY2011 were also DOD (48%) and HHS (29%). See Figure 10 . Minority or disadvantaged businesses received 31 Phase I STTR awards (6% of all Phase I STTR awards) totaling $3.1 million (5% of total Phase I STTR funding) in FY2011, and 14 Phase II STTR awards (6%) totaling $7.9 million (4%). Companies from Historically Underutilized Business Zones (HUBZones) received 16 Phase I STTR awards (3% of all Phase I awards) totaling $1.5 million (3% of total Phase I STTR funding) in FY2011, and 6 Phase II STTR awards (3%) totaling $2.6 million (1%). Figure 11 shows the aggregate funding level and number of STTR awards by state for FY2006-FY2010 (the latest five-year period for which award data by state are available). STTR funding was concentrated in certain states. The three states that received the largest number and amount of STTR awards during this period—California (651 awards totaling $195.8 million), Massachusetts (474 awards totaling $139.9 million), and Virginia (267 awards totaling $77.2 million)—accounted for 33% of the total number of SBIR awards and 32% of the total funding for this period. The top ten states accounted for more than 60% of awards and funding. In contrast, the ten states with the fewest awards and lowest aggregate award amounts accounted for about 1% of awards and total funding during this period. Table 3 provides information on overall agency STTR obligations for FY2011, as well as the number and aggregate amounts of Phase I and Phase II awards. Table 4 provides historical information on the number of Phase I and Phase II STTR awards and total annual STTR funding from the program's inception through FY2011. The SBIR/STTR Reauthorization Act of 2011 (enacted as Division E of the National Defense Authorization Act for Fiscal Year 2012, P.L. 112-81 ) authorizes the SBIR and STTR programs through September 30, 2017. The act also changes certain aspects of the programs. This section provides an overview of these changes. Perhaps the most widely debated issue of the reauthorization was whether to permit small companies that are majority-owned by venture capital operating companies, hedge funds, or private equity firms to receive grants under the SBIR and STTR programs. In what might be considered a compromise position, the act permits NIH, DOE, and NSF to award not more than 25% of SBIR funds to small businesses "that are owned in majority part by multiple venture capital operating companies, hedge funds, or private equity firms through competitive, merit-based procedures that are open to all eligible small business concerns." Other federal agencies may not award more than 15% of SBIR funds to such firms. The act directs the GAO to conduct triennial studies on venture capital operating company, hedge fund, and private equity firm involvement in the program. The first report is due in December 2014. For further discussion of this issue, see " Eligibility of Venture Capital-Backed Small Businesses ." The act increases the percentages of extramural R&D funding that agencies must set aside for the SBIR and STTR programs, introducing the changes over multiple years. See Table 5 . Additionally, the law increases the award guidelines on Phase I SBIR/STTR awards from $100,000 to $150,000 and on Phase II SBIR/STTR awards from $750,000 to $1,000,000. Agencies cannot exceed these guidelines by more than 50% without a waiver from the SBA. The act also provides express authority to agencies to make a sequential Phase II award to continue the work of an initial Phase II award. Sequential Phase II awards are also subject to the $1 million guideline/$1.5 million limit. Upon agency request, the SBA Administrator may grant a waiver allowing an agency to exceed the limits with respect to a specific topic for a fiscal year if the limitations will interfere with the ability of the agency to fulfill its research mission through the SBIR program or the STTR program. The agency must agree to minimize the number of awards that exceed the award guidelines. The act directs the GAO to audit and report on agency calculation of their extramural R&D budgets. GAO has reported that agencies have been inconsistent and late in reporting to the SBA their explanations of how they calculate their extramural R&D budgets, which are the basis used to calculate the minimum SBIR and STTR set-aside amounts. For further discussion of this issue, see " Calculation of Extramural Research Funding and Set-Aside ." The act gives small businesses more flexibility in applying for Phase II awards. Recipients of a Phase I award from one federal agency may now apply for a Phase II award from another agency to pursue the original work (e.g., a company that received a Phase I award from the Department of Energy may apply for a Phase II award from the Department of Defense to build on its Phase I work). In addition, a small business may switch between the SBIR and STTR programs for Phase I and Phase II awards (e.g., a small business that wins an SBIR Phase I award may now compete for a Phase II STTR award). The act requires agency heads to verify that any activity to be performed with respect to a project with a Phase I or Phase II SBIR or STTR award has not been funded under the SBIR program or STTR program of another Federal agency to prevent the duplication of funded work. In addition, the act establishes a pilot program that allows the Department of Defense, Department of Education, and National Institutes of Health to award Phase II grants to small businesses that did not first receive a Phase I grant. The 2011 reauthorization act includes a number of provisions seeking to increase the programs' effectiveness in technology commercialization. The act requires each SBIR/STTR agency to establish a system to measure the success of small businesses that received Phase I awards in securing Phase II awards. Agencies are also required to establish minimum performance standards for small businesses in advancing from a Phase I award to a Phase II award, and to evaluate each recipient's compliance with the standard. Small firms that fail to meet this standard are barred from competing for additional Phase I SBIR or STTR awards from that agency for a one year. Similarly, the act requires each agency to: establish systems to measure the success of SBIR and STTR awardees in securing Phase III SBIR or STTR awards, establish a minimum performance standard in this regard, evaluate each recipient's compliance with the standard, and bar firms that fail to meet this standard from competing for additional Phase I (and in some cases, Phase II) SBIR or STTR awards for one year. Agencies are required to report their tracking systems and minimum performance standards to the SBA Administrator for approval. The act also authorized agencies to establish commercialization readiness pilot programs. This authority allows each agency to use up to 10% of its SBIR and STTR funds to make awards of up to three times the dollar amounts established for Phase II awards. These awards may be used to support technology development, testing, evaluation, and commercialization assistance for SBIR and STTR Phase II technologies, or to support the progress of R/R&D and commercialization conducted under the SBIR or STTR programs to Phase III. To establish a commercialization readiness pilot program, agencies must first make a written application to the SBA Administrator for approval describing a compelling reason that additional investment in SBIR or STTR technologies is necessary, including unusually high regulatory, systems integration, or other costs relating to development or manufacturing of identifiable, highly promising small business technologies or a class of such technologies expected to substantially advance the mission of the agency. In making such awards, agency heads are directed to consider whether the technology to be supported by the award is likely to be manufactured in the United States. The act encourages agencies to award SBIR and STTR grants to small businesses that work with federal laboratories or that are involved in cooperative research and development agreements (also known as CRADAs). In addition, the act allows agencies to contract with a vendor to provide SBIR/STTR awardees with technical assistance services. Such services could include access to a network of scientists and engineers engaged in a wide range of technologies or access to technical and business literature available through online databases. Funding of these services is intended to help the small businesses make better technical decisions, solve technical problems which arise during the conduct of their SBIR/STTR projects, minimize technical risks associated with such projects, and develop and commercialize new commercial products and processes resulting from such projects. Alternatively, an agency may authorize SBIR/STTR awardees to purchase such services up to $5,000 per year, in addition to the amount of the recipient's award. The act also establishes a "Phase 0 Proof of Concept Partnership Pilot Program" at NIH to accelerate the creation of small businesses and the commercialization of research innovations from universities or other research institutions that participate in the NIH STTR program. Under this pilot, NIH may make awards of up to $1 million per year for up to three years. These funds may be used to support technical validations, for market research, to clarify intellectual property rights position and strategy, or to investigate commercial or business opportunities. These funds may not be used for basic research activities or for the acquisition of research equipment or supplies unrelated to commercialization activities. Another commercialization-focused provision of the act provides a special acquisition preference to SBIR and STTR award recipients. The act directs agencies and prime contractors, to the greatest extent practicable, to issue Phase III awards relating to technology, including sole source awards, to the SBIR and STTR award recipients that developed the technology. The act requires each agency that makes total SBIR and STTR awards in excess of $50 million to report annually to the SBA Administrator on efforts to improve U.S. manufacturing activities and to make recommendations for further improvements. The SBA is required to incorporate the agency reports into its mandatory annual report to Congress. The act includes a provision to protect the rights of small businesses to data generated in the performance of an SBIR award for a period of not less than four years. In addition, the act directs GAO to report to Congress on the implementation and effectiveness of data rights protection. Specifically, the act directs GAO to assess whether federal agencies comply with data rights protections for SBIR awardees and their technologies; whether the laws and policy directives intended to clarify the scope of data rights are sufficient to protect SBIR awardees; and whether there is an effective grievance tracking process for SBIR awardees who have grievances against a federal agency regarding data rights and a process for resolving those grievances. The act required a report within 18 months of its enactment (approximately June/July 2013). GAO issued a letter in November 2013 stating that it was awaiting SBA's revision of the policy directive as it "has a bearing on the issue of whether laws and policy directives are sufficient to protect SBIR awardees." SBA subsequently published its updated policy directive on February 24, 2014. GAO has not published a report on this matter as of August 2014. Congress has expressed continuing concerns about waste, fraud, and abuse in the SBIR and STTR programs. The 2011 reauthorization act includes a number of provisions to identify and eliminate waste, fraud, and abuse. To this end, the act: requires the SBA administrator to amend the SBIR Policy Directive and the STTR Policy Directive to include measures to prevent fraud, waste, and abuse; directs that the amendments to the policy directives include definitions or descriptions of fraud, waste, and abuse; guidelines for the monitoring and oversight of applicants to, and recipients of, awards; and a requirement that each SBIR/STTR agency provide information on the method established by each agency inspector general to report fraud, waste, and abuse on its website and in any SBIR/STTR solicitation; requires SBIR and STTR applicants and award recipients to certify its compliance with the laws relating to the programs and the conduct guidelines established under the policy directives; directs inspectors general in SBIR and STTR agencies to establish fraud detection indicators; review regulations and operating procedures; coordinate information sharing between agencies, to the extent otherwise permitted under federal law; and improve the education and training of and outreach to program administrators, applicants, and recipients; and requires the GAO to publish an initial report within one year from the date of enactment and every four years thereafter. For further discussion of this issue, see " Concerns About Duplicative Awards and Other Types of Waste, Fraud, and Abuse ." The act requires the Director of the Office of Science and Technology Policy to establish an Interagency SBIR/STTR Policy Committee that includes representatives of the SBA and all agencies with an SBIR or STTR program. The law directs the committee to develop policy recommendations on ways to improve program effectiveness and efficiency, including issues related to development of the SBIR and STTR awards databases; agency flexibility in establishing Phase I and II award sizes; best practices in technology commercialization and mechanisms for addressing company funding gaps after Phase II but prior to commercialization; a framework for a systematic assessment of SBIR and STTR programs, including tracking awards and outcomes; and outreach and technical assistance activities that increase the participation of small businesses underrepresented in the SBIR and STTR programs. Following initial one-year and 18-month reports, the committee is to report to selected committees of Congress every two years. The act also establishes a pilot program that allows agencies to use no more than 3% of SBIR program funds for administrative activities, oversight, and contract processing. Among the authorized uses of these funds are: to support the administration of the SBIR and STTR programs; to support outreach and technical assistance relating to the SBIR and STTR programs, including technical assistance site visits, personnel interviews, and national conferences; to increase outreach activities to increase the participation of women-owned and socially and economically disadvantaged small business concerns; to support the implementation of commercialization and outreach initiatives of P.L. 112-81 ; to increase participation of states that have traditionally received low levels of SBIR awards; to support activities related to congressional oversight, including the prevention of waste, fraud, and abuse; to carry out the laws authorizing participation by majority venture capital-owned small businesses; to pay for contract processing costs relating to the SBIR and STTR programs; and to pay for additional personnel and assistance with application reviews. The act further required the SBA to publish revised SBIR and STTR policy directives incorporating the act's changes in the programs mandated by the act within 180 days of the passage of the legislation. SBA published revised policy directives for comment in the Federal Register on August 6, 2012; the comment period closed on October 5 th ; and final action occurred in December 2013. The policy directives were updated on February 24, 2014. The final rule for venture capital participation was finalized and published in the Federal Register on December 27, 2012. As it has since establishing the SBIR and STTR programs, Congress seeks to better understand and address challenges to the programs' effectiveness. The following section provides an overview of selected ongoing issues that Congress may opt to consider. Much of the debate over the reauthorization of the SBIR and STTR programs in 2011 revolved around a regulation that required at least 51% ownership by an individual or individuals. Some experts argued that participation by small firms that are majority-owned by venture capital companies, hedge funds, and private equity firms should be permitted. Proponents of this change maintained that, particularly in the biotechnology sector, the most innovative companies were not able to use the SBIR program because they did not meet these ownership criteria. Opponents of altering the eligibility requirements argued that the program is designed to provide financial assistance where venture capital is not available. They asserted that the program's objective is to bring new concepts to the point where private sector investment is feasible. While the new law permits limited participation by majority venture capital owned companies, it remains to be seen how this will affect the outcomes of the two programs. A continuing issue for the SBIR and STTR programs is agency compliance with expending the statutory minimum percentage of extramural research funding annually. In a September 2013 report, GAO found that 8 of the 11 agencies participating in the SBIR program and 4 of the 5 agencies participating in the STTR program failed to consistently comply with spending requirements for FY2006-FY2011. In June 2014, GAO reported that three agencies failed to comply with the SBIR requirement and three failed to comply with the STTR requirement in FY2012. GAO reported that program managers at two of the non-compliant agencies asserted that their agencies would be in compliance if the agencies spent the total amount reserved or budgeted for their programs, regardless of what year the funding was spent. GAO asserted that the law requires agencies to "expend" a certain amount of funding each year and attributes the agencies' misinterpretation, in part, to the SBA's SBIR and STTR policy directives which "inaccurately state that the authorizing legislation requires agencies to 'reserve' the minimum amount each year." Among the factors affecting agencies' failure to comply with meeting the mandatory minimum expenditure levels are challenges in calculating the amount to be set aside; the enactment of appropriations after the start of the fiscal year; and differing agency interpretations of the statutory requirement for "expended." The SBIR and STTR set-asides are based on an agency's extramural budget for research or research and development. The calculation of the amount of this budget can be complex for some agencies. For example, several agencies support extramural R/R&D funding through multiple subunits. In addition, agency extramural R/R&D funding can come from more than one appropriations account, and such accounts can include activities and programs that are not extramural R/R&D. Accordingly, each agency must determine its extramural R/R&D budgets using a methodology that identifies extramural R/R&D funding as well as what is to be excluded from this amount. Given the complexity of this challenge, Congress required each agency to report its methodology to SBA annually within four months of enactment of its appropriation. The SBIR Program Policy Directive requires that this report also include an itemization and explanation of excluded items. However, GAO also found that at least six agencies did not itemize and/or explain exclusions from their calculations. In addition, according to GAO, agencies generally have submitted these reports to SBA too late for the SBA to provide timely feedback to the agencies after reviewing their methodologies and exclusions. GAO recommended that agencies submit their methodology reports in accordance with the four months provided after enactment of appropriations as specified in law. Another factor affecting the calculation of SBIR funding is that, in practice, agencies generally calculate their SBIR set-asides based on their extramural R/R&D budgets and not on their extramural R/R&D obligations as required by statute . An agency's extramural R/R&D budget reflects its spending plans for a fiscal year, whereas an agency's extramural R/R&D obligations reflect the amount of funds an agency obligates to spending in a fiscal year; a final obligation figure for extramural R/R&D may not be calculable until the end (or very close to the end) of a fiscal year. Thus, an agency's extramural R/R&D obligations (and the minimum SBIR set-aside amount) may be higher or lower than the level the agency anticipated in its extramural R/R&D budget. Enactment of appropriations after the start of a fiscal year may also affect the ability of agencies to expend SBIR/STTR funds in that fiscal year. For example, if an agency plans its expenditures around a level specified in a continuing resolution but then receives a higher level of funding in its final appropriations act(s), then expenditure of the additional amount set aside for SBIR/STTR in that fiscal year may be difficult. A related factor that may delay calculation of the amount to be set aside for SBIR/STTR is the time required for an agency to determine the amount of its extramural research funding. Appropriations acts often provide funding to accounts with multiple purposes, including extramural R&D, intramural R&D, and non-R&D activities. In such cases, agencies must make allocation decisions for these funds (subject to limitations and guidance provided in the appropriations act(s) and related report language) before the extramural research budget can be calculated. Similarly, agency officials have asserted that agencies had already planned their programs and made awards in FY2012 prior to enactment of the SBIR/STTR Reauthorization Act of 2011 which contained provisions increasing the set aside percentage and which was enacted a quarter into FY2012. Some program managers at agencies that fell short of the statutorily required expenditures in FY2012 told GAO that they believed their agency was in compliance if their agency spent the total amount reserved or budgeted for the program regardless of what year the funding is spent. GAO, however, responded that the statute requires each agency to "expend" the funds in the year it is set aside. GAO recommended that SBA revise its SBIR and STTR policy directives to accurately reflect the statutory language regarding program spending requirements. Congress might consider statutory changes that alter or clarify how agencies are to determine the amount to be set aside each year for SBIR and STTR, and whether those amounts must be spent in the same fiscal year; obligated, in whole or in part, for expenditure over multiple fiscal years; or expended without restriction to any given period. A statutory goal of the SBIR and STTR programs is to foster the development and commercialization of new technologies. Success in achieving this goal can take different forms, for example an innovation that addresses an agency need (e.g., an improved material for a NASA spacecraft), a commercial opportunity, or both. Such innovations can promote economic growth, job creation, and national competitiveness, or address other societal needs and challenges such as national defense, public health, and environmental protection. The 2011 reauthorization act includes a number of provisions focused on improving commercialization. For example, the act authorizes agencies to provide assistance to SBIR/STTR awardees to overcome technical barriers and to allow agencies to establish commercialization readiness pilot programs. Some analysts have cautioned against placing too much emphasis on commercialization for evaluating the success of the SBIR program. These analysts argue that commercialization is only one of the four overarching SBIR/STTR program goals, and that too strong of a focus on one goal might diminish the emphasis on the others. GAO has noted that using commercialization outcomes as the primary metric of SBIR/STTR success may be insufficient because SBIR and STTR awardees make be making contributions to other agency goals—such as meeting research needs or expanding innovation. Given SBIR/STTR agencies' wide range of missions—from general missions, such as advancing fields of science, to more specific missions, such as providing for the national defense—some analysts have recommended that Congress continue to provide flexibility to agencies in the operation of their programs. Data collection has been and remains an issue for the SBIR and STTR programs according to several reports. An August 2009 GAO study reiterated earlier GAO findings of deficiencies in the SBA Tech-Net system designed to collect information from agency SBIR programs. This report noted that "Although SBA did not meet its statutorily mandated deadline of June 2001, the database has been operational since October 2008, and contains limited new information but may also contain inaccurate historical data." A November 2010 report issued by the SBA's Office of the Inspector General noted that "limited progress" had been made on the Tech-Net system. Participating agencies were still experiencing difficulty in searching the database for duplicative awards and other indicators of fraud because information in the Tech-Net database was incomplete, and the search capabilities of the system were limited…. Additionally, SBA had not developed the government-use component of Tech-Net to capture information on the commercialization of SBIR research and development projects. GAO also addressed agencies' shortcomings with respect to assessing the commercialization success of awardees in reports issued in November 2010 and August 2011. The earlier report found that "DOD lacks complete commercialization data to determine the effectiveness of the program in transitioning space-related technologies into acquisition programs or the commercial sector" and that "there are inconsistencies in recording and defining commercialization." The later study indicated that "Comparable data are not available across participating agencies to evaluate progress in increasing commercialization of SBIR technologies." The report goes on to state that, "with the exception of DOD, agencies that GAO reviewed did not generally take steps to verify commercialization data they collected from award recipients, so the accuracy of the data is largely unknown." In a December 2013 report, GAO stated that it was "unable to assess the extent of technology transition associated with the military department SBIR programs because comprehensive and reliable technology transition data [for SBIR projects] are not collected." Among the challenges GAO identified in this regard were the lack of a common definition for technology transition across SBIR programs resulting in potential inconsistencies in reporting and the difficulty in tracking transitions due to the long time periods over which they can take place. GAO stated that DOD has not communicated a timeline for when it will be able to comply with statutory reporting requirements. To address these shortcomings, GAO recommended that DOD establish a common definition for technology transition to be used by all DOD SBIR programs; develop a plan to meet new technology transition reporting requirements that will improve the completeness, quality, and reliability of SBIR transition data; and report to Congress on its plan for meeting the reporting requirements set out in P.L. 112-81 . In testimony before the House Small Business Committee in July 2014, GAO once again noted the continuing problem. While acknowledging that DOD agencies have collected selected transition success stories on an ad hoc basis from SBIR program officials, acquisition program officials, prime contractors, and small businesses, GAO found that "the extent of transition is unknown because comprehensive and reliable transition data are not collected." Further, GAO found that the two data systems used by DOD to identify transition successes program-wide "have significant gaps in coverage and data reliability concerns that limit their transition tracking capabilities. In addition, the systems are not designed to capture detailed information on acquisition programs, fielded systems, or on projects that did not transition." Some critics of the SBIR/STTR programs express particular concern that some firms had become adept at competing for SBIR awards to support their research activities, but had little record of accomplishment in the commercialization of their work. These critics, who sometimes refer to such small businesses as "SBIR shops," assert that these firms may have little interest in commercialization. For example, Lux Research, Inc., an emerging technologies consulting firm, asserts that such firms "go from one SBIR grant to another for years, sometimes decades, and their teams have professional grant writers who are paid to do nothing else but submit successful grant applications into multiple agencies." Others analysts assert that that while the issue bears watching, the evidence shows that "more of the multiple award winners are also successful in commercialization, receiving additional investment dollars from other sources, and/or successful in having their technologies infused into federal agencies." Congress responded to such concerns in the 2011 reauthorization act by requiring agencies to track companies success in advancing their work from Phase I to Phase II or from Phase I to Phase III, establishing minimum performance standards in this regard, and denying firms the right to participate in Phase I and Phase II of an agency's SBIR and STTR programs for one year if they fail to meet these standards. Identification and elimination of waste, fraud, and abuse in the SBIR/STTR programs have been abiding concerns of Congress. Congress has held multiple hearings, enacted legislation intended to address these concerns, and directed GAO to monitor and report on agency progress in implementing the law and combatting waste, fraud, and abuse. (For example, see " Provisions to Reduce Waste, Fraud, and Abuse " for a discussion of the waste, fraud, and abuse provisions of the 2011 reauthorization act.) While waste, fraud, and abuse can occur in a variety of ways, duplication of research proposals has been a particular concern for many years. In 1995, GAO reported that contractors had received duplicate funding for similar SBIR research proposals and attributed such duplication to false contractor certifications, lack of a consistent definition for "similar'' research," and lack of interagency sharing of data on SBIR awards. At a 2009 Senate Committee on Commerce, Science, and Transportation hearing, a technology company executive testified that his former employer sought to defraud agency SBIR programs in a number of ways, including duplication in Phase I and Phase II proposals prior to funding; duplication in Phase I and Phase II contracts after funding within performance reports; invoicing the government for the same equipment and materials under different SBIR grants; subcontracting SBIR work out to another company without the government's knowledge; and cross-charging labor and materials used to complete commercial work to government-funded SBIR contracts. The witness further asserted, "To certain types of individuals, the ease that research fraud can be conducted with SBIR funds becomes an addictive alternative to the hard work of commercializing actual research." At the same hearing, the NASA acting inspector general testified that the agency had investigated or was currently investigating cases of alleged fraud for submitting duplicate proposals to different federal agencies and receiving multiple awards for essentially the same work under the SBIR program; submitting different proposals to multiple federal agencies but providing duplicate deliverables based on the same research; failing to comply with subcontracting limitations; using principal investigators who were not primarily employed by the small business awardee; and failing to perform a substantial portion of the research work contracted by NASA. In addition, he testified that some firms had misrepresented their eligibility, including false assertions of American ownership and meeting the small business size standard. While testifying that NASA had taken corrective measures to address vulnerabilities to waste, fraud, and abuse, he noted that "in the cases that we are conducting today, we still see the same violations that we saw as early as 1992." Among its provisions, the 2011 reauthorization act directs the SBA to amend its SBIR and STTR policy directives to include definitions or descriptions of fraud, waste, and abuse. The amended directives now identify a variety of actions that constitute waste, fraud, or abuse, including: misrepresentations or material, factual omissions to obtain, or otherwise receive funding under, an SBIR award; misrepresentations of the use of funds expended, work done, results achieved, or compliance with program requirements under an SBIR award; misuse or conversion of SBIR award funds, including any use of award funds while not in full compliance with SBIR program requirements, or failure to pay taxes due on misused or converted SBIR award funds; fabrication, falsification, or plagiarism in applying for, carrying out, or reporting results from an SBIR award; failure to comply with applicable federal costs principles governing an award; extravagant, careless, or needless spending; self-dealing, such as making a sub-award to an entity in which the principal investigator has a financial interest; acceptance by agency personnel of bribes or gifts in exchange for grant or contract awards or other conflicts of interest that prevents the government from getting the best value; and lack of monitoring, or follow-up if questions arise, by agency personnel to ensure that awardee meets all required eligibility requirements, provides all required certifications, performs in accordance with the terms and conditions of the award, and performs all work proposed in the application. The 2011 authorization act required GAO to publish an initial report within one year from the date of enactment of the act and every four years thereafter on agency efforts to combat waste, fraud, and abuse and comply with the provisions of the act in this regard. In November 2012, GAO published Small Business Research Programs: Agencies Are Implementing New Fraud, Waste, and Abuse Requirements . The GAO report found that the SBA had revised its SBIR and STTR policy directives in August 2012 to include new requirements to help agencies identify and prevent waste, fraud, and abuse, including 10 minimum requirements that all SBIR/STTR agencies must meet. GAO also found that while SBIR and STTR programs varied in their plans to implement the new requirements, program managers did not anticipate significant challenges in this regard. GAO also noted that each agency already had in place tools to address or partially address the new requirements. The Small Business Act has required the SBA to report annually to Congress on the SBIR and STTR programs since the inception of these programs. SBA compliance with this requirement has been an ongoing issue. Most recently, the SBA did not produce an annual report to Congress for FY2009 or FY2010, instead producing a single report covering the three-year period from FY2009 to FY2011. In addition, as of July 25, 2014, the SBA had not delivered an FY2012 or an FY2013 annual report to Congress. Failure to produce these reports on a timely basis may impede Congress's exercise of its oversight responsibilities. Among the issues that may affect the timeliness of SBA reporting are SBIR/STTR agencies' delays in providing data to the SBA and adequate staffing levels at SBA devoted to producing the report. As the 2011 reauthorization law is implemented, Congress may decide to explore how the new provisions affect program operation and outcomes including efforts to identify and eliminate duplication of awards and to protect the rights of small businesses to data generated in the performance of an SBIR award. In addition, some experts question whether the SBIR and STTR programs are meeting their different mandated objectives. Other critics maintain that the government has no role in directly supporting industrial research and development. These and other issues may be debated as the SBIR and STTR programs continue to function through September 30, 2017. | The Small Business Innovation Research (SBIR) program was established in 1982 by the Small Business Innovation Development Act (P.L. 97-219) to increase the participation of small innovative companies in federally funded R&D. The act requires federal agencies with extramural R&D budgets of $100 million or more to set aside a portion of these funds to finance an agency-run SBIR program. As of 2014, 11 federal agencies operate SBIR programs. A complementary program, the Small Business Technology Transfer (STTR) program, was created by the Small Business Research and Development Enhancement Act of 1992 (P.L. 102-564) to facilitate the commercialization of university and federal R&D by small companies. Agencies with extramural R&D budgets of $1 billion or more are required to set aside a portion of these funds to finance an agency-run STTR program. As of 2014, five federal agencies operate STTR programs. Both the SBIR and STTR programs have three phases. Phase I funds feasibility-related research and development (R&D) related to agency requirements. Phase II supports further R&D efforts initiated in Phase I that meet particular program needs and that exhibit potential for commercial application. Phase III is focused on commercialization of the results of Phase I and Phase II grants, however the SBIR and STTR programs do not provide funding in Phase III. The SBIR and STTR programs have been extended and reauthorized several times since their initial enactments. Most recently, the programs were reauthorized through September 30, 2017 under the SBIR/STTR Reauthorization Act of 2011 which was enacted as Division E of the National Defense Authorization Act for Fiscal Year 2012 (P.L. 112-81). Among its provisions, the act incrementally increases the set-aside for the SBIR effort to 3.2% by FY2017 and beyond; incrementally expands the set-aside for the STTR activity to 0.45% in FY2016 and beyond; increases the amount of Phase I and Phase II awards; allows recipients of a Phase I award from one federal agency to apply for a Phase II award from another agency to pursue the original work; allows the National Institutes of Health, the Department of Energy, and the National Science Foundation to award up to 25% of SBIR funds to small businesses that are majority-owned by venture capital companies, hedge funds, or private equity firms, and allows other agencies to award up to 15% of SBIR funds to such firms; creates commercialization pilot programs; and expands oversight activities, among other things. Through FY2011, federal agencies had made more than 133,000 awards totaling $33.7 billion under the SBIR and STTR programs. In FY2011, agencies awarded $2.224 billion in SBIR funding. The Department of Defense (DOD) and Department of Health and Human Services (HHS) accounted for more than three-fourths of SBIR funding in FY2011. While more than two-thirds of SBIR grants made in FY2011 were Phase I awards, more than three-fourths of SBIR funding went to Phase II awards. In FY2011, agencies awarded $251.2 million in STTR funding. DOD and HHS accounted for nearly four-fifths of STTR funding. Like the SBIR program, most STTR grants (76%) were for Phase I awards, while most funding (76%) went to Phase II awards. In exercising its oversight authorities for the SBIR and STTR programs, Congress has placed a strong emphasis on monitoring the implementation and effects of changes made by the 2011 reauthorization act. In particular, Congress has expressed continuing interest in the participation of majority-owned venture capital firms in the SBIR program, the effectiveness of efforts seeking to improve commercialization outcomes, the share of awards and funding received by women-owned and minority and disadvantaged firms, and the SBA's agency coordination, policy guidance, data collection, and dissemination responsibilities. |
Electric utility generating facilities are a major source of air pollution. The combustion of fossil fuels (petroleum, natural gas, and coal), which accounts for about two-thirds of U.S. electricity generation, results in the emission of a stream of gases. These gases include several pollutants that directly pose risks to human health and welfare, including particulate matter (PM), sulfur dioxide (SO 2 ), nitrogen oxides (NOx), and mercury (Hg). Particulate matter, SO 2 , and NOx are currently regulated under the Clean Air Act (CAA), and the Environmental Protection Agency (EPA) has promulgated rules to regulate mercury beginning in 2010. Other gases may pose indirect risks, notably carbon dioxide (CO 2 ), which contributes to global warming. Table 1 provides estimates of SO 2 , NOx, and CO 2 emissions from electric generating facilities. Annual emissions of Hg from utility facilities are more uncertain; current estimates indicate about 48 tons. Utilities are subject to an array of environmental regulations, which affect in different ways both the cost of operating existing generating facilities and the cost of constructing new ones. The evolution of air pollution controls over time and as a result of growing scientific understanding of health and environmental impacts has led to a multilayered and interlocking patchwork of controls. Moreover, additional controls are in the process of development, particularly with respect to NOx as a precursor to ozone, to both NOx and SO 2 as contributors to PM 2.5 , and to Hg as a toxic air pollutant. Also, under the United Nations Framework Convention on Climate Change (UNFCCC), the United States agreed to voluntary limits on CO 2 emissions. The current Bush Administration has rejected the Kyoto Protocol, which would impose mandatory limits, in favor of a voluntary reduction program. In contrast to the Administration's position, in June 2005, the Senate passed a Sense of the Senate calling for mandatory controls on greenhouse gases that would be designed not to impose significant harm on the economy. For many years, the complexity of the air quality control regime has caused some observers to call for a simplified approach. Now, with the potential both for additional control programs on SO 2 and NOx and for new controls directed at Hg and CO 2 intersecting with the technological and policy changes affecting the electric utility industry, such calls for simplification have become more numerous and insistent. One focus of this effort is the "multi-pollutant" or "four-pollutant" approach. This approach involves a mix of regulatory and economic mechanisms that would apply to utility emissions of up to four pollutants in various proposals—SO 2 , NOx, Hg, and CO 2 . The objective would be to balance the environmental goal of effective controls across the pollutants covered with the industry goal of a stable regulatory regime for a period of years. In February 2002, the Bush Administration announced two air quality proposals to address the control of emissions of SO 2 , NOx, Hg, and CO 2 . The first proposal, called "Clear Skies," would amend the Clean Air Act to place emission caps on electric utility emissions of SO 2 , NOx, and Hg. Implemented through a tradeable allowance program, the emissions caps would be imposed in two phases: 2010 (2008 in the case of NOx) and 2018. As part of a complete rewrite of Title IV of the Clean Air Act, the Administration's proposal was introduced in the 108 th Congress as H.R. 999 and S. 485 . Revised versions of Clear Skies legislation were introduced in the 109 th Congress as H.R. 227 and S. 131 . The proposal has not been reintroduced in the 110 th Congress. The second Administration proposal initiates a new voluntary greenhouse gas reduction program, similar to ones introduced by the earlier George H. W. Bush and Clinton Administrations. Developed in response to the U.S. ratification of the 1992 UNFCCC, these previous plans projected U.S. compliance, or near compliance, with the UNFCCC goal of stabilizing greenhouse gas emissions at their 1990 levels by the year 2000 through voluntary measures. The Bush Administration proposal does not make that claim, projecting only a 100 million metric ton reduction in emissions from what would occur otherwise in the year 2012. Total emissions would continue to rise. Instead, the plan focuses on improving the carbon efficiency of the economy, reducing 2002 emissions of 183 metric tons per million dollars of GDP to 151 metric tons per million dollars of GDP in 2012. It proposes several voluntary initiatives, along with increased spending and tax incentives, to achieve this goal. The Administration notes that the new initiatives would achieve about one-quarter of the objective, while three-quarters of the projected reduction is seen as occurring through existing efforts. In the 110 th Congress, five bills have been introduced that would impose multi-pollutant controls on utilities. They are all four-pollutant proposals that include carbon dioxide. S. 1168 , introduced by Senator Alexander, and S. 1177 , introduced by Senator Carper, are revised versions of S. 2724 , introduced in the 109 th Congress. S. 1201 , introduced by Senator Sanders, and S. 1554 , introduced by Senator Collins, are similar but revised versions of S. 150 , introduced in the 109 th Congress. In contrast, H.R. 3989 , introduced by Representative McHugh, represents a new proposal. All of these bills involve some form of emission caps, beginning in 2009-2012 time frame. S. 1168 , S. 1177 , and S. 1201 include a second phase beginning in 2013-2015; H.R. 3989 includes a multi-phase program for CO 2 only. They would employ a tradeable credit program to implement the SO 2 , NOx, and CO 2 caps while all but H.R. 3989 permit plant-wide averaging in complying with the Hg requirements. The provisions concerning SO 2 , NOx, and Hg in the five bills are generally more stringent than the comparable provisions of S. 131 of the 109 th Congress. It is difficult to compare the CO 2 caps contained in these bills with the Administration's proposal concerning CO 2 —both because the Administration's proposal is voluntary rather than mandatory and because it is broader (covering all greenhouse gas emissions rather than just utility CO 2 emissions). The five bills are summarized in the Appendix . Each of these bills generally builds on the SO 2 allowance trading scheme contained in Title IV of the 1990 Clean Air Act Amendments (CAAA). Under this program, utilities are given a specific allocation of permitted emissions (allowances) and may choose to use those allowances at their own facilities, or, if they do not use their full quota, to bank them for future use or to sell them to other utilities needing additional allowances. All five bills introduced in the 110 th Congress provide for a tradeable allowance scheme to implement their emission caps on SO 2 , NOx, and CO 2 . However, allowance allocation schemes in the bills differ, with S. 1201 and S. 1554 containing detailed provisions for allocating SO 2 , NOx, and CO 2 allowances to various economic sectors and interests. In most cases, these interests (or their trustees in the case of households and dislocated workers and communities) would auction off (or otherwise sell) their allowances to the affected utilities and use the collected funds for their own purposes. In addition, S. 1201 requires the increasing use of auctions, mandating 100% of the annual allowance allocation be auctioned within 15 years of enactment. In contrast, S. 1168 bases its allowance formulas on fuel usage adjusted by factors specified in the bill, along with a requirement that 25% of the allowances be auctioned. S. 1177 specifies CO 2 and NOx limitations based on electricity output, and SO 2 limitations based on the current Title IV program. The bill sets a schedule for increasing the percentage of the annual allowance allocation that is to be auctioned with 100% required in 2036 and thereafter. Finally, H.R. 3989 auctions 100% of its CO 2 allowances while providing discretion to EPA to allocate SO 2 and NOx allowances. On mercury, all five bills focus on achieving a 90% reduction by 2011 ( S. 1554 and H.R. 3989 ), 2013 ( S. 1201 ) or 2015 ( S. 1168 and S. 1177 ). In contrast, the emissions goal of S. 131 of the 109 th Congress would have allowed about three times more emissions and three to five more years for compliance. In addition, all but H.R. 3989 restrict Hg credit trading to plant-wide averaging of emissions, in contrast with the cap-and-trade program of S. 131 . H.R. 3989 is even more stringent, imposing the emissions rate limitation on a unit-by-unit basis. The bills currently introduced in the 110 th Congress specify CO 2 reductions. In contrast, the Administration's CO 2 proposal relies on various voluntary programs and incentives to encourage reductions in greenhouse gases from diverse sources, including CO 2 emissions from electric generation. These voluntary reductions should not be taken as a given, as neither the George H. W. Bush Administration's nor the Clinton Administration's voluntary programs achieved their stated goals. Thus, in one sense, comparing a mandatory reduction program such as that proposed by S. 1168 , S. 1177 , S. 1201 , and S. 1554 with the Administration's voluntary program is comparing apples to oranges. The first is legally binding, the second has been criticized as merely an exhortation. The CO 2 reduction requirements of S. 1168 , S. 1201 , and S. 1554 are similar, except that S. 1201 and S. 1554 requires affected sources also offset CO 2 emissions from small electric generating units. In contrast, S. 1177 imposes a cap that starts out slightly higher than the other two bills and declines on a slower schedule. Finally, H.R. 3989 has the most detailed reduction scheme with substantial reductions from coal-fired facilities scheduled through 2050. All but H.R. 3989 have provisions to create offsets and facilitate sequestration efforts. Among its titles, S. 1168 has extensive provisions providing for greenhouse gas offsets from landfill methane (CH 4 ), sulfur hexafluoride (SF 6 ) projects, afforestation or reforestation, energy efficiency, agricultural practices (manure management), and biomass. The provisions in S. 1177 include allowance allocations for incremental nuclear capacity, clean coal technology, and renewable energy, along with programs to encourage sequestration. Likewise, S. 1554 includes allowance allocations to encourage renewable energy, energy efficiency, and sequestration. Finally, S. 1201 requires the EPA to develop standards for providing allowances for geologic and biological sequestration. In addition to emissions caps, S. 131 of the 109 th Congress would have substantially modified or eliminated several provisions in the Clean Air Act with respect to electric generating facilities. The bill would have eliminated New Source Performance Standards (NSPS) (Section 111) and replaced them with statutory standards for SO 2 , NOx, particulate matter, and Hg for new sources. Modified sources could have also opted to comply with these new statutory standards and be exempted from the applicable Best Available Control Technology (BACT) determinations under Prevention of Significant Deterioration (PSD) provisions (CAA, Part C) or Lowest Achievable Emissions Rate (LAER) determinations under non-attainment provisions (CAA, Part D). Compliance with these provisions would have exempted such facilities from New Source Review (NSR), PSD-BACT requirements, visibility Best Available Retrofit Technology (BART) requirements, Maximum Achievable Control Technology (MACT) requirements for Hg, and non-attainment LAER and offset requirements. The exemption would not have applied to PSD-BACT requirements if facilities were within 50 km of a PSD Class 1 area. Existing sources could have also received these exemptions if they agreed to meet a particulate matter standard specified in the bill along with good combustion practices to minimize carbon monoxide emissions within three years of enactment. In addition, S. 131 would have provided these exemptions for industrial sources that choose to opt into the Clear Skies program. S. 131 also would have included an exemption for steam electric generating facilities from Hg regulation under Section 112 of the CAA (including the residual risk provisions), and relief from enforcement of any Section 126 petition (with respect to reducing interstate transportation of pollution) before December 31, 2014. The five bills in the 110 th Congress generally omit the regulatory changes of S. 131 , while introducing new provisions. All five bills would revise the current New Source Review (NSR) program to require affected electric generating units 40 years or older (30 years old in the case of H.R. 3989 ) to meet more stringent SO 2 and NOx performance standard by either 2015 ( S. 1201 ), 2016 ( S. 1554 ), 2020 ( S. 1168 and S. 1177 ), or five years after enactment ( H.R. 3989 ). All except S. 1554 and H.R. 3989 contain provisions establishing a new performance standard for CO 2 . S. 1168 and S. 1177 would also eliminate the annual NOx and SO 2 caps contained in the recently promulgated Clean Air Interstate Rule (CAIR). In addition to the above, S. 1201 and S. 1554 would create several new regulatory programs and standards, including an Efficiency Performance Standard, and a Renewable Portfolio Standard. These programs would be implemented through a credit trading program. | With the prospect of new layers of complexity being added to air pollution controls, and with electricity restructuring putting a premium on economic efficiency, interest is being expressed in finding mechanisms to achieve health and environmental goals in simpler, more cost-effective ways. The electric utility industry is a major source of air pollution, particularly sulfur dioxide (SO2), nitrogen oxides (NOx), and mercury (Hg), as well as unregulated greenhouse gases, particularly carbon dioxide (CO2). At issue is whether a new approach to environmental protection could achieve the nation's air quality goals more cost-effectively than the current system. One approach being proposed is a "multi-pollutant" strategy—a framework based on a consistent set of emissions caps, implemented through emissions trading. Just how the proposed approach would fit with the current (and proposed) diverse regulatory regimes remains to be worked out; they might be replaced to the greatest extent feasible, or they might be overlaid by the framework of emissions caps. In February 2002, the Bush Administration announced two air quality initiatives. The first, "Clear Skies," would amend the Clean Air Act to place emission caps on electric utility emissions of SO2, NOx, and Hg. Implemented through a tradeable allowance program, the emissions caps would generally be imposed in two phases: 2008 and 2018. "Clear Skies" was re-introduced in the 109th Congress as S. 131. The second initiative begins a voluntary greenhouse gas reduction program. This plan, rather than capping CO2 emissions, focuses on improving the carbon efficiency of the economy, reducing 2002 emissions of 183 metric tons per million dollars of GDP to 151 metric tons per million dollars of GDP in 2012. In the 110th Congress, five bills have been introduced that would impose multi-pollutant controls on utilities. They are all four-pollutant proposals that include carbon dioxide. S. 1168 and S. 1177 are revised versions of S. 2724, introduced in the 109th Congress. S. 1201 and S. 1554 are expanded and revised versions of S. 150, introduced in the 109th Congress, while H.R. 3989 is a new proposal. All of these bills involve some form of emission caps, beginning in the 2009-2012 time frame, with all but S. 1554 including a second phase in 2013-2015 (CO2 only for H.R. 3989). They would employ a tradeable credit program to implement the SO2, NOx, and CO2 caps; all but H.R. 3989 permit plant-wide averaging in complying with the Hg requirements. The provisions concerning SO2, NOx, and Hg in the 110th Congress bills are generally more stringent than the comparable provisions of S. 131 of the 109th Congress. It is difficult to compare the CO2 caps contained in these bills with the Administration's proposal concerning CO2—both because the Administration's proposal is voluntary rather than mandatory and because it is broader (covering all greenhouse gas emissions rather than just utility CO2 emissions). |
On June 4, 2015, the U.S. Office of Personnel Management (OPM) revealed that a cyber intrusion into its information technology systems and data "may have compromised the personal information of [approximately 4.2 million] current and former Federal employees." Later in June, OPM reported a separate cyber incident, which it said had compromised its databases housing background investigation records and resulted in the theft of sensitive information of 21.5 million individuals. The OPM breach, one of the largest reported on federal government systems, was detected partly through the use of the Department of Homeland Security's (DHS's) Einstein systemâan intrusion detection system that "screens federal Internet traffic to identify potential cyber threats." Reportedly, the hackers used compromised security credentialsâthose assigned to a KeyPoint Government Solutions employee, a federal background check contractor working on OPM systemsâto exploit OPM's systems and gain access. Officials do not believe that the intruders are still in the system. In the aftermath of the intrusions, Katherine Archuleta has stepped down as the director of OPM amid criticisms of how the agency managed its response to the intrusions and secured its information systems. Beth Cobert has taken on the role of acting director. In addition, OPM's Electronic Questionnaires for Investigations Processing (e-QIP) application, the "web-based automated system that was designed to facilitate the processing of standard investigative forms used when conducting background investigations," has been taken offline for "security enhancements." Notably, as is common with data breaches, a vailable information on the recent OPM breach developments remains incomplete. Assumptions about the nature, origins, extent, and implications of the data breach may change, and some media reporting may conflict with official statements. Policymakers have received official briefings on the breach developments, and Congress has held a number of hearings on the issue. This report provides an overview of the current understanding of the recent OPM breaches, as well as issues and questions raised about the source of the breaches, possible uses of the information exfiltrated, potential national security ramifications, and implications for the cybersecurity of federal information systems. Information released in June 2015 regarding the first OPM breach indicates that hackers gained access to personal information including "employees' Social Security numbers, job assignments, performance ratings and training information." The second reported breach involved the theft of data on 19.7 million current, former, and prospective employees and contractors who applied for a background investigation in 2000 or after using certain OPM forms. This second breach also impacted personal information of 1.8 million non-applicants; OPM notes that these non-applicants are primarily individuals married to or otherwise cohabitating with background investigation applicants. OPM confirmed that "the usernames and passwords that background investigation applicants used to fill out their background investigation forms were also stolen." About 1.1 million stolen records also include fingerprints. Notably, the two breaches revealed in June 2015 are not the first incidents targeting OPM databases containing such sensitive information. In a previous 2014 breach of OPM, hackers purportedly targeted "files on tens of thousands of employees who [had] applied for top-secret security clearances." Determining an actor (and actor's motivation) involved in a cyber incident can help guide how the United States responds. If a perpetrator is believed to be motivated by profit or economic advantage, the investigation and response may be led by law enforcement using the tools of the criminal justice system. If the perpetrator is deemed to be a state-sponsored actor with a different motivation, the United States may utilize diplomatic or military tools in its response. Speaking at an intelligence conference on June 24, 2015, Admiral Michael Rogers, director of the National Security Agency and head of U.S. Cyber Command, declined to discuss who might be responsible for the attacks, stating "I'm not [going to] get into the specifics of attribution.... That's a process that we're working through on the policy side. There's a wide range of people, groups and nation states out there aggressively attempting to gain access to that data." Speaking at the same conference a day later, however, Director of National Intelligence James Clapper identified China as the "leading suspect" in the attacks. Mr. Clapper expressed grudging admiration for the alleged hackers, noting "[y]ou have to kind of salute the Chinese for what they did.... You know, if we had an opportunity to do that, I don't think we'd hesitate for a moment." Without explicitly denying involvement, China has called speculation about its role in the OPM breaches neither "responsible nor scientific." In late June 2015, top officials from the United States and China met in Washington, DC, for the annual session of the U.S.-China Strategic & Economic Dialogueâthe two countries' most high-level dialogue. The dialogue included discussion of cyber issues, but progress on these issues was not mentioned among the dialogue's official "outcomes." China said in early July that it was "imperative to stop groundless accusations, step up consultations to formulate an international code of conduct in cyberspace and jointly safeguard peace, security, openness and cooperation of the cyber space through enhanced dialogue and cooperation in the spirit of mutual respect." Of note, the United States in May 2014 filed criminal charges over a set of computer intrusions allegedly from China. The U.S. Department of Justice indicted  five members of China's People's Liberation Army (PLA) for commercial cyber espionage that allegedly targeted five U.S. firms and a labor union. It was the first, and so far only, time the United States has filed criminal charges against known state actors for cyber economic espionage. Criminal charges appear to be unlikely in the case of the OPM breach. As a matter of policy, the United States has sought to distinguish between cyber intrusions to collect data for national security purposesâto which the United States deems counterintelligence to be an appropriate responseâand cyber intrusions to steal data for commercial purposesâto which the United States deems a criminal justice response to be appropriate. Describing discussions with Chinese officials at the July 2013 session of the annual U.S.-China Strategic & Economic Dialogue, a month after Edward Snowden made public documents related to U.S. signals intelligence, a senior Obama Administration stated, "[W]e were exceptionally clear, as the President has been, that there is a vast distinction between intelligence-gathering activities that all countries do and the theft of intellectual property for the benefit of businesses in the country, which we don't do and we don't think any country should do." The OPM breach so far appears to be seen in the category of intelligence-gathering, rather than commercial espionage. If the United States chooses to respond in other ways to intrusions from China, experts have suggested that China has multiple vulnerabilities that the United States could exploit. "China's uneven industrial development, fragmented cyber defenses, uneven cyber operator tradecraft, and the market dominance of Western information technology firms provide an environment conducive to Western CNE [computer network exploitation] against China," notes one scholar of Chinese cyber issues. It remains unclear how data from the OPM breaches might be used if they are indeed now in Chinese government hands. Experts in and out of government suspect that "China may be trying to build a giant database of federal employees" that could help identify U.S. officials and their roles. Writing in Wired magazine, Senator Ben Sasse observed, "China may now have the largest spy-recruiting database in history." There have been suggestions that information exposed in the breaches "could be useful in crafting 'spear-phishing' e-mails, which are designed to fool recipients into opening a link or an attachment so that the hacker can gain access to computer systems." In addition to being used by nation states, a trove of data from breaches such as those at OPM can provide a number of avenues for criminals to exploit. For instance, compromised Social Security numbers and other personally identifiable information (PII) may be used for identity theft and financially motivated cybercrime, such as credit card fraud. However, experts have been skeptical as to whether compromised information from the OPM breaches will even appear for sale in the online black market. When cybercriminals have tried in the underground markets to pass off other stolen data as that coming from the OPM breaches, this has been debunked, and the stolen data were shown to have come from other sources. The lack of stolen OPM data appearing in the criminal underworld has led some to speculate the breaches were more likely conducted for espionage rather than criminal purposes. Nonetheless, even if data were stolen for non-criminal purposes, they could still fall into criminal hands. While discussion about the stolen fingerprint information has been limited, analysts have begun to question how this data could be used. Some have speculated that if the fingerprints are of high enough quality, there may be "acutely negative long-term consequences for individuals affected and their future use of fingerprints to verify their identities." Depending on whose hands the fingerprints come into, they could be used for criminal or counterintelligence purposes. For instance, they could be trafficked on the black market for profit or used to reveal the true identities of undercover officials. Also a concern is that biometric data such as fingerprints cannot be reissuedâunlike other identifying information such as Social Security numbers. This could make recovery from the breach more challenging for some. Reports have emerged indicating that OPM had attempted to take over the administration of Scattered Castlesâthe intelligence community's (IC's) database of sensitive clearance holdersâand create a single clearance system for government employees. Although the IC refused out of concerns of increased vulnerability to hacking, news reports allege that some sharing of information between systems was underway by 2014. U.S. officials have denied that Scattered Castles was affected by the OPM hack, but they have neither confirmed nor denied that the databases were linked. If the IC's database were linked with OPM's, this could potentially help the hackers gain access to intelligence agency personnel and identify clandestine and covert officers. Even if data on intelligence agency personnel were not compromised, the hackers might be able to use the sensitive personnel information to "neutralize" U.S. officials by exploiting their personal weaknesses and/or targeting their relatives abroad. Access to the IC's database could also reveal the process and criteria for gaining clearances and special access, allowing foreign agents to more easily infiltrate the U.S. government. Some in the national security community have compared the potential damage of the OPM breaches to U.S. interests to that caused by Edward Snowden's leaks of classified information from the National Security Agency. Yet the potential exists for damage beyond mere theft of classified information, including data manipulation or misinformation. While there is no evidence to suggest that this has happened, hackers would have had the ability, some say, while in U.S. systems to alter personnel files and create fictitious ones that would have gone undetected as far back as 2012. Another concern is the possibility for data publication, as was done with the Snowden records. Dissemination of sensitive personnel files could damage the ability of clearance holders to operate with cover, and could open them up to potential exploitation from foreign intelligence agents. The cybersecurity of most federal information systems is governed by the Federal Information Security Management Act (FISMA, 44 U.S.C. §3551 et seq.), which was updated at the end of the 113 th Congress ( P.L. 113-283 ). The update gave explicit operational authority to DHS for implementation, including the authority to issue binding operational directives, and it set requirements for breach notification for federal agencies. In addition, 40 U.S.C. §11319, as added by P.L. 113-291 , provided agency chief information officers (CIOs) with additional budgeting and program authorities. A potential question for Congress is whether those and other provisions of law give agencies the legislative authority and resources they need to adequately address the risks of future intrusions. Among the specific questions Congress might consider are the following: Are the current authorities and requirements under FISMA sufficient, if fully implemented, to protect federal systems from future intrusions such as the most recent OPM intrusions? If not, what changes are needed to sufficiently reduce the level of risk? For example, should the priority level for cybersecurity be elevated with respect to other aspects of mission fulfillment; should the federal government adopt the explicit goal of being assessed by independent experts as having world-class cybersecurity? What are the barriers to improving federal cybersecurity to a level that would sufficiently reduce the risks of incidents such as the breaches at OPM, and what legislative actions are needed to remove them? For example, do agency heads, responsible for cybersecurity under FISMA, have sufficient understanding of cybersecurity to execute those responsibilities effectivelyâa broadly held concern with respect to private-sector chief executive officers that the National Institute of Standards and Technology (NIST) Cybersecurity Framework was designed in part to help address? Are the recent amendments to CIO authorities sufficient for them to implement their cybersecurity responsibilities under FISMA? Does DHS have sufficient authorities to protect federal civilian systems under its statutory responsibilities? For example, should it have greater legislative authority to deploy countermeasures on federal systems, as some legislative proposals would provide? Are the specific actions taken and proposed by the Obama Administration in the wake of the OPM breaches, such as the "cybersecurity sprint" and the proposed strategy and acquisition guidance initiatives, sufficient to provide the required improvements in cybersecurity at federal agencies? Congress is currently considering legislation to reduce perceived barriers to information sharing among private-sector entities and between them and federal agencies. An additional potential question for Congress is whether the protections outlined in the proposed bills against inadvertent disclosure by federal agencies will be sufficient in the wake of breaches such as those involving OPM. | On June 4, 2015, the U.S. Office of Personnel Management (OPM) revealed that a cyber intrusion had impacted its information technology systems and data, potentially compromising the personal information of about 4.2 million former and current federal employees. Later that month, OPM reported a separate cyber incident targeting OPM's databases housing background investigation records. This breach is estimated to have compromised sensitive information of 21.5 million individuals. Amid criticisms of how the agency managed its response to the intrusions and secured its information systems, Katherine Archuleta has stepped down as the director of OPM, and Beth Cobert has taken on the role of acting director. In addition, OPM's Electronic Questionnaires for Investigations Processing (e-QIP) application, the system designed to help process forms used in conducting background investigations, has been taken offline for security improvements. Officials are still investigating the actors behind the breaches and what the motivations might have been. Theft of personally identifiable information (PII) may be used for identity theft and financially motivated cybercrime, such as credit card fraud. Many have speculated that the OPM data were taken for espionage rather than for criminal purposes, however, and some have cited China as the source of the breaches. It remains unclear how the data from the OPM breaches might be used if they are indeed now in the hands of the Chinese government. Some suspect that the Chinese government may build a database of U.S. government employees that could help identify U.S. officials and their roles or that could help target individuals to gain access to additional systems or information. National security concerns include whether hackers could have obtained information that could help them identify clandestine and covert officers and operations. The cybersecurity of most federal information systems is governed by the Federal Information Security Management Act (FISMA, 44 U.S.C. §3551 et seq.). Questions for policymakers include whether existing provisions of law give agencies the legislative authority and resources they need to adequately address the risks of future intrusions. In addition, effective sharing of cybersecurity information has been considered an important tool for protecting information systems from unauthorized intrusions and exfiltration of data. The 114 th Congress is considering legislation to reduce perceived barriers to information sharing among private-sector entities and between them and federal agencies. |
The U.S. Census Bureau periodically collects national survey information on child support. By interviewing a random sample of single-parent families, the Census Bureau is able to generate an array of data that is useful in assessing the performance of noncustodial parents in paying their child support. Although the Ce nsus Bureau has been collecting child support information in a special Child Support Supplement to the April Current Population Survey (CPS) biennially since 1978, the supplement survey has changed significantly over the years. According to the Census Bureau, the most recent data, from 2013, are comparable only back to 1993. During the early years of the survey, information was collected only from custodial mothers. Beginning with the 1991 data, information was also collected from custodial fathers. This report presents unsegmented data with respect to custodial mothers and fathers (i.e., custodial parents' data). The survey population includes all persons who have their own children under the age of 21 living with them, while the other parent lives outside the household. The Child Support Enforcement (CSE) program was enacted in 1975 as part of P.L. 93-647 (Title IV-D of the Social Security Act). It is a federal-state program whose purpose is to help strengthen families by securing financial support for children from their noncustodial parent on a consistent and continuing basis, and by helping some families to remain self-sufficient and off public assistance by providing the requisite CSE services. The CSE program is administered by the Office of Child Support Enforcement (OCSE) in the Department of Health and Human Services (HHS), and funded by general revenues. All 50 states, the District of Columbia, Guam, Puerto Rico, and the Virgin Islands operate CSE programs and are entitled to federal matching funds. The CSE program provides seven major services on behalf of children: (1) parent location, (2) paternity establishment, (3) establishment of child support orders, (4) review and modification of child support orders, (5) collection of child support payments, (6) distribution of child support payments, and (7) establishment and enforcement of medical child support. The CSE program is estimated to handle at least 50% of all child support cases; the remaining cases are handled by private attorneys, collection agencies, or through mutual agreements between the parents. In FY2013, the CSE program collected $28.0 billion in child support payments (from noncustodial parents) and served 15.6 million child support cases. The national Census Bureau data show that the aggregate amount of child support received in 2013 was $22.5 billion, and that 13.4 million parents had custody of children under the age of 21 while the other parent lived elsewhere. In 2013, almost 83% of custodial parents were mothers. Of all custodial parents, 48% were white (non-Hispanic), 25% were black, 23% were Hispanic, 16% were married, 33% were divorced, 38% were never married, 13% did not have a high school diploma, almost 20% had at least a bachelor's degree, 50% worked full-time year-round, 29% had family income below poverty, and nearly 43% received some type of public assistance (i.e., Medicaid, food stamps, public housing or rent subsidy, TANF, or general assistance). Table 1 summarizes several child support indicators from biennial survey data for selected years from 1993 through 2013. The table shows that the likelihood of having a child support award, being legally entitled to a child support payment, and actually receiving at least one child support payment decreased over the 21-year period from 1993 through 2013. In contrast, the percentage of custodial parents (owed child support) who received the full amount of the child support that they were owed increased by almost 24%, from 37% in 1993 to 46% in 2013. In 2013, about 49% of the 13.4 million custodial parents (with children under the age of 21) were awarded child support. Of those who were actually due child support payments (5.7 million), about 74% of them received at least one payment and almost 46% received all that they were owed. In 2013, only 2.6 million (19%) of the 13.4 million custodial parents eligible for child support actually received the full amount of child support that was owed to them. In 2013, the average child support payment received by custodial parents amounted to $3,953, 6.5% higher than the average child support payment in 1993 ($3,712). In 2013, 68% of the $32.9 billion in aggregate child support due was actually paid. In 1993, 65% of the $38 billion (adjusted for inflation, in 2013 dollars) in child support due was paid. During the 21-year period 1993 through 2013, after adjusting for inflation, aggregate child support due started at $38.0 billion in 1993, fluctuated to a high of $46.9 billion in 2003, and dropped to a low of $32.9 billion in 2013. Over the entire period, aggregate child support due decreased by 13%, total child support received decreased 9%, and the amount left unpaid decreased 21% (see Table 1 ). While sex, race, marital status, and education are significant factors in predicting whether a custodial parent will be issued a child support order, award rates tend to be significantly lower than receipt rates. For example, although female custodial parents were almost 1.7 times more likely to be awarded child support in 2013 as their male counterparts, among parents who were owed/due child support, both had at least a 73% chance of actually receiving child support payments. (See Table 2 .) Moreover, in 2013, 37% of black custodial parents were awarded child support compared to 56% of white custodial parents. Even so, nearly 65% of black custodial parents who were owed/due child support actually received child support payments and 79% of white custodial parents who were owed child support actually received child support payments in 2013. Similarly, while 42% of never-married parents were awarded child support in 2013, almost 68% of never-married parents who were owed child support actually received child support payments in 2013. Also, 38% of custodial parents without a high school diploma were awarded child support, while almost 62% of custodial parents without a high school diploma who were owed child support actually received child support. The pattern of receipt rates being higher than award rates also held for the economic factors listed in Table 2 —in that once a child support obligation was awarded, the probability of actually receiving payments rose significantly for all categories of custodial parents. In 2013, 45% of custodial parents with incomes below the poverty level were awarded child support, and nearly 66% of those owed/due payments actually received child support payments. Table 2 also shows that 49% of custodial parents who worked full-time year-round were awarded child support, while almost 77% of those owed received child support payments. Similarly, 47% of custodial parents who received public assistance were awarded child support, while nearly 67% of those who were owed child support payments actually received child support payments. Of the categories of custodial parents presented in Table 2 , custodial parents who were divorced followed by custodial parents who were white (non-Hispanic) were the categories of parents most likely to be awarded child support. In 2013, 57.7% of custodial parents who were divorced and 56.4% of white (non-Hispanic) custodial parents were awarded child support. The table also shows that custodial parents with an associate's degree who were owed/due child support was the category of parents most likely to receive child support payments in 2013. In 2013, 83.1% of custodial parents with an associate's degree who were owed payments actually received child support payments. In 2013, the average yearly child support payment received by custodial parents with payments was $5,333; $5,181 for mothers and $6,526 for fathers. These full or partial payments represented (on average) 14% of the custodial parent's yearly income, 16% of the custodial mothers' total yearly income, and 9% of the custodial fathers'. In 2013, for custodial parents with income below the poverty level, child support payments for those who received them made up, on average, 49% of their yearly income. In 2013, child support payments made up 13% of the yearly income of custodial parents without a high school diploma who were owed child support and who actually received full or partial payments. In 2013, child support represented about 18% of the income of the 2.6 million custodial parents who received all of the child support that they were owed. The Census Bureau data also include information on health insurance. In 2013, 54% of the 6.5 million custodial parents with child support awards had awards that included health insurance. The noncustodial parent provided the health insurance coverage in 51.1% of the awards with health insurance provisos and in 10.4% of the awards without health insurance stipulations. Moreover, the noncustodial parent provided health insurance coverage for 19.4% of the nearly 6.9 million custodial parents who did not have a child support award. Overall, 3.5 million noncustodial parents provided health care for their children in 2013. This represented 26.1% of the 13.4 million children under the age of 21 who were living with a custodial parent while their other parent lived elsewhere. | The national Census Bureau data show that in 2013, 13.4 million parents had custody of children under the age of 21 while the other parent lived elsewhere, and the aggregate amount of child support received was $22.5 billion. In 2013, almost 83% of custodial parents were mothers. Of all custodial parents, 48% were white (non-Hispanic), 25% were black, 23% were Hispanic, 16% were married, 33% were divorced, 38% were never married, 13% did not have a high school diploma, almost 20% had at least a bachelor's degree, 50% worked full-time year-round, 29% had family income below poverty, and nearly 43% received some type of public assistance. In 2013, 2.6 million (40%) of the 6.5 million custodial parents with child support orders actually received the full amount of child support that was owed to them. The average yearly child support payment received by custodial parents with payments was $5,181 for mothers and $6,526 for fathers. These full or partial payments represented about 16% of the custodial mothers' total yearly income and 9% of the custodial fathers' yearly income. Compared to 1993 Census data, less child support was received by custodial parents in 2013 ($24.8 billion in 1993 versus $22.5 billion in 2013; in 2013 dollars). However, a higher percentage of those owed child support actually received all that they were due (36.9% in 1993 versus 45.6% in 2013). |
Rules of origin (ROO), the methodology used to prove country of origin, are central components of U.S. trade policy. Such rules can be very straightforward when all of the parts of a product are manufactured and assembled primarily in one country. However, when component parts of a finished product originate in many countries—as is often the case in global industries such as autos and electronics—determining origin can be a complex, sometimes subjective, and time-consuming process. Determining a product's country of origin can have significant implications for an imported product's treatment with respect to U.S. trade programs and other government policies. For example, the United States restricts imports from certain countries, including Cuba, Iran, and North Korea, as part of larger foreign policy considerations. U.S. trade policy also seeks to promote economic growth in developing countries by offering trade preference programs, including the Generalized System of Preferences (GSP), and the African Growth and Opportunity Act (AGOA). Such policies require that officials make accurate country of origin determinations so that the benefits of the preferential tariff treatment are received and program goals are met. Certain key characteristics of contemporary globalized manufacturing may also prove challenging to the ROO process and implementation. These characteristics include the growing complexity of global value chains and, consequently, the increasing demand for fast and efficient movement of intermediate goods across borders to assure competitive prices and profitability. Some observers assert the combined effects of these characteristics have created a globalized manufacturing environment that is sufficiently intricate and flexible to make the application of ROO more complex and, at times, potentially misleading. This report first provides a general overview of the implementation of the U.S. ROO system. It then discusses the advantages and disadvantages of U.S.-implemented ROO schemes. The report concludes with some policy options for Congress that proponents assert could improve the ROO process. The country of origin of an imported product is defined in U.S. trade laws and customs regulations as the country of manufacture, production, or growth of any article of foreign origin entering the customs territory of the United States. There are two types of rules of origin (ROO): Non-preferential ROO are used to determine the origin of goods imported from countries with which the United States has most-favored-nation (MFN) status, and are the principal regulatory tools for accurate assessment of tariffs on imports, addressing country of origin labeling issues, qualifying goods for government procurement, and enforcing trade remedy actions and trade sanctions. Preferential ROO are used to determine the eligibility of imported goods from U.S. free trade agreement (FTA) partners and certain developing countries to receive duty-free benefits under U.S. trade preference programs (e.g., the Generalized System of Preferences and the African Growth and Opportunity Act), and other special import programs (e.g., goods entering from U.S. territories). Preferential ROO schemes vary from agreement to agreement and preference to preference. U.S. laws and regulations on rules of origin conform to the World Trade Organization (WTO) Agreement on Rules of Origin, in which WTO members agreed not to use ROO to pursue trade policy objectives in a manner that would disrupt trade, and to apply them in a consistent, uniform, impartial, and reasonable manner. No specific U.S. trade law provides an overall definition of "rules of origin" or "country of origin." Instead, U.S. Customs and Border Protection (CBP)—the agency primarily responsible for determining country of origin (as it is for enforcing tariffs and other laws that apply to imported products)—relies on a body of court decisions, CBP regulations, and agency interpretations to confer origin on an imported product if the matter is in doubt. Although CBP is the primary enforcement agency for U.S. trade laws, the Customs Modernization Act (Title VI of P.L. 103-182 ) actually shifted much of the responsibility for complying with customs laws and regulations from CBP to the importer of record. This means that the importer must understand customs procedures (including, for example, the applicability of a preferential ROO scheme to his or her product and country of origin), and apply "reasonable care" to enter, properly classify, and determine the value of merchandise so CBP can properly assess duties, collect accurate statistics, and determine whether all other applicable legal requirements have been met. In cases where the country of origin is unclear, importers may seek advance ROO rulings from CBP in an effort to accelerate the import process. As a member of the World Trade Organization (WTO), the United States must grant most-favored-nation (MFN) treatment to the products of other WTO member countries with respect to tariffs and other trade-related measures. Non-preferential ROO ensure that imports from U.S. MFN trading partners receive the proper tariff treatment. Non-preferential ROO are also important for country of origin labeling, government procurement, enforcement of trade remedy actions, compilation of trade statistics, supply-chain security issues, and other laws. Under non-preferential rules of origin, two major criteria apply. First, goods that are wholly the growth, product, or manufacture of one particular country are attributed to that country. This is known as the wholly obtained principle. Second, if an imported product consists of components from more than one country, a principle known as substantial transformation is used to determine origin. In most cases, the origin of the good is determined to be the last place in which it was substantially transformed into a new and distinct article of commerce based on a change in name, character, or use. Making the determination about what constitutes a change sufficient for a product to be considered substantially transformed is when an origin ruling can prove to be quite complex. When determining origin, CBP takes into account one or more of the following factors: the character, name, or use of the article; the nature of the article's manufacturing process, as compared to the processes used to make the imported parts, components, or other materials used to make the product; the value added by the manufacturing process, including the cost of production, the amount of capital investment, or labor required, compared to the value imparted by other component parts; and, the essential character is established by the manufacturing process or by the essential character of the imported parts or materials. Origin determinations are fact-specific, but CBP acknowledges that there can be considerable uncertainty about what is deemed to be substantial transformation due to the "inherently subjective nature" which may be involved in CBP interpretations of these facts. Participating countries in the Uruguay Round of multilateral trade talks (that also established the WTO in 1995) recognized the need for rules of origin to be objective, understandable, predictable, and transparent. In the WTO Agreement on Rules of Origin, members agreed not to use rules of origin to pursue trade policy objectives in a manner that would disrupt trade, and to apply them in a consistent, uniform, impartial, and reasonable manner. However, the agreement also allows each WTO member to determine its own ROO regime. All WTO members also agreed to notify other members about preferential ROO, including a listing of the preferential arrangements which they implement, along with all applicable administrative decisions and rulings. The WTO Agreement on Rules of Origin established a Harmonization Work Program (HWP) in an effort to develop uniform, cooperative, and coherent non-preferential rules of origin to be used by all WTO members. The ongoing HWP issued a first draft of a consolidated negotiating text in 1998, and a technical review completed in 1999. These efforts secured a general agreement on an overall design for harmonized rules of origin, including definitions, general rules, and two appendices (one on definitions of wholly obtained goods and one on product-specific rules of origin). Continuing negotiations are being carried out in the WTO Committee on Rules of Origin (CRO) under the WTO Council for Trade in Goods, and the World Customs Organization (WCO) Technical Committee on Rules of Origin (TCRO). In the Trade Act of 2002 ( P.L. 107-210 ), one of the principal U.S. trade negotiating objectives was the conclusion of a WTO agreement on harmonized rules of origin. According to the United States Trade Representative (USTR), reaching agreements on the technical aspects of the HWP have turned out to be more complex than initially envisioned, and negotiations continue in 2015. CBP (formerly known as the U.S. Customs Service) has made several proposals since 1991 to simplify and standardize non-preferential ROO, generally by expanding the application of regulations set forth in 19 C.F.R. Part 102 (the "NAFTA Marking Rules") to entries of goods under non-preferential rules of origin and for "free trade agreements already negotiated that use the substantial transformation test to determine whether products qualify for reduced tariffs." CBP mentioned that the NAFTA marking rules had already been implemented for all imports from Canada and Mexico, and for nearly all textile and apparel products since 1996 and, consequently, that the importing community and CBP have had extensive experience in applying these rules. CBP noted that its experience in implementing NAFTA marking rules had shown that "by virtue of their greater specificity and transparency, codified rules result in determinations that are more objective and predictable than under the case-by-case adjudication method." In addition, CBP stated its belief that "the proposed extension of the Part 102 rules to all trade will result in more objective, transparent, and predictable determinations, and will, therefore, facilitate the exercise of reasonable care by importers with respect to their obligations regarding identification of the proper country of origin of imported merchandise." A public comment period on the proposed rule ended on September 23, 2008. The comment period was extended twice—first, until October 23, 2008 (73 F.R. 51963), and again (due to technical corrections in the underlying Code of Federal Regulations sections) on October 30, 2008 (73 F.R. 64575) until December 1, 2008. Much of the public response opposed the 2008 CBP proposal. Many associations and businesses voiced general opposition to the proposed rule because they said the proposal could substantially increase costs of entry, place undue burdens on members of the trading community (especially on small businesses), and increase the complexity of the importing process. Others commented on the difficulty of applying these NAFTA marking rules to particular products such as computer software or pharmaceuticals. Some industry organizations, including the National Association of Manufacturers, questioned the CBP assumption that implementing a tariff shift method could increase predictability and transparency. Other associations commented that, if implemented, the regulation could cause an unintended major reversal of existing law that could harm some importers who have relied on the existing law for years. In September 2011, CBP issued a final rule making the NAFTA marking rules applicable to some products subject to non-preferential ROO, namely pipe fittings and flanges, greeting cards, glass optical fiber, rice preparations, and some textile and apparel products. However CBP officials also announced that they did not adopt as a final rule the "portion of the notice that proposed amendments to the CBP regulations to establish uniform rules governing CBP determinations of the country of origin of imported merchandise. Preferential rules of origin are used to verify that products are eligible for duty-free status under U.S. trade preference programs, such as the Generalized System of Preferences (GSP), the African Growth and Opportunity Act (AGOA), or free trade agreements (FTAs), such as the North American Free Trade Agreement (NAFTA) and the U.S- South Korea Free Trade Agreement (KORUS FTA). As with non-preferential ROO, if goods are "wholly the product" of a beneficiary of preference program or free trade agreement, establishing origin is usually fairly straightforward. However, if a good was not entirely grown or manufactured in the targeted country or region, rules of origin specific to the trade preference or FTA apply. Preferential ROO vary from agreement to agreement and preference to preference. Most U.S. FTAs use three methods, or a combination thereof, to determine what products "originate" and thus actually qualify for the benefits of the agreement. In some agreements, a tariff shift method, or change in the Harmonized Tariff Schedule (HTS) tariff classification (as a result of production occurring entirely in one or more of the parties), may be used to determine whether or not the product qualifies for these benefits. The NAFTA is one example in which this methodology is used. This methodology is favored by U.S. customs officials because they say that it provides an objective method for describing exactly the kind of substantial transformation that must occur to determine the origin of a product. For example, the "yarn forward" principle, related to preferential ROO for certain textile and apparel products, is a type of tariff shift test that requires textile and apparel products to originate in an FTA country from the yarn stage forward (fibers may come from anywhere). Notably, the specific term, "yarn forward" never actually appears in an FTA. Instead, the tariff shift presented in the ROO indicates the amount of processing required (substantial transformation) in an FTA country in order to confer originating status. Specific ROO for certain products, including textiles and apparel, generally appear in an annex to the FTA, and list various categories of goods by reference to their Harmonized Tariff Schedule (HTS) tariff lines. With certain products, a technical test may be used that requires specific processing operations occur in the originating country. Sometimes known as a critical process criterion, this test mandates that certain production or sourcing processes be performed that may (positive test) or may not (negative test) confer originating status. For example, in the U.S.-South Korea Free Trade Agreement (KORUS), certain chemicals require that manufacturing processes such as purification, chemical reaction, controlled mixing and blending, changes in particle size, or other technical tests such as these, must take place in one or both FTA parties in order to confer origin. A local content or regional value content (RVC) test is required of many products imported into the United States under FTAs or preference programs. A local content test stipulates a product must contain a minimum percentage of domestic value-added determined by the origin of physical components or parts and labor and manufacturing processes that originated in the FTA partner or beneficiary developing country to receive the tariff benefit. The amount of local content required may vary among U.S. free trade agreements and preferences, and differ among product categories within an arrangement. In some cases, the local content requirement may be fulfilled on a regional basis. For example, in order for a product to qualify for duty-free treatment under the Generalized System of Preferences (GSP), the cost or value of the materials produced in that developing country (or produced in one or more members of an association of countries treated as one country under GSP), and the direct cost of the processing operations performed in that beneficiary country (or association of countries as described above), must be at least 35% of the appraised value of the product . The previous example illustrates "cumulation," or the way that ROO may allow for combining value-added inputs from a region or group of countries into a manufactured product that qualifies as an import under the terms of a regional FTAs or regionally-targeted preference program. Cumulation may help accomplish another major policy objective of regional trade programs: the stimulation of regional integration through deepened intra-regional trade. In some preferential arrangements, a certain percentage of U.S. content may count toward meeting the regional content test. In U.S. FTAs, three alternative methods are often used to calculate regional value content (RVC), which is often used to determine the origin of assembled products such as autos and auto parts. Manufacturers and importers are sometimes given more than one ROO option to calculate the RVC because one method of calculation may be more beneficial than the other for particular companies or industries. Three common types of RVC calculations are: Build-down m etho d: calculates the RVC by subtracting the value of the non-originating merchandise (VNM) from the adjusted value (AV) of the finished product. The adjusted value includes all costs, profit, general expenses, parts and materials, labor, shipping, marketing, and packing. If the RVC (expressed as a percentage) of the product value is equal to or greater than the minimum percentage specified in the ROO, the product qualifies. Build-up m ethod: calculates RVC by adding together the value of all of the regional inputs (e.g., costs, general expenses, parts, materials, labor, shipping, marketing, and packing). If the RVC (expressed as a percentage) of the product is equal to or greater than the minimum percentage specified in the ROO, the product qualifies. Net c ost m ethod : captures only the costs involved in manufacturing, including factory labor, materials, and direct overhead. Other costs, such as sales promotion, marketing, royalties, and profit, are excluded from the calculation. The use of a small, easily identifiable set of input costs is thought to make the net cost method easier to use in calculating RVC. Due to their obscure and technical nature, rules of origin frameworks are generally not in the forefront of the continuing debates on trade liberalization or globalization. Nevertheless, the role of ROOs (both preferential and non-preferential) is central to the international trading system and trade negotiations. Preferential rules of origin are arguably essential to ensure that the benefits of an FTA are provided to those countries that have negotiated and entered into the agreement. Without preferential ROO, it would be possible for imports from non-FTA countries to enter the FTA partner with the lowest external tariff, and then sell the good throughout the region under the FTA rate. This could force a convergence of external tariffs and possibly a competitive devaluation of external tariffs in the region. For similar reasons, ROO are also important when providing unilateral trade preferences to ensure that only goods from eligible countries receive the benefits. Some policy observers, however, assert that the worldwide proliferation of trade agreements creates inefficiencies in the trading system because there are so many complex ROO frameworks. Others express concern that current U.S. systems for determining country of origin may run counter to overall U.S. trade policy. Still other observers say that negotiation of specific ROO allows countries to shield import-sensitive segments of industries by instituting ROO that either do not include a particular product, or make the ROO so difficult that the product does not qualify. Some observers assert that ROO interpretation is complex and subjective. Other experts maintain that, in a global manufacturing environment, there should be other means of determining country of origin. Finally, some experts wonder if ROO definitions could produce results that could be counter to certain policy objectives. Some economists argue that the proliferation of bilateral and regional trade agreements—each with their own preferential ROO scheme—adds new complexities for importers and manufacturers; thus potentially inserting economic inefficiencies into the international trading system. Since preferential rules of origin are specific to each free trade agreement or preference program, assembling the proper documentation can be a complex and costly process. Some in the business community mention that the administrative costs associated with navigating the increasingly complex patchwork of regulations involved in establishing origin can outweigh the benefits of FTAs. Some economists also assert that the worldwide proliferation of FTAs have led to an inefficient "spaghetti bowl" approach to trade policy with individual ROO requirements. The lack of transparency of preferential ROO (and their apparent use as instruments of protectionism) is also a matter of concern for some critics. An often-repeated example of this is the "triple-transformation rule" for apparel products within the North American Free Trade Agreement (NAFTA). This rule requires that the raw materials (fiber), the cloth, and the garment itself all be processed within the FTA region to be NAFTA-eligible. Other observers say FTAs provide importers with greater flexibility in sourcing goods, and provide exporters with greater access to foreign markets where the same FTA ROO requirements would apply on entry into the FTA partner's market. Importers always have the option of entering products under MFN status (in which case non-preferential rules of origin would apply) if they determine this is the most cost-effective method of entry. Therefore, FTAs could be seen as providing importers with additional options in choosing suppliers, as well as modes of entry (i.e., under preferential or non-preferential ROO). Importers can weigh the costs of compliance (combined with the more favorable FTA tariff rate) against importing goods from suppliers outside the FTA. For example, a study of trade flows under NAFTA ROO illustrated that when the MFN tariff on a product is equal or more favorable than the NAFTA tariff, importers will typically choose to import under the MFN rate to avoid the additional compliance costs. However, when importers determine that the NAFTA rate (plus additional transaction costs) is more favorable, they choose to import goods under NAFTA. Importers may, in some cases, decide not to enter goods under an FTA, but the availability of such preferences gives them greater flexibility to purchase and import products in the most cost-effective manner available. The fact remains, however, that the utilization of trade preferences under preferential rules of origin is sometimes costly, and may also inhibit the use of preferences. The key challenges of constructing ROO in preferential trading relationships are twofold: finding the balance between the effectiveness and the efficiency of ROO, and simplifying and making ROO more transparent. Because some preferential ROO in FTAs are negotiated product by product and industry by industry, some critics allege that there is "enormous scope for well-organized industries to essentially insulate themselves from the effects of the FTA by devising suitable ROO," thus diminishing the FTA's trade liberalizing effects overall. Thus, more restrictive (and often more complex) ROO may be crafted to compensate domestic manufacturers that stand to lose protection as a result of an FTA or preference. Others contend that such measures are often successful in softening the opposition from import-competing groups, thus enhancing the political feasibility of subsequent FTA implementation (after congressional approval). Some studies indicate that more restrictive rules of origin, such as higher local content requirements, may encourage producers of finished goods in an FTA region to shift from lower-cost suppliers of intermediate goods outside an FTA to higher-cost suppliers within an FTA region (often U.S. suppliers) to qualify for more favorable FTA tariff benefits. Thus, more restrictive ROO can be used to provide "protection" to these regional suppliers and maintain existing protection against outsiders, to the extent that they provide sufficient incentive for FTA producers to buy more inputs inside the region. Therefore, more restrictive local or regional content requirements can spread the benefits of an FTA to manufacturers of intermediate products in the region. The following example illustrates the interest the U.S. automobile sector demonstrated in influencing ROO during negotiations on the NAFTA: All three [U.S.] automakers had an interest in a reasonably high rule of origin to make it more difficult for European and Japanese competitors to locate assembly plants in Canada or Mexico and thereby ship finished automobiles to the United States duty-free. But GM differed from Chrysler.... Because of [its] joint venture with Isuzu in Canada, GM favored a lower rule of origin, around 60 percent [regional content requirement]. For reasons that reflected their own patterns of production and competitive position, Ford and Chrysler preferred a higher rule, approximately 70 percent. Auto parts makers had every incentive to push for as high as a percentage as possible, since high percentages protected them from foreign competitors. Country of origin rulings can be complex, especially when questions on what processes or procedures are sufficient for a product to be "substantially transformed" come into play. A major reason for this complexity is that, especially in situations involving non-preferential (MFN) origin rules, officials must often make these determinations on a "case-by-case" basis. Some importers have criticized CBP because they assert that some of these determinations are subjective and inconsistent. U.S. exporters sometimes argue that ROO determinations by officials in other countries are arbitrary and lack transparency. In the United States, importers may request a binding ruling in advance of importing the good from the CBP Office of Regulations and Rulings. CBP also provides a Customs Rulings Online Search System (CROSS) that importers can search for a ruling on a product similar to theirs for additional guidance. In December 2014, WTO members concluded the WTO Agreement on Trade Facilitation, in which they agreed to issue advance rulings on ROO and other trade matters "in a reasonable time-bound manner," and to "promptly publish … laws, regulations, and administrative rulings" of general application relating to rules of origin. It is believed that increased transparency of ROO interpretation worldwide will provide greater assurance for exporters from the United States and other countries that the origin of their products will be handled in a consistent manner. In an international trading environment in which components of goods originate in many countries and assembly can occur anywhere in the world, some observers suggest that single-country origin determinations are misleading. Rapid advancements in science and technology since World War II have contributed to a major transformation of modern manufacturing. New manufacturing techniques have made it possible for lesser-skilled workers to manufacture higher quality products with little waste or loss. In addition, the development of faster and more efficient communications and transportation technology has made it possible to reliably construct and ship components, parts and materials from multiple locations to the site of final assembly, making the manufacturing process more complex and intricate. As a result, an increasing variety of a product's parts and components come from many different nations, and, especially with more complex merchandise, manufacture and assembly may also be conducted in several different countries. World trade and production are increasingly structured around "global value chains" (GVCs), defined as "the full range of activities that firms and workers do to bring a product from its conception to its end use and beyond." A value chain typically includes design, production, marketing, distribution, support, and delivery to the final consumer. Beyond increased competition among manufacturers, there has also been a restructuring of the overall manufacturing process toward subcontracting or "outsourcing" production to globally-integrated contract manufacturers. "Full-package" production companies in China and other countries have the capacity to link multiple specialized producers in many countries into specialized networks that manufacture all components and assemble final products. These producers are sufficiently integrated to control all manufacturing, logistics, and final delivery of the end-use products. These characteristics of modern manufacturing have significant implications for international trade, including the following: The "nationality" of the retailer or brand, the "nationalities" of the specialized producers, and "nationalities" of the ultimate manufacturers or assemblers of a product are often different. Most goods (and increasingly services) are "made in the world." Countries increasingly specialize in tasks and business functions rather than in manufacture of specific products, and countries compete on economic roles within the value chain rather than in the production of end-use goods. Although major U.S. manufacturing firms are actively involved in the overall management of their GVCs, some industries, such as retailers, may know less about where or how a product was made; Frequently, a relatively small percentage of the product's total value was created in the attributed country of origin; and, GVCs exist across many industry sectors, including electronics, motor vehicles, chemical products, agriculture and food products, fashion, and business and financial services. A 2011 analysis of the manufacture of an Apple iPhone 4 provides a very clear case study of how electronics and other products are produced in the global manufacturing environment. Most of Apple's iPhones are assembled in China by Foxconn, a Taiwanese contract manufacturer that handles all sourcing and logistics. The gross export value of the product (factory gate price) of the product was $194.04. Value-added (e.g., parts, electrical components, design, assembly, software development) came from the following countries: $80.05 of the value-added inputs originated in Korea; $24.63 originated in the United States; $16.08 came from Germany; $3.25 came from France; $0.70 came from Japan; $6.54 of the total value-added was contributed by China; and, $62.19 was undetermined (rest of world, ROW). Even though China's contribution to the iPhone's value was relatively small, the product is considered a product of China according to CBP regulations, because the product was last "substantially transformed" in China. As described above, in the increasingly global manufacturing environment, the assembly point of the manufactured product and of its individual components may differ. These rapidly accelerating changes in the manufacturing process can lead to additional complexities in ROO determinations because officials must ascribe origin to a single country for import purposes. In turn, these complexities may lead to apparent inconsistencies. For example, in some cases, CBP officials may decide that the assembly process (including the value-added by labor costs) is sufficient to confer origin, as it is the "last place of substantial transformation." In other cases, officials have determined that the final assembly process and labor costs incurred are actually not sufficient to confer this essential character. However, since CBP has the legal flexibility to be able to consider "the totality of the circumstances and makes such decisions on a case-by-case basis," the agency is able to fully consider the extent and technical nature of the processing that occurs in each country, thus taking into account the "resources expended on product design and development, extent and nature of post-assembly inspection procedures, and worker skill required during the actual manufacturing process" when making country of origin determinations. Therefore, the flexibility to analyze individual components and manufacturing processes could lead to more precise country of origin determinations, despite the complex nature of global manufacturing. Rules of origin are central components of trade policy. Preferential rules of origin are especially important for ensuring that only goods qualified to receive benefits under an FTA or preference receive those benefits. ROO may also be constructed to ensure that import-competing U.S. producers are not adversely affected by an FTA, thus possibly assuring a degree of public support for the measure. Non-preferential rules are essential for making sure that goods coming from countries that enjoy MFN status with the United States are assessed the proper tariffs, and are also key to supporting other U.S. trade laws, such as country of origin labeling. At present, CBP makes non-preferential country of origin determinations primarily based on an established body of regulatory and legal precedents. For many imports, determining origin is relatively straightforward. However, if the matter is in doubt, the origin question is decided on a case-by-case basis with input, records, and samples provided by the importer of record. Although origin rulings are fact-specific, there is sometimes uncertainty over what will be deemed as substantial transformation. Businesses sometimes criticize CBP and the current process as lacking clarity, consistency, and predictability. Additionally, given the expanding use of preferential ROO as the United States potentially enters into additional FTAs, determining country of origin (or waiting for rulings from CBP) may prove to be a significant burden on importers, especially on smaller firms. With regard to non-preferential rules, the United States has agreed to an ongoing Harmonization Work Program (HWP) under the auspices of the WTO Committee on Rules of Origin and the World Customs Organization. According to the USTR, however, reaching agreements on the technical aspects of the HWP are more complex than initially envisioned, and negotiations are expected to continue. Congress could, through legislation or other means, encourage the Administration to exercise leadership in this area with a view toward reaching a resolution to these negotiations. In fact, one of the principal negotiating objectives set forth in the Trade Act of 2002 was the conclusion of an agreement on rules of origin. Some observers assert that preferential ROO are inefficient and lack transparency. However, negotiators sometimes make incremental changes. For example, since October 2009, NAFTA partners have implemented four sets of changes to the NAFTA rules of origin. The fourth set of changes, agreed in January 2011, covered products whose annual trilateral trade exceeds $90 million. Therefore, it is possible for preferential ROO to be simplified through mutual agreement of the parties even after an FTA is implemented. If Congress desires to provide greater preferential access to the U.S. market (and gain reciprocal access to the markets of trading partners), it could urge U.S. negotiators to liberalize ROO, and to examine the costs and benefits of applying a uniform set of preferential ROO with respect to future FTA negotiations. Since the processes of globalization are likely to continue making origin determinations more complex, Congress might also consider providing CBP with additional legislative guidance, especially in the area of non-preferential rules. However, such efforts may adversely affect importers and manufactures that benefit from the current system. In addition, even though the determination process may be complex and lengthy, CBP has the flexibility to examine the complete manufacturing process, including design, sources of intermediate components, labor costs, and assembly processes in order to make its country of origin determination. Some trade policy analysts have called for the liberalization or revision of industry-specific preferential rules of origin. Others advocate the abolition of rules of origin entirely, because they inject a large amount of inefficiency in the world trading system, and because they can effectively serve as a form of protection for import-competing industries. Some trade policy analysts argue for the multilateral elimination of tariffs, which, they say, would eliminate the need for ROO entirely. However, the end of tariffs would automatically lead to the end of all preference programs for developing countries, as well as the tariff preference benefits of FTAs. In addition, eliminating ROO entirely could pose issues for other trade policy objectives such as collecting trade statistics, country of origin labeling, implementing trade sanctions, enforcing trade remedies, and other trade policy objectives. | Determining the country of origin of an imported product is important for properly assessing tariffs, enforcing trade remedies (such as antidumping and countervailing duties) or quantitative restrictions (tariff quotas), and statistical purposes. Other commercial trade policies are also linked with country of origin determinations, such as labeling and government procurement regulations. Rules of origin (ROO),the methodology used to prove country of origin, can be very straightforward—as long as the parts of a product are manufactured and assembled in one country. However, when a finished product's component parts originate in many countries, as is often the case in today's global trading environment—determining origin can be a more complex process. U.S. Customs and Border Protection (CBP) is the U.S. agency responsible for determining country of origin. CBP uses non-preferential ROO to determine the origin of goods imported from countries with which the United States has most-favored-nation (MFN) status. A key principle used in non-preferential ROO cases is "substantial transformation," which means the country in which the product was last substantially transformed, or made into a "new and distinct" product. Since no U.S. laws specifically govern non-preferential ROO, these determinations are made by CBP primarily on a case-by-case basis using CBP's own rules and precedents. Preferential ROO are used to determine the eligibility of imports from U.S. free trade agreement (FTA) partners to receive FTA benefits, and whether goods from eligible developing countries qualify for tariff benefits under U.S. trade preference programs like the Generalized System of Preferences (GSP). Preferential ROO apply specifically to each FTA or preference, meaning that they vary from agreement to agreement and preference to preference. CBP has periodically proposed implementing a more uniform system of determining non-preferential ROO. CBP's last proposal was made in July 2008, when it suggested that a system implemented under North American Free Trade Agreement (NAFTA) ROO "has proven to be more objective and transparent and provide greater predictability in determining the country of origin of imported merchandise than the system of case-by-case adjudication they would replace." The NAFTA scheme had already been used for several years to determine the origin of imports under NAFTA. The proposed ROO modifications received so many responses from the public that the deadline for public comment was extended twice. Changes in ROO requirements are opposed by some importers due to the costs involved in transitioning to new rules, or because they assert that some products they import might be at a disadvantage under different ROO methodology. According to a subsequent Federal Register notice, CBP implemented a portion of the proposed regulations applicable to a few specific products, including glass optical fiber, pipe fittings and flanges, and greeting cards. This report deals with ROO in three parts. First, it describes the reasons that country of origin rules are important and describes U.S. laws and methods that provide direction in making ROO determinations. Second, it discusses some of the more controversial issues involving rules of origin, including the apparently subjective nature of some CBP origin determinations, and the effects of the global manufacturing process on ROO. Third, it concludes with some alternatives and options that Congress could consider that might assist in simplifying the process. |
This report provides Congress with official, unclassified data from U.S. government sources on transfers of conventional arms to developing nations by major suppliers for the period 2007 through 2014. It also includes some data on worldwide supplier transactions. It updates and revises CRS Report R42017, Conventional Arms Transfers to Developing Nations, 2003-2010 , by [author name scrubbed]. Data in this report provide a means for Congress to identify existing supplier-purchaser relationships in conventional weapons acquisitions. Use of these data can assist Congress in its oversight role of assessing how the current nature of the international weapons trade might affect U.S. national interests. For most of recent American history, maintaining regional stability and ensuring the security of U.S. allies and friendly nations throughout the world have been important elements of U.S. foreign and national security policy. Knowing the extent to which foreign government arms suppliers are transferring arms to individual nations or regions provides Congress with a context for evaluating policy questions it may confront. Such policy questions may include, for example, whether to support specific U.S. arms sales to given countries or regions or to support or offset arms transfers by other nations. The data in this report may also assist Congress in evaluating whether multilateral arms control arrangements or other U.S. foreign policy initiatives are being supported or undermined by the actions of arms suppliers. The principal focus of this report is the level of arms transfers by major weapons suppliers to nations in the developing world—where most analysts agree that the potential for the outbreak of regional military conflicts currently is greatest, and where the greatest proportion of the conventional arms trade is conducted. For decades, during the height of the Cold War, providing conventional weapons to friendly states was an instrument of foreign policy utilized by the United States and its allies. This was equally true for the Soviet Union and its allies. The underlying rationale given for U.S. arms transfer policy then was to help ensure that friendly states were not placed at risk through a military disadvantage created by arms transfers by the Soviet Union or its allies. Following the Cold War's end, U.S. arms transfer policy has been based on maintaining or augmenting friendly and allied nations' ability to deal with regional security threats and concerns. Data in this report illustrate global patterns of conventional arms transfers which have changed in the post-Cold War and post-Persian Gulf War years. Relationships between arms suppliers and recipients continue to evolve in response to changing political, military, and economic circumstances. Whereas the principal motivation for arms sales by key foreign suppliers in earlier years might have been to support a foreign policy objective, today that motivation may be based as much, if not more, on economic considerations as those of foreign or national security policy. Nations in the developing world continue to be the primary focus of foreign arms sales activity by conventional weapons suppliers. During the period of this report, 2007-2014, conventional arms transfer agreements (which represent orders for future delivery) to developing nations comprised 77.2% of the value of all international arms transfer agreements . The portion of agreements with developing countries constituted 75.5% of all agreements globally from 2011-2014. In 2014, arms transfer agreements with developing countries accounted for 86% of the value of all such agreements globally. Deliveries of conventional arms to developing nations, from 2011 to 2014 constituted 62% of all international arms deliveries. In 2014, arms deliveries to developing nations constituted 44% of the value of all such arms deliveries worldwide. The data in this new report supersede all data published in previous editions. Because these new data for 2007-2014 reflect potentially significant updates to and revisions of the underlying U.S. government databases used for this report, only the data in this most recent edition should be used for comparison of data found in previous reports. The data are expressed in U.S. dollars for the calendar years indicated, and adjusted for inflation (see box note below). U.S. commercial ly licensed arms export deliveries values are excluded (see "U.S. Commercial Arms Exports" box note below). Also excluded are arms transfers by any supplier to subnational groups. The definition of developing nations, as used in this report, and the specific classes of items included in its values totals are found in box notes below. The report's table of contents provides a detailed listing and description of the various data tables to guide the reader to specific items of interest. The value of all arms transfer agreements worldwide (to both developed and developing nations) in 2014 was $71.8 billion. This was a slight increase in arms agreements values over the 2013 total of $70.1 billion. ( Figure 1 ) ( Table 1 ) ( Table 30 ) ( Table 31 ). In 2014, the United States led in arms transfer agreements worldwide, making agreements valued at $36.2 billion (50.4% of all such agreements), up from $26.7 billion in 2013. Russia ranked second in 2014 with $10.2 billion in agreements (14.2% of these agreements globally), down slightly from $10.3 billion in 2013. The United States and Russia collectively made agreements in 2014 valued at over $46 billion, 64.6% of all international arms transfer agreements made by all suppliers ( Figure 1 ) ( Table 30 ) ( Table 31 , Table 32 , and Table 34 ). For the period 2011-2014, the total value of all international arms transfer agreements ($312.4 billion in current dollars) was higher than the worldwide value during 2007-2010 ($239.1 billion in current dollars). During the period 2007-2010, developing world nations accounted for 74.4% of the value of all arms transfer agreements made worldwide. During 2011-2014, developing world nations accounted for 75.5% of all arms transfer agreements made globally. In 2014, developing nations accounted for 86% of all arms transfer agreements made worldwide ( Figure 1 ) ( Table 30 ) ( Table 31 ). In 2014, the United States ranked first in the value of all arms deliveries worldwide, making nearly $12.2 billion in such deliveries or 26%. This is the eighth year in a row that the United States has led in global arms deliveries. Russia ranked second in worldwide arms deliveries in 2014, making $9.2 billion in such deliveries, and ranked second for six of those eight years. France ranked third in 2014, making $5.1 billion in such deliveries. These three suppliers of arms in 2014 collectively delivered nearly $26.5 billion, or 56.6% of all arms delivered worldwide by all suppliers in that year ( Table 2 ) ( Table 36 , Table 37 , and Table 39 ). The value of all international arms deliveries in 2014 was nearly $46.8 billion. This is a decrease in the total value of arms deliveries from the previous year from $62.3 billion. The total value of such arms deliveries worldwide in 2011-2014 (about $209.7billion) was higher than the deliveries worldwide from 2007 to 2010 (about $168 billion ( Table 2 ) ( Table 36 and Table 37 ) ( Figure 7 and Figure 8 ). Developing nations from 2011 to 2014 received 62% of the value of all international arms deliveries. In the earlier period, 2007-2010, developing nations accounted for 56.8% of the value of all arms deliveries worldwide. In 2014, developing nations collectively accounted for 44% of the value of all international arms deliveries ( Table 2 ) ( Table 15 , Table 36 , and Table 37 ). Worldwide weapons orders increased in 2014. The total of $71.8 billion was a slight increase from $70.1 billion in 2013. The United States' worldwide weapons agreements values increased in value from $26.3 billion in 2013 to $36.2 billion in 2014. The U.S. market share increased greatly as well, from roughly 38% in 2013 to 50% in 2014. Although the United States retained its position as the leading arms supplying nation in the world, nearly all other major suppliers saw declines. The principal exception was France, whose worldwide agreements increased from $3.4 billion in 2013 to $4.4 billion in 2014. Meanwhile, Russia posted a marginal decline in its global arms agreements values, from $10.3 billion in 2013 to $10.2 billion in 2014. The collective market share of worldwide arms agreements for the four major West European suppliers—France, the United Kingdom, Germany, and Italy—was approximately 11% in 2014. Although the global total in weapons sales in 2014 represents an increase, the international arms market is not likely growing overall. The U.S. global total for arms agreements in 2011 seems a clear outlier figure. Moreover, there continue to be significant constraints on its growth, due, in particular, to the weakened state of the global economy. The Eurozone financial crisis and the slow international recovery from the recession of 2008 have generally limited defense purchases of prospective customers. Concerns over their domestic budget problems have led many purchasing nations to defer or limit the purchase of new major weapons systems. Some nations have chosen to limit their purchasing to upgrades of existing systems and to training and support services. Others have decided to emphasize the integration into their force structures of the major weapons systems they had previously purchased. Orders for weapons upgrades and support services can still be rather lucrative, and such sales can provide weapons suppliers with continued revenue, despite the reduction in demand for major weapons systems. As new arms sales have become more difficult to conclude in the face of economic factors, competition among sellers has increased. A number of weapons-exporting nations are focusing not only on the clients with which they have held historic competitive advantages due to well-established military-support relationships, but also on potential new clients in countries and regions where they have not been traditional arms suppliers. As the overall market for weapons has stagnated, arms suppliers have faced the challenge of providing weapons in type and price that can create a competitive edge. To overcome the key obstacle of limited defense budgets in several developing nations, arms suppliers have increasingly utilized flexible financing options, and guarantees of counter-trade, co-production, licensed production, and co-assembly elements in their contracts to secure new orders. Given important limitations on significant growth of arms sales to developing nations—especially those that are less affluent—competition between European nations or consortia on the one hand and the United States on the other is likely to be especially intense where all these suppliers have previously concluded arms agreements with the more affluent states. Recent examples of this competition have been the contests for combat aircraft sales to the oil-rich Persian Gulf states, and a major competition for the sale of a substantial number of combat aircraft to India. The more affluent developing nations have been leveraging their attractiveness as clients by demanding greater cost offsets in their arms contracts, as well as transfer of more advanced technology and provisions for domestic production options. Weapons contracts with more wealthy developing nations in the Near East and Asia appear to be especially significant to European weapons suppliers that have used foreign arms sales contracts as a means to support their own domestic weapons development programs and need them to compensate, wherever possible, for declining arms orders from the rest of the developing world. At the same time, nations in the developed world continue to pursue measures aimed at protecting important elements of their national military industrial bases by limiting arms purchases from other developed nations. This has resulted in several major arms suppliers emphasizing joint production of various weapons systems with other developed nations as an effective way to share the costs of developing new weapons, while preserving productive capacity. Some supplier nations have decided to manufacture items for niche weapons categories where their specialized production capabilities give them important advantages in the international arms marketplace. The strong competition for weapons contracts has also led to consolidation of certain sectors of the domestic defense industries of key weapons-producing nations to enhance their competiveness further. Although less-affluent nations in the developing world may be compelled by financial considerations to limit their weapons purchases, others in the developing world with significant financial assets continue to launch new and costly weapons-procurement programs. Having notable income from oil sales has provided a major advantage for major oil-producing states in funding their arms purchases. At the same time dependency on oil imports has caused difficulties for many oil consuming states, and contributed to their decision to curtail or defer new weapons acquisitions. Any possible effects of significant oil declines since the end of 2014 on global arms purchases would not be seen in the period covered by this report. Despite the volatility of the international economy in recent years, some nations in the Near East and Asia regions have resumed or continued large weapons purchases. These purchases have been made by a limited number of developing nations in these two regions. Most recently they have been made by Saudi Arabia and the United Arab Emirates in the Near East—both pivotal partners in the U.S. effort to contain Iran. India in Asia is another large arms purchaser. For certain developing nations in these regions, the strength of their individual economies appears to be a key factor in their decisions to proceed with major arms purchases. A few developing nations in Latin America, and, to a much lesser extent, in Africa, have sought to modernize key sectors of their military forces. In recent years, some nations in these regions have placed large arms orders, by regional standards, to advance that goal. Many countries within these regions are significantly constrained by their financial resources and thus limited in the weapons they can purchase. Given the limited availability of seller-supplied credit and financing for weapons purchases, and their smaller national budgets, most of these countries are forced to be especially selective in their military purchases. As a consequence, few major weapons systems purchases are likely to be made in either region. The value of all arms transfer agreements with developing nations in 2014 was $61.8 billion, a substantial increase from the $54.3 billion total in 2013 ( Figure 1 ) ( Table 1 ) ( Table 3 ) ( Table 4 ). In 2014, the value of all arms deliveries to developing nations ($20.6 billion) decreased slightly from the value of 2013 deliveries ($20.9 billion). Deliveries since 2007 peaked in 2011 and are seen declining slightly since ( Figure 7 and Figure 8 ) ( Table 2 ) ( Table 15 ). The United States and Russia have dominated the arms market in the developing world since 2011. Both nations either ranked first or second among countries for all four years in terms of the value of arms transfer agreements. From 2011 to 2014, the United States made nearly $115 billion of these agreements, or 46.3%. During this same period, Russia made $41.7 billion, 16.8% of all such agreements, expressed in current dollars. Collectively, the United States and Russia made 63.1% of all arms transfer agreements with developing nations during this four-year period. France, the third leading supplier, from 2011 to 2014 made nearly $14.2 billion or 5.7% of all such agreements with developing nations during these years. In the earlier period (2007-2010) Russia ranked second with $35.9 billion in arms transfer agreements with developing nations or 20%; the United States made $65.9 billion in arms transfer agreements during this period or 37%. The United Kingdom made $12.1 billion in agreements or 10.3% ( Table 3 ). In any given year for the period 2007-2014, most arms transfers to developing nations were made by two or three major suppliers. The United States ranked first among these suppliers for all but one year during this period. Russia has been a competitor for the lead in arms transfer agreements with developing nations, ranking first in 2009, and second every year since. Although Russia has lacked the larger traditional client base for armaments held by the United States and the major West European suppliers, it has been a major source of weaponry for a few key purchasers in the developing world. Russia's most significant high-value arms transfer agreements continue to be with India. Russia has also had some success in concluding arms agreements with clients in the Near East and Southeast Asia. Russia has increased its sales efforts in Latin America with a principal focus on Venezuela. Russia has adopted more flexible payment arrangements, including loans, for its prospective customers in the developing world generally, including a willingness in specific cases to forgive outstanding debts owed to it by a prospective client in order to secure new arms purchases. At the same time Russia continues efforts to enhance the quality of its follow-on support services to make Russian weaponry more attractive and competitive, attempting to assure potential clients that it will provide timely and effective service and spare parts for the weapon systems it sells. Among the four major West European arms suppliers, France and the United Kingdom have been the most successful in concluding significant orders with developing countries from 2007 to 2014, based on either long-term supply relationships or their having specialized weapons systems available for sale. Germany, however, has shown particular success in selling naval systems customized for developing nations. The United Kingdom has had comparable successes with aircraft sales. Despite the competition the United States faces from other major arms suppliers, it appears likely it will hold its position as the principal supplier to key developing world nations, especially with those able to afford major new weapons. From the onset of the Cold War period, the United States developed an especially large and diverse base of arms equipment clients globally with whom it is able to conclude a continuing series of arms agreements annually. For decades it has also provided upgrades, spare parts, ordnance and support services for the wide variety of weapon systems it has previously sold to this large list of clients. This provides a steady stream of orders from year to year, even when the United States does not conclude major new arms agreements for major weapon systems. It also makes the United States a logical supplier for new- generation military equipment to these traditional purchasers. Major arms-supplying nations continue to center their sales efforts on the wealthier developing countries, as arms transfers to the less-affluent developing nations remain constrained by the scarcity of funds in their defense budgets and the unsettled state of the international economy. From 2007 to 2010, the values of all arms transfer agreements with developing nations increased from year to year, but declined in 2010. These agreements reached a peak in 2011 at nearly $77 billion. The increase in agreements with developing nations from 2007 to 2011, and particularly in 2011, was driven to an important degree by sales to the more affluent developing nations, especially key oil-producing states in the Persian Gulf, which actively sought new advanced weaponry during these years, as part of a U.S. effort to enhance the militaries of its key partners there. More recently, the less-traditional European and non-European suppliers, including China, have been successful in securing some agreements with developing nations, although at lower levels and with uneven results, compared to the major weapons suppliers. Yet, these non-major arms suppliers have occasionally made arms deals of significance, such as missile sales and light combat systems. Although their agreement values appear larger when they are aggregated as a group, most of their annual arms transfer agreement values during 2007-2014 have been comparatively low when they are listed as individual suppliers. In various cases, these suppliers have been successful in selling older generation or less-advanced equipment. This group of arms suppliers is more likely to be the source of small arms and light weapons and associated ordnance, rather than routine sellers of major weapons systems. Most of these arms suppliers do not rank very high in the value of their arms agreements and deliveries, although some will rank among the top 10 suppliers from year to year ( Table 4 3 , Table 9 , Table 10 , Table 15 , Table 20 , and Table 21 ). The total value of United States arms transfer agreements with developing nations registered an increase from $18 billion in 2013 to nearly $29.8 billion in 2014. The U.S. market share of the value of all such agreements was 48.2% in 2014, an increase from a 33.2% share in 2013 ( Figure 1 , Figure 7 , and Figure 8 ) ( Table 1 , Table 3 , Table 4 , and Table 5 ). In 2014, the total value of U.S. arms transfer agreements with developing nations was comprised primarily of major new orders in the Near East and Asia. The U.S. reached key agreements with Saudi Arabia and Iraq in the Near East and South Korea in Asia. The United States also continued to secure orders for significant equipment and support services contracts with a broad number of U.S. clients globally. The nearly $30 billion arms agreement total for the United States in 2014 also reflects the continuing U.S. advantage of having well-established defense support arrangements with many weapons purchasers worldwide, based upon the existing U.S. weapon systems that the militaries of these clients utilize. U.S. agreements with all of its customers in 2014 include not only sales of very costly major weapon systems, but also the upgrading and the support of systems previously provided. It is important to emphasize that U.S. arms agreements involving a wide variety of items such as spare parts, ammunition, ordnance, training, and support services can have significant costs associated with them. The larger valued arms transfer agreements with the United States in 2014 with developing nations included multiple agreements with Saudi Arabia to provide TOW missiles and a variety of other weapons, missiles, and associated support for over $4 billion. Purchases from Iraq reached $1.8 billion. By the conclusion of 2014, Qatar had placed orders for items including PATRIOT PAC-3 missiles, Javelin missiles and related support, and AH-64D Apache helicopters for a total of over $9.6 billion. South Korea's orders totaled over $7 billion, including, among other things, contracts for CH-47D aircraft and related support and RQ-4 Global Hawk UAVs. The total value of Russia's arms transfer agreements with developing nations in 2014 was $10.1 billion, a slight decrease from $10.2 billion in 2013, still placing Russia second in such agreements with the developing world. Russia's share of all developing world arms transfer agreements also declined significantly from 18.8% in 2013 to 16.4% in 2014 ( Figure 1 , Figure 7 , and Figure 8 ) ( Table 1 , Table 3 , Table 4 , Table 5 , and Table 10 ). Russia's arms transfer agreement totals with developing nations have been notable during the eight years covered in this report, reaching a peak in 2012 of $15.5 billion (in current dollars). During the 2011-2014 period, Russia ranked second among all suppliers to developing countries, making nearly $42 billion in agreements (in current dollars) ( Table 9 ). Russia's status as a leading supplier of arms to developing nations reflects a successful effort to overcome the significant industrial production problems associated with the dissolution of the former Soviet Union. The major arms clients of the former Soviet Union were generally less wealthy developing countries. In the Soviet era, several client states received substantial military aid grants and significant discounts on their arms purchases. Confronted with a limited arms client base in the post-Cold War era and stiff competition from Western arms suppliers for new markets, Russia adapted its selling practices in the developing world in an effort to regain and sustain an important share among previous and prospective clients in that segment of the international arms market. In recent years, Russia has made significant efforts to provide more creative financing and payment options for prospective arms purchasers. Russia has agreed to engage in counter-trade, offsets, debt-swapping, and, in key cases, to make significant licensed production agreements in order to sell its weapons. Russia's willingness to agree to licensed production has been a critical element in several cases involving important arms clients, particularly India and China. Russia's efforts to expand its arms customer base elsewhere have met with mixed results. Some successful Russian arms sales efforts have occurred in Southeast Asia. Here Russia has signed arms agreements with Malaysia, Vietnam, Burma, and Indonesia. Russia has also concluded major arms deals with Venezuela and Algeria. Elsewhere in the developing world, Russian military equipment continues to be competitive because it ranges from the most basic to the highly advanced. Russia's less expensive armaments have proven attractive to less affluent developing nations. Missiles and aircraft continue to provide a significant portion of Russia's arms exports, less so naval systems. Nevertheless, the absence of substantial funding for new research and development efforts in these and other military equipment areas has hampered Russia's longer-term foreign arms sales prospects. Weapons research and development (R&D) programs exist in Russia, yet other major arms suppliers have advanced much more rapidly in developing and producing weaponry than have existing Russian military R&D programs, a factor that may deter expansion of the Russian arms client base. This was illustrated by Russia's decision to acquire French technology through purchase of the Mistral amphibious assault ship, rather than relying on Russian shipbuilding specialists to create a comparable ship for the Russian Navy. However in August 2015, France canceled the Mistral agreement. Nonetheless, Russia has had important arms development and sales programs, particularly involving India and, to a lesser extent, China, which should provide it with sustained business for a decade. During the mid-1990s, Russia sold major combat fighter aircraft and main battle tanks to India, and has provided other major weapons systems through lease or licensed production. It continues to provide support services and items for these various weapons systems. More recently, Russia has lost major contracts to other key weapons suppliers, threatening its long-standing supplier relationship with India. Russian sales of advanced weaponry in South Asia have been a matter of ongoing concern to the United States because of long-standing tensions between Pakistan and India. The United States has been seeking to expand its military cooperation with and arms sales to India as part of the U.S. strategic shift to the Asia-Pacific region. A key Russian arms client in Asia has been China, which purchased advanced aircraft and naval systems. Since 1996, Russia has sold China Su-27 fighter aircraft and agreed to their licensed production. It has sold the Chinese quantities of Su-30 multi-role fighter aircraft, Sovremenny-class destroyers equipped with Sunburn anti-ship missiles, and Kilo-class Project 636 diesel submarines. Russia has also sold the Chinese a variety of other weapons systems and missiles. Chinese arms acquisitions seem aimed at enhancing its military projection capabilities in Asia, and its ability to influence events throughout the region. One U.S. policy concern is to ensure that it provides appropriate military equipment to U.S. allies and friendly states in Asia to help offset any prospective threat China may pose to such nations. There have been no especially large recent Russian arms agreements with China. The Chinese military is currently focused on absorbing and integrating into its force structure the significant weapon systems previously obtained from Russia, and there has also been tension between Russia and China over China's apparent practice of reverse engineering and copying major combat systems obtained from Russia, in violation of their licensed production agreements. In 2014, Russian arms agreements with developing nations included two Kilo submarines for more than $1.2 billion and around 200 T-90 battle tanks for approximately $1 billion with Algeria. Russia also signed an agreement with China for S-400 air defense systems totaling nearly $3 billion, and an agreement with India for anti-tank shells at over $432 million. It was not until the Iran-Iraq war in the 1980s that China became an important arms supplier, one willing and able to provide weaponry when other major suppliers withheld sales to both belligerents. During that conflict, China demonstrated that it was willing to provide arms to both combatants in quantity and without conditions. Subsequently, China's arms sales have been more regional and targeted in the developing world. From 2011 to 2014, the value of China's arms transfer agreements with developing nations has averaged over $3 billion annually. During the period of this report, the value of China's arms transfer agreements with developing nations was highest in 2013 at $4.2 billion (in current dollars). China's arms agreements total in 2014 was $2.2 billion. China's totals can be attributed, in part, to continuing contracts with Pakistan, a key historic client. More broadly, China's sales figures reflect several smaller valued weapons deals in Asia, Africa, and the Near East, rather than especially large agreements for major weapons systems ( Table 4 3 , Table 10 , and Table 11 ) ( Figure 7 ). Comparatively, few developing nations with significant financial resources have purchased Chinese military equipment during the eight-year period of this report. Most Chinese weapons for export are less advanced and sophisticated than weaponry available from Western suppliers or Russia. China, consequently, does not appear likely to be a key supplier of major conventional weapons in the developing world arms market in the immediate future. That said, China has indicated that increasingly it views foreign arms sales as an important market in which it wishes to compete, and has increased the promotion of its more advanced aircraft in an effort to secure contracts from developing countries. China's weapons systems for export seem based upon designs obtained from Russia through previous licensed production programs. Nonetheless, China's likely client base will be states in Asia and Africa seeking quantities of small arms and light weapons, rather than major combat systems. China has also been an important source of missiles to some developing countries. For example, China has supplied battlefield and cruise missiles to Iran and surface-to-surface missiles to Pakistan. According to U.S. officials, the Chinese government no longer supplies other countries with complete missile systems. However, Chinese entities are suppliers of missile-related technology. Such activity raises questions about China's willingness to fulfill the government's stated commitment to act in accordance with the restrictions on missile transfers set out in the Missile Technology Control Regime (MTCR). Because China has military products—particularly its missiles—that some developing countries would like to acquire, it can present an obstacle to efforts to stem proliferation of advanced missile systems to some areas of the developing world. China continues to be the source of a variety of small arms and light weapons transferred to African states. The prospects for significant revenue earnings from these arms sales are limited. China likely views such sales as one means of enhancing its status as an international political power, and increasing its ability to obtain access to significant natural resources, especially oil. The control of sales of small arms and light weapons to regions of conflict, especially to some African nations, has been a matter of concern to the United States and others. The United Nations also has undertaken an examination of this issue in an effort to achieve consensus on a path to curtail this weapons trade comprehensively. During July 2012, the United Nations attempted to reach agreement on the text of an Arms Trade Treaty (ATT), aimed at setting agreed standards for member states regarding what types of conventional arms sales should be made internationally, and what criteria should be applied in making arms transfer decisions. At the end of the month-long period, set aside for negotiations, this effort failed to achieve the necessary consensus on a treaty draft. China, while not a member of the group of U.N. states negotiating the final draft, made it publicly clear that it did not support any treaty that would prevent any state from making its own, independent, national decision to make an arms sale. The U.N. adopted the treaty as a resolution following a vote on April 2, 2013; China and Russia abstained. The treaty entered into force on December 24, 2014. To date, 78 states have ratified the treaty, with the United States as a signatory. France, the United Kingdom, Germany, and Italy—the four major West European arms suppliers—have supplied a wide variety of sophisticated weapons to a number of purchasers. They are potential sources of armaments for nations that the United States chooses not to supply for policy reasons. The United Kingdom, for example, sold major combat fighter aircraft to Saudi Arabia in the mid-1980s, when the United States chose not to sell a comparable aircraft. More recently, India made European aircraft suppliers finalists in its competition for a major sale of combat aircraft--a competition ultimately won by France. The contending U.S. and Russian aircraft were rejected. France also contracted with the Egyptian navy for frigates valued at approximately $1.4 billion. Moreover, Saudi Arabia recently purchased 72 Eurofighter Typhoon fighter aircraft from the United Kingdom, an aircraft built by four European nations—the U.K, Germany, Italy and Spain. During the Cold War, NATO allies of the United States generally supported the U.S. position in restricting arms sales to certain nations. In the post-Cold War period, however, their national defense export policies have not been fully coordinated with the United States. Key European arms supplying states, especially France, view arms sales foremost as a matter for national decision. Economic considerations appear to be a greater driver in French arms sales decision-making than matters of foreign policy. France has also frequently used foreign military sales as an important means for underwriting development and procurement of new weapons systems for its own military forces. The potential for policy differences between the United States and major West European supplying states over conventional weapons transfers to specific countries has increased in recent years because of a divergence of views over what is an appropriate arms sale. Such a conflict resulted from an effort led by France and Germany in 2004-2005 to lift the arms embargo on arms sales to China adhered to by members of the European Union. The United States viewed this as a misguided effort, and vigorously opposed it. Ultimately, the proposal to lift the embargo was not adopted. However, this episode proved to be a source of significant tension between the United States and some members of the European Union. The arms sales activities of major European suppliers, consequently, will continue to be of interest to U.S. policymakers, given their capability to make sales of advanced military equipment to countries of concern in U.S. national security policy. The four major West European suppliers (France, the United Kingdom, Germany, and Italy), as a group, registered a significant decrease in their collective share of all arms transfer agreements with developing nations between 2013 and 2014. This group's share fell from 25.4% in 2013 to 9.5% in 2014. The collective value of this group's arms transfer agreements with developing nations in 2014 was $5.9 billion compared to a total of nearly $13.8 billion in 2013 (in current dollars). Of these four nations, France was the leading supplier with $4.3 billion in agreements in 2014. Italy, meanwhile registered $800 million in arms agreements in 2014. ( Figure 7 and Figure 8 ) ( Table 3 and Table 5 ). In the period from 2007 to 2014, the four major West European suppliers were important participants in the developing world arms market. Individual suppliers within the major West European group have had notable years for arms agreements during this period: France in 2009 ($9.3 billion) and in 2008 ($5.6 billion); the United Kingdom in 2007 ($9.8 billion) and 2012 ($5.7 billion); Germany ($7.1 billion) in 2013, and in 2012 ($4.8 billion); and Italy in 2008 ($1.7 billion). In the case of all of these West European nations, large agreement totals in one year have usually resulted from the conclusion of large arms contracts with one or a small number of major purchasers in that particular year ( Table 3 and Table 5 ). The major West European suppliers, individually, have enhanced their competitive position in weapons exports through strong government marketing support for their foreign arms sales. All of them can produce both advanced and basic air, ground, and naval weapons systems. The four major West European suppliers have sometimes competed successfully for arms sales contracts with developing nations against the United States, which has tended to sell to several of the same major clients, especially to the Persian Gulf states that see the United States as the ultimate guarantor of Gulf security. The continuing demand for U.S. weapons in the global arms marketplace, from a large established client base, has created a more difficult environment for individual West European suppliers to secure large new contracts with developing nations on a sustained basis. Yet, as the data indicate, the major West European suppliers continue to make significant arms transfer contracts each year. An effort to enhance their market share of the arms trade in the face of the strong demand for U.S. defense equipment, among other considerations, was a key factor in inducing European Union (EU) member states to adopt a new code of conduct for defense procurement practices. This code was agreed on November 21, 2005, at the European Defense Agency's (EDA) steering board meeting. Currently voluntary, the EU hopes it will become mandatory, and through its mechanisms foster greater cooperation within the European defense equipment sector in the awarding of contracts for defense items. By successfully securing greater intra-European cooperation in defense program planning and collaboration in defense contracting, the EU hopes that the defense industrial bases of individual EU states will be preserved, thereby enhancing the capability of European defense firms to compete for arms sales throughout the world. Some European arms companies have begun, and others completed the phasing out of production of certain types of weapons systems. These suppliers have increasingly sought to engage in joint production ventures with other key European weapons suppliers or even client countries in an effort to sustain major sectors of their individual defense industrial bases—even if a substantial portion of the weapons produced are for their own armed forces. Examples are the Eurofighter and Eurocopter projects. A few European suppliers have also adopted the strategy of cooperating in defense production ventures with the United States such as the Joint Strike Fighter (JSF), rather than attempting to compete directly, thus meeting their own requirements for advanced combat aircraft while positioning themselves to share in profits resulting from future sales of this new fighter aircraft. The leading markets for arms in regions of the developing world have been predominately in the Near East and Asia. Latin American and African nations, by contrast, have not been major purchasers of weapons, with rare exceptions. The regional arms agreement data tables in this report demonstrate this. U.S. policymakers have placed emphasis on helping to maintain stability throughout the regions of the developing world. Consequently, the United States has made and supported arms sales and transfers it has argued would advance that goal, while discouraging significant sales by other suppliers to states and regions where military threats to nations in the area are minimal. Other arms suppliers do not necessarily share the U.S. perspective on what constitutes an appropriate arms sale, and in some instances the financial benefit of the sale to the supplier overrides other considerations. The regional and country specific arms-transfer data in this report provide an indication of where various arms suppliers are focusing their attention and who their principal clients are. By reviewing these data, policymakers can identify potential developments that may be of concern, and use this information to assist a review of options they may choose to consider, given the circumstances. What follows below is a review of data on arms-transfer agreement activities in the two regions that lead in arms acquisitions, the Near East and Asia. This is followed, in turn, by a review of data regarding the leading arms purchasers in the developing world more broadly. The Persian Gulf crisis of August 1990-February 1991 was the principal catalyst for major new weapons purchases in the Near East made during the last twenty-five years. This crisis, culminating in a U.S.-led war to expel Iraq from Kuwait, firmly established the U.S. as the guarantor of Gulf security and created new demands by key purchasers such as Saudi Arabia, Kuwait, the United Arab Emirates, and other members of the Gulf Cooperation Council (GCC) for a variety of advanced weapons systems. Subsequently, concerns over the growing strategic threat from Iran, which have continued into the 21 st century, have become the principal basis of GCC states' advanced arms purchases. Because GCC states do not share a land border with Iran, their weapons purchases have focused primarily on air, naval, and missile defense systems. Egypt and Israel have also continued their military modernization programs by increasing their purchases of advanced weaponry, primarily from the United States. From 2007-2010, Saudi Arabia was the largest purchaser with an agreements value of $29.6 billion. In 2011-2014 Saudi Arabia again held the largest number of agreements with a total value of $56.4 billion (in current dollars). India was again second with $38.1 billion ( Table 11 and Table 12 ). The Near East has generally been the largest arms market in the developing world. In the earlier period (2007-2010), it ranked first with 49.5% of the total value of all developing nations arms transfer agreements ($87.9 billion in current dollars). The Asia region ranked second in 2007-2010 with 30.8% of these agreements ($54.8 billion in current dollars). During 2011-2014, the Near East region again placed first with 60.1% of all developing nations agreements ($148.5 billion in current dollars). The Asia region ranked second in 2011-2014 with $72.4 billion of these agreements or 29.3% ( Table 6 and Table 7 ). The United States ranked first in arms transfer agreements with the Near East during the 2007-2010 period with 53.5% of their total value ($47 billion in current dollars). The United Kingdom was second during these years with 12.2% ($10.7 billion in current dollars). Recently, from 2011 to 2014, the United States dominated in arms agreements with this region with almost $86.9 billion (in current dollars), a 58.5% share. Russia accounted for 14.4% of the region's agreements in the most recent period ($21.4 billion in current dollars) ( Figure 5 ) ( Table 6 and Table 8 ). The data on regional arms-transfer agreements from 2007 to 2014 reflect that Asia, after the Near East, is the second largest region of the developing world for orders of conventional weaponry. Throughout Asia, several developing nations have been upgrading and modernizing their defense forces, and this has led to new conventional weapons sales in that region. Beginning in the mid-1990s, Russia became the principal supplier of advanced conventional weaponry to China for about a decade—selling it fighters, submarines, destroyers, and missiles—while establishing itself as the principal arms supplier to India. Russian arms sales to these two countries have been primarily responsible for much of the increase in Asia's overall share of the arms market in the developing world during much of the period of this report. Russia has also expanded its client base in Asia, securing aircraft orders from Malaysia, Vietnam, Burma, and Indonesia. It is notable that India, while the principal Russian arms customer, during recent years has sought to diversify its weapons supplier base, purchasing the Phalcon early warning defense system aircraft in 2004 from Israel and numerous items from France in 2005, in particular six Scorpene diesel attack submarines. In 2008 India purchased six C130J cargo aircraft from the United States. In 2010, the United Kingdom sold India 57 Hawk jet trainers for $1 billion. In 2010 Italy also sold India 12 AW101 helicopters. In 2011, France secured a $2.4 billion contract with India to upgrade 51 of its Mirage-2000 combat fighters, and the United States agreed to sell India 10 C-17 Globemaster III aircraft for $4.1 billion. This pattern of Indian arms purchases indicates that Russia will likely face strong new competition from other major weapons suppliers for the India arms market, and it can no longer be assured that India will consistently purchase its major combat systems. Indeed, India in 2011 had eliminated Russia from the international competition to supply a new-generation combat fighter aircraft, a competition won by France. Asia has traditionally been the second-largest developing-world arms market. In 2011-2014, Asia ranked second, accounting for 29.3% of the total value of all arms transfer agreements with developing nations ($72.4 billion in current dollars). In the earlier period, 2007-2010, the Asia region ranked second, accounting for 30.8% of all such agreements ($54.8 billion in current dollars) ( Table 6 and Table 7 ). In the earlier period (2007-2010), Russia ranked first in the value of arms transfer agreements with Asia with 31.2% ($17.1 billion in current dollars)--primarily due to major combat aircraft and naval system sales to India and China. The major West European suppliers, as a group, made 15.71% of this region's agreements in 2007-2010. In the later period (2011-2014), the United States ranked first in Asian agreements with 32.9% ($23.8 billion in current dollars); Russia ranked second with 24.9% ($18 billion in current dollars). The major West European suppliers, as a group, made 17.8% of this region's agreements in 2011-2014. ( Figure 6 ) ( Table 8 ). Saudi Arabia was the leading developing world arms purchaser from 2007-2014, with agreements totaling $86.6 billion. India was the second largest developing world arms purchaser from 2007 to 2014, making arms transfer agreements totaling $38.1 billion during these years (in current dollars). These increases reflect the military modernization efforts by India, underway since the 1990s. In the 2007-2010 period, Saudi Arabia ranked first in arms transfer agreements at $29.6 billion (in current dollars). In 2011-2014 Saudi Arabia ranked first in arms transfer agreements, with $56.4 (in current dollars). The total value of all arms transfer agreements with developing nations from 2007 to 2014 was $425.6 billion (in current dollars). ( Table 3 , Table 6 , Table 12 , and Table 13 ). Regional weapons delivery data reflect the diverse sources of supply and type of conventional weaponry actually transferred to developing nations. Even though the United States, Russia, and the four major West European suppliers dominate in the delivery of the 14 classes of weapons examined, it is also evident that the other European suppliers and some non-European suppliers, including China, can be leading suppliers of selected types of conventional armaments to developing nations ( Tables 25- 29 ). Weapons deliveries to the Near East, historically the largest purchasing region in the developing world, reflect the quantities and types delivered by both major and lesser suppliers. The following is a summary of weapons deliveries to this region for the period 2011-2014 from Table 27 : United States 80 tanks and self-propelled guns 419 APCs and armored cars 32 supersonic combat aircraft 147 artillery 406 surface-to-air missiles Russia 190 tanks and self-propelled guns 40 APCs and armored cars 10 supersonic combat aircraft 1 submarine 40 helicopters 5,410 surface-to-air missiles 70 surface-to-surface missiles 70 anti-ship missiles China 50 artillery 650 surface-to-air missiles Major West European Suppliers 280 APCs and armored cars 5 major surface combatants 13 minor surface combatants 20 supersonic combat aircraft 70 helicopters 50 surface-to-surface missiles 170 anti-ship missiles All Other European Suppliers 60 tanks and self-propelled guns 240 artillery 430 APCs and armored cars 3 major surface combatants 33 minor surface combatants 20 supersonic combat aircraft All Other Suppliers 10 tanks and self-propelled guns 140 APCs and armored cars 1 minor surface combatant 20 helicopters 270 surface-to-air missiles 40 anti-ship missiles These data indicate that substantial quantities of major combat systems were delivered to the Near East region from 2011-2014, in particular, tanks and self-propelled guns, armored vehicles, supersonic combat aircraft, helicopters, air defense and anti-ship missiles. Although the United States, Russia, and the European suppliers were the ones who delivered the greater number of these significant combat systems, other suppliers provided important naval systems and ground equipment as well. Both aircraft platforms and naval craft are particularly expensive, and constitute a large portion of the dollar values of arms deliveries of all suppliers to this region during the 2011-2014 period. Although not necessarily as expensive as aircraft or naval vessels, other weapon systems possess significant capabilities and create important security threats in the Near East region. Such systems include anti-ship and surface-to-surface missiles. In these categories Russia delivered 70 anti-ship and 70 surface-to-surface missiles to the Near East from 2011-2014. The four major West European suppliers collectively delivered 50 surface-to-surface missiles and 170 anti-ship missiles. Tables 3 through 13 present current official data on arms transfer agreements with developing nations by major suppliers from 2007 to 2014. These data show the most recent trends in arms contract activity by major suppliers. Delivery data, which reflect implementation of sales previously concluded, are provided in Tables 14 through 24 . Table 30 , Table 31 , Table 32 , Table 33 , and Table 34 provide data on worldwide arms transfer agreements from 2007-2014, while Table 35 , Table 36 , Table 37 , Table 38 , and Table 39 provide data on worldwide arms deliveries during this period. To use these data regarding agreements for purposes other than assessing general trends in seller/buyer activity is to risk drawing conclusions that can be readily invalidated by future events—precise values and comparisons, for example, may change due to cancellations or modifications of major arms transfer agreements previously concluded. These data sets reflect the comparative magnitude of arms transactions by arms suppliers with recipient nations expressed in constant dollar terms, unless otherwise noted. Illustrative pie and bar charts are provided in this section to give the relative market share of individual arms suppliers globally, to the developing world and to specific regions. Table 1 provides the value of worldwide arms transfer agreements for 2007-2010. 2011-2014 and 2014, and the suppliers' share of such agreements with the developing world . Table 2 provides the value of worldwide arms deliveries for 2007-2010, 2011-2014 and 2014, and the suppliers' share of such deliveries with the developing world . Specific content of other individual data tables is described below. Table 3 shows the annual current dollar values of arms transfer agreements to developing nations by major suppliers from 2007-2014. This table provides the data from which Table 4 (constant dollars) and Table 5 (supplier percentages) are derived. Regional Arms Transfer Agreements, 2007-2014 Table 6 gives the values of arms transfer agreements between suppliers and individual regions of the developing world for the periods 2007-2010 and 2011-2014. These values are expressed in current U.S. dollars. Table 7 , derived from Table 6 , gives the percentage distribution of each supplier's agreement values within the regions for the two time periods. Table 8 , also derived from Table 6 , illustrates what percentage share of each developing world region's total arms transfer agreements was held by specific suppliers during the years 2007-2010 and 2011-2014. Arms Transfer Agreements With Developing Nations, 2007-2014: Leading Suppliers Compared Table 9 gives the values of arms transfer agreements with the developing nations from 2007 to 2014 by the top 11 suppliers. The table ranks these suppliers on the basis of the total current dollar values of their respective agreements with the developing world for each of three periods—2007-2010, 2011-2014, and 2007-2014. Arms Transfer Agreements With Developing Nations In 2014 : Leading Suppliers Compared Table 10 ranks and gives for 2014 the values of arms transfer agreements with developing nations of the top 11 suppliers in current U.S. dollars. Arms Transfer Agreements With Near East 2007-2014 : Suppliers and Recipients Table 11 gives the values of arms transfer agreements with the Near East nations by suppliers or categories of suppliers for the periods 2007-2010 and 2011-2014. These values are expressed in current U.S. dollars. They are a subset of the data contained in Table 3 and Table 6 . Arms Transfers to Developing Nations, 2007-2014 : Agreements With Leading Recipients Table 12 gives the values of arms transfer agreements made by the top 10 recipients of arms in the developing world from 2007 to 2014 with all suppliers collectively. The table ranks recipients on the basis of the total current dollar values of their respective agreements with all suppliers for each of three periods—2007-2010, 2011-2014 and 2007-2014. Arms Transfers to Developing Nations In 2014 : Agreements With Leading Recipients Table 13 names the top 10 developing world recipients of arms transfer agreements in 2014. The table ranks these recipients on the basis of the total current dollar values of their respective agreements with all suppliers in 2014. Developing Nations Arms Delivery Values Table 14 shows the annual current dollar values of arms deliveries (items actually transferred) to developing nations by major suppliers from 2007-2014. The utility of these particular data is that they reflect transfers that have occurred. They provide the data from which Table 15 (constant dollars) and Table 16 (supplier percentages) are derived. Regional Arms Delivery Values, 2007-2014 Table 17 gives the values of arms deliveries by suppliers to individual regions of the developing world for the periods 2007-2010 and 2011-2014. These values are expressed in current U.S. dollars. Table 18 , derived from Table 17 , gives the percentage distribution of each supplier's deliveries values within the regions for the two time periods. Table 19 , also derived from Table 17 , illustrates what percentage share of each developing world region's total arms delivery values was held by specific suppliers during the years 2007-2010 and 2011-2014. Arms Deliveries to Developing Nations, 2007-2014 : Leading Suppliers Compared Table 20 gives the values of arms deliveries to developing nations from 2007-2014 by the top 11 suppliers. The table ranks these suppliers on the basis of the total current dollar values of their respective deliveries to the developing world for each of three periods—2007-2010, 2011-2014, and 2007-2014. Arms Deliveries to Developing Nations In 2014 : Leading Suppliers Compared Table 21 ranks and gives for 2014 the values of arms deliveries to developing nations of the top 10 suppliers in current U.S. dollars. Arms Deliveries to Near East, 2007-2014 : Suppliers and Recipients Table 22 gives the values of arms delivered to Near East nations by suppliers or categories of suppliers for the periods 2007-2010 and 2011-2014. These values are expressed in current U.S. dollars. They are a subset of the data contained in Table 14 and Table 17 . Arms Deliveries to Developing Nations, 2007-2014 : The Leading Recipients Table 23 gives the values of arms deliveries made to the top 10 recipients of arms in the developing world from 2007 to 2014 by all suppliers collectively. The table ranks recipients on the basis of the total current dollar values of their respective deliveries from all suppliers for each of three periods—2007-2010, 2011-2014 and 2007-2014. Arms Transfers to Developing Nations In 2014 : Agreements With Leading Recipients Table 24 names the top 10 developing world recipients of arms transfer agreements in 2014. The table ranks these recipients on the basis of the total current dollar values of their respective agreements with all suppliers In 2014. Other useful data for assessing arms transfers are those that indicate who has actually delivered specific numbers of specific classes of military items to a region. These data are relatively "hard" in that they reflect actual transfers of military equipment. They have the limitation of not giving detailed information regarding either the sophistication or the specific name of the equipment delivered. However, these data show relative trends in the delivery of important classes of military equipment and indicate who the leading suppliers are from region to region over time. Data in the following tables set out actual deliveries of fourteen categories of weaponry to developing nations from 2007 to 2014 by the United States, Russia, China, the four major West European suppliers as a group, all other European suppliers as a group, and all other suppliers as a group. The tables show these deliveries data for all of the developing nations collectively, for Asia, for the Near East, for Latin America, and for Africa. Care should be taken in using the quantitative data within these specific tables. Aggregate data on weapons categories delivered by suppliers do not provide precise indices of the quality and/or quantity of the weaponry delivered. The history of recent conventional conflicts suggests that quality and/or sophistication of weapons can offset quantitative advantage. Further, these data do not provide an indication of the relative capabilities of the recipient nations to use effectively the weapons delivered to them. Superior training—coupled with good equipment, tactical and operational proficiency, and sound logistics—may, in the last analysis, be a more important factor in a nation's ability to engage successfully in conventional warfare than the size of its weapons inventory. Ten tables follow. Table 30 , Table 31 , Table 32 , Table 35 , Table 36 , and Table 37 provide the total dollar values for arms transfer agreements and arms deliveries worldwide for the years 2007-2014. These tables use the same format and detail as Table 3 , Table 4 , Table 5 , Table 14 , Table 15 , and Table 16 , which provide the total dollar values for arms transfer agreements with and arms deliveries to developing nations . Table 33 , Table 34 , Table 38 , and Table 39 provide a list of the top 11 arms suppliers to the world based on the total values (in current dollars) of their arms transfer agreements and arms deliveries worldwide during calendar years 2007-2010, 2011-2014, and 2011. These tables are set out in the same format and detail as Table 9 and Table 10 for arms transfer agreements with, and Table 21 for arms deliveries to developing nations, respectively. Total Worldwide Arms Transfer Agreements Values, 2007-2014 . Table 30 shows the annual current dollar values of arms transfer agreements worldwide. Since these figures do not allow for the effects of inflation, they are, by themselves, of limited use. They provide, however, the data from which Table 31 ( constant dollars) are derived, based on the Department of Defense Price Deflator. Table 32 (supplier percentages) are derived from data in Table 31 . Total Worldwide Delivery Values 2007-2014 . Table 35 shows the annual current dollar values of arms deliveries (items actually transferred) worldwide by major suppliers from 2007-2014. The utility of these data is that they reflect transfers that have occurred. They provide the data from which Table 36 ( constant dollars) are derived, based on the Department of Defense Price Deflator. Table 37 (supplier percentages) are derived from data in Table 36 . Tanks and Self-propelled Guns: This category includes light, medium, and heavy tanks; self-propelled artillery; self-propelled assault guns. Artillery: This category includes field and air defense artillery, mortars, rocket launchers and recoilless rifles—100 mm and over; FROG launchers—100mm and over. Armored Personnel Carriers (APCs) and Armored Cars: This category includes personnel carriers, armored and amphibious; armored infantry fighting vehicles; armored reconnaissance and command vehicles. Major Surface Combatants: This category includes aircraft carriers, cruisers, destroyers, frigates. Minor Surface Combatants: This category includes minesweepers, subchasers, motor torpedo boats, patrol craft, motor gunboats. Submarines: This category includes all submarines, including midget submarines. Guided Missile Patrol Boats: This category includes all boats in this class. Supersonic Combat Aircraft: This category includes all fighter and bomber aircraft designed to function operationally at speeds above Mach 1. Subsonic Combat Aircraft: This category includes all fighter and bomber aircraft designed to function operationally at speeds below Mach 1. Other Aircraft: This category includes all other fixed-wing aircraft, including trainers, transports, reconnaissance aircraft, and communications/utility aircraft. Helicopters: This category includes all helicopters, including combat and transport. Surface-to-air Missiles: This category includes all ground-based air defense missiles. Surface-to-surface Missiles: This category includes all surface-surface missiles without regard to range, such as Scuds and CSS-2s. It excludes all anti-tank missiles. It also excludes all anti-ship missiles, which are counted in a separate listing. Anti-ship Missiles: This category includes all missiles in this class such as the Harpoon, Silkworm, Styx, and Exocet. | This report provides Congress with official, unclassified, quantitative data on conventional arms transfers to developing nations by the United States and foreign countries for the preceding eight calendar years for use in its policy oversight functions. All agreement and delivery data in this report for the United States are government-to-government Foreign Military Sales (FMS) transactions. Similar data are provided on worldwide conventional arms transfers by all government suppliers, but the principal focus is the level of arms transfers by major weapons supplying governments to nations in the developing world. Developing nations continue to be the primary focus of foreign arms sales activity by weapons suppliers. During the years 2007-2010, the value of arms transfer agreements with developing nations comprised 74.4% of all such agreements worldwide. More recently, arms transfer agreements with developing nations constituted 75.5% of all such agreements globally from 2011-2014, and 86.0% of these agreements in 2014. The value of all arms transfer agreements with developing nations in 2014 was $61.8 billion. In 2014, the value of all arms deliveries to developing nations was $20.6 billion. Recently, from 2011 to 2014, the United States and Russia have dominated the arms market in the developing world, with both nations either ranking first or second for each of these four years in the value of arms transfer agreements. From 2011 to 2014, the United States made nearly $115 billion in such agreements, 46.3% of all these agreements (expressed in current dollars). Russia made $41.7 billion, 16.8% of these agreements. During this same period, collectively, the United States and Russia made 63.1% of all arms transfer agreements with developing nations, ($156.4 billion in current dollars). In 2014, the United States ranked first in arms transfer agreements with developing nations with $29.8 billion or 48.2% of these agreements. In second place was Russia with $10.1 billion or 16.3% of such agreements. In 2014, Russia ranked first in the value of arms deliveries to developing nations at $8.4 billion, or 40.8% of all such deliveries. The United States ranked second in these deliveries at over $7.6 billion or 27.2%. In worldwide arms transfer agreements in 2014—to both developed and developing nations—the United States dominated, ranking first with $36.2 billion in such agreements or 50.4% of all such agreements. Russia ranked second in worldwide arms transfer agreements in 2014 with $10.2 billion in such global agreements or 14.2%. The value of all arms transfer agreements worldwide in 2014 was $71.8 billion. In 2014, South Korea ranked first concluding $7.8 billion in agreements. Brazil ranked third in the value of arms transfer agreements among all developing nations weapons purchasers, concluding $6.5 billion in such agreements. Iraq ranked second with $7.3 billion in such agreements. |
The Secretary of the Department of Homeland Security (DHS) is charged with preventing the entry of terrorists, securing the borders, and carrying out immigration enforcement functions. The Department of Defense's (DOD) role in the execution of this responsibility is to provide support to DHS and other federal, state and local (and in some cases foreign) law enforcement agencies, when requested. Since the 1980s, the DOD (and National Guard), as authorized by Congress, has conducted a wide variety of counterdrug support missions along the borders of the United States. After the attacks of September 11, 2001, military support was expanded to include counterterrorism activities. Although the DOD does not have the "assigned responsibility to stop terrorists from coming across our borders," its support role in counterdrug and counterterrorism efforts appears to have increased the Department's profile in border security. Some states, particularly those along the southern border that are experiencing reported escalations in crime and illegal immigration, are welcoming the increased military role and have taken steps to procure additional military resources. Governor Janet Napolitano of Arizona, for example, sent the DOD a request for federal funding to support the state's deployment of National Guard troops to the border after reportedly exhausting available state resources for combating illegal immigration and drug trafficking. Others view the increased presence of military support along the borders as undiplomatic, potentially dangerous, and a further strain on already overextended military resources. Nonetheless, the concerns over aliens and smugglers exploiting the porous southern border continue to grow, and some now argue that the military should play a much larger and more direct role in border security. On May 15, 2006, President Bush announced that up to 6,000 National Guard troops would be sent to the southern border to support the Border Patrol. According to the President, the Guard will assist the Border Patrol by operating surveillance systems, analyzing intelligence, installing fences and vehicle barriers, building roads, and providing training. Guard units will not be involved in direct law-enforcement activities and will be under the control of the Governors. The Administration has indicated that the vast majority of the force at the border would be drawn from Guardsmen performing their regularly scheduled, two- or three-week annual training, pursuant to Title 32 of the U.S. Code (see later discussion). Initial deployments of Guardsmen to the border began in June 2006 under the mission name, "Operation Jump Start." As of November 2006, approximately 5661 guardsmen were participating in the mission. In the 109 th Congress, Senate-passed S. 2611 and House-passed H.R. 5122 , as well as H.R. 1986 , H.R. 3938 , and H.R. 3333 , would have authorized, under certain parameters, the use of military forces or the National Guard along the border. The military does not appear to have a direct legislative mandate to protect or patrol the border or to engage in immigration enforcement. Indeed, direct military involvement in law enforcement activities without proper statutory authorization might run afoul of the Posse Comitatus Act. The military does have, however, general legislative authority that allows it to provide support to federal, state, and local law enforcement agencies (LEA) in counterdrug and counterterrorism efforts, which might indirectly provide border security and immigration control assistance. Military personnel for these operations are drawn from the active and reserve forces of the military and from the National Guard. The primary restriction on military participation in civilian law enforcement activities is the Posse Comitatus Act (PCA). The PCA prohibits the use of the Army and Air Force to execute the domestic laws of the United States except where expressly authorized by the Constitution or Congress. The PCA has been further applied to the Navy and Marine Corps by legislative and administrative supplements. For example, 10 U.S.C. §375, directs the Secretary of Defense to promulgate regulations forbidding the direct participation "by a member of the Army, Navy, Air Force, or Marines in a search, seizure, arrest, or other similar activity" during support activities to civilian law enforcement agencies. DOD issued Directive 5525.5, which outlines its policies and procedures for supporting federal, state, and local LEAs. According to the Directive, the following forms of direct assistance are prohibited: (1) interdiction of a vehicle, vessel, aircraft, or other similar activity; (2) a search or seizure; (3) an arrest, apprehension, stop and frisk, or similar activity; and (4) use of military personnel in the pursuit of individuals, or as undercover agents, informants, investigators, or interrogators. It is generally accepted that the PCA does not apply to the actions of the National Guard when not in federal service. As a matter of policy, however, National Guard regulations stipulate that its personnel are not , except for exigent circumstances or as otherwise authorized, to directly participate in the arrest or search of suspects or the general public. The PCA does not apply "in cases and under circumstances expressly authorized by the Constitution." Under the Constitution, Congress is empowered to call forth the militia to execute the laws of the Union. The Constitution, however, contains no provision expressly authorizing the President to use the military to execute the law. The question of whether the constitutional exception includes instances where the President is acting under implied or inherent constitutional powers is one the courts have yet to answer. DOD regulations, nonetheless, do assert two constitutionally based exceptionsâsudden emergencies and protection of federal property. The PCA also does not apply where Congress has expressly authorized use of the military to execute the law. Congress has done so in three ways: by giving a branch of the armed forces civilian law enforcement authority (e.g., the Coast Guard), by addressing certain circumstances with more narrowly crafted legislation, and by establishing general rules for certain types of assistance. The military indirectly supports border security and immigration control efforts under general legislation that authorizes the armed forces to support federal, state, and local LEAs. Since the early 1980s, Congress has periodically authorized an expanded role for the military in providing support to LEAs. Basic authority for most DOD assistance was originally passed in 1981 and is contained in Chapter 18 of Title 10 of the U.S. CodeâMilitary Support for Civilian Law Enforcement Agencies. Under Chapter 18 of Title 10, Congress authorizes DOD to share information (§371); loan equipment and facilities (§372); provide expert advice and training (§373); and maintain and operate equipment (§374). For federal LEAs, DOD personnel may be made available, under §374, to maintain and operate equipment in conjunction with counterterrorism operations (including the rendition of a suspected terrorist from a foreign country) or the enforcement of counterdrug laws, immigration laws, and customs requirements. For any civilian LEA, §374 allows DOD personnel to maintain and operate equipment for a variety of purposes, including aerial reconnaissance and the detection, monitoring, and communication of air and sea traffic, and of surface traffic outside the United States or within 25 miles of U.S. borders, if first detected outside the border. Congress placed several stipulations on Chapter 18 assistance, e.g., LEAs must reimburse DOD for the support it provides unless the support "is provided in the normal course of military training or operations" or if it "results in a benefit...substantially equivalent to that which would otherwise be obtained from military operations or training." Pursuant to §376, DOD can only provide such assistance if it does not adversely affect "the military preparedness of the United States." Congress incorporated posse comitatus restrictions into Chapter 18 activities in §375. In 1989, Congress began to expand the military's support role. For example, Congress directed DOD, to the maximum extent practicable, to conduct military training exercises in drug-interdiction areas, and made the DOD the lead federal agency for the detection and monitoring of aerial and maritime transit of illegal drugs into the United States. Congress later provided additional authorities for military support to LEAs specifically for counterdrug purposes in the National Defense Authorization Act for FY1991. Section 1004 authorized DOD to extend support in several areas to any federal, state, and local (and sometimes foreign) LEA requesting counterdrug assistance. This section has been extended regularly and is now in force through the end of FY2011. As amended, §1004 authorizes the military to: maintain, upgrade, and repair military equipment; transport federal, state, local, and foreign law enforcement personnel and equipment within or outside the U.S.; establish bases for operations or training; train law enforcement personnel in counterdrug activities; detect, monitor, and communicate movements of air, sea, and surface traffic outside the U.S., and within 25 miles of the border if the detection occurred outside the U.S.; construct roads, fences, and lighting along U.S. border; provide linguists and intelligence analysis services; conduct aerial and ground reconnaissance; and establish command, control, communication, and computer networks for improved integration of law enforcement, active military, and National Guard activities. Section 1004 incorporates the posse comitatus restrictions of Chapter 18. Unlike Chapter 18, however, this law does allow support which could affect military readiness in the short-term, provided the Secretary of Defense believes the support outweighs such short-term adverse effect. The National Guard is a military force that is shared by the states and the federal government and often assists in counterdrug and counterrrorism efforts. After September 11, for example, President Bush deployed roughly 1,600 National Guard troops for six-months under Title 10 authority to support federal border officials and provide a heightened security presence. Under "Title 10 duty status," National Guard personnel operate under the control of the President, receive federal pay and benefits, and are subject to the PCA. Typically, however, the National Guard operates under the control of state and territorial Governors. In "state active duty" National Guard personnel operate under the control of their Governor, are paid according to state law, can perform activities authorized by state law, and are not subject to the restrictions of the PCA. Because border security is primarily a federal concern, some states have looked to the federal government for funding to support some of their National Guard activities. Under Title 32 of the U.S. Code, National Guard personnel generally serve a federal purpose and receive federal pay and benefits, but command and control remains with the Governor. This type of service is commonly referred to as "Title 32 duty status," and examples are discussed below. According to the Administration, the deployment of the 6,000 Guardsmen derives its authority from 32 U.S.C. §502(a), which allows the Secretary of the Army and Air Force to prescribe regulations for National Guard drill and training and §502(f), described below. Federal funding may be provided to a state for the implementation of a drug interdiction program in accordance with 32 U.S.C. §112. Under this section, the Secretary of Defense may grant funding to the Governor of a state who submits a "drug interdiction and counterdrug activities plan" that satisfies certain statutory requirements. The Secretary of Defense is charged with examining the sufficiency of the drug interdiction plan and determining whether the distribution of funds would be proper. While the emphasis is certainly on counterdrug efforts, a state plan might include some related border security and immigration-related functions that overlap with drug interdiction activities. Arizona's drug interdiction plan, for example, recognizes related border issues created by human smuggling and terrain vulnerabilities with respect to the illegal entry of aliens into the United States. By approving the State of Arizona's drug interdiction plan, the Secretary of Defense has enabled the Arizona National Guard to engage in some border security measures. Section 502(f) of Title 32 has been used to expand the operational scope of the National Guard beyond its specified duties. This provision provides that "a member of the National Guard may ... without his consent, but with the pay and allowances provided by law ... be ordered to perform training or other duty " in addition to those he is already prescribed to perform (emphasis added). This is the provision of law that was used to provide federal pay and benefits to the National Guard personnel who provided security at many of the nation's airports after September 11 and who participated in Katrina and Rita-related disaster relief operations. States, such as Arizona, have argued that the "other duty" language should be liberally applied (like it was for Hurricane Katrina and Rita) to include activities associated with border security efforts. Some question, however, whether domestic operations, in general, are a proper use of this Title 32 authority. In 2004, Congress passed another law that could arguably provide federal funding for National Guard personnel conducting border security operations under Title 32. Chapter 9 of Title 32 of the U.S. Code authorizes the Secretary of Defense to provide federal funding at his discretion to a state, under the authority of the Governor of that state, for the use of their National Guard forces if there is a "necessary and appropriate" "homeland defense activity." A "homeland defense activity" is statutorily defined as "an activity undertaken for the military protection of the territory or domestic population of the United States ... from a threat or aggression against the United States." Although a deployment of National Guard troops for border security purposes could arguably be an activity "undertaken for the military protection" of a "domestic population," it is unclear whether the porous nature of the border or illegal entry of aliens is the type of "threat" or "aggression" that would be "necessary and appropriate" for National Guard troops. The State of Arizona requested federal funds for its National Guard under Chapter 9 for the performance of homeland defense-border security activities. | The military generally provides support to law enforcement and immigration authorities along the southern border. Reported escalations in criminal activity and illegal immigration, however, have prompted some lawmakers to reevaluate the extent and type of military support that occurs in the border region. On May 15, 2006, President Bush announced that up to 6,000 National Guard troops would be sent to the border to support the Border Patrol. Addressing domestic laws and activities with the military, however, might run afoul of the Posse Comitatus Act, which prohibits use of the armed forces to perform the tasks of civilian law enforcement unless explicitly authorized. There are alternative legal authorities for deploying the National Guard, and the precise scope of permitted activities and funds may vary with the authority exercised. This report will be updated as warranted. |
The Bush Administration's FY2005 budget request, released February 2, 2004, budgetedEnergy and Water Development Programs at $27.94 billion, compared to $27.26 billion appropriatedfor the same programs for FY2004. On June 16 the House Appropriations Committee reported itsbill with $27.99 billion, and the House passed it June 25. The House and Senate both approved aconference report ( H.Rept. 108-792 ) on H.R. 4818 on November 20, containingFY2005 appropriations for previously unpassed bills, including Energy and Water Development. H.R. 4818 was forwarded to the President December 6 and signed December 8 ( P.L.108-447 ). Table 1. Status of Energy and Water DevelopmentAppropriations, FY2005 *Held at desk in Senate until December 6, when the House approved H.Con.Res. 528 . The Energy and Water Development bill includes funding for civil worksprojects of the U.S. Army Corps of Engineers (Corps), the Department of theInterior's Bureau of Reclamation (BOR), 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 BushAdministration's request was $27.938 billion for these programs for FY2005,compared with $27.253 billion appropriated for FY2004. The House bill( H.R. 4614 ) reported by the Appropriations Committee, and passed bythe House June 25, contained funding at $27.988 billion. The omnibus ConsolidatedAppropriations bill ( H.R. 4818 , P.L. 108-447 ) appropriates $28.488billion, less an across-the-board rescission of 0.80% (Division J, section 122, asamended by H.Con.Res 528). Throughout this report, figures cited for funding in theomnibus bill do not reflect this 0.80% reduction. Table 2 includes budget totals for energy and water development appropriations enacted for FY1998 to FY2004 and the Administration's request for FY2005. Table 2. Energy and Water Development Appropriations, FY1998 to FY2005 (budget authority in billions of current dollars) a a These figures represent current dollars, exclude permanent budget authorities, andreflect rescissions. Table 3 lists totals for each of the four titles. The table also lists several "scorekeeping" adjustments of accounts within Titles II and III that affect the totalamount appropriated in the bill but are not included in the totals of the individualtitles. Table 3. Energy and Water Development Appropriations Summary of Funding by Title ($ billions) Source: H.Rept. 108-792 . Note: a. Does not include the modified rescission amount of .80% in H.Con.Res. 528 . For the Corps in FY2005, the Administration requested $4.12 billion, a decrease of $460 million from the enacted appropriation for FY2004. The Administration'srequest focused funding on construction projects that could be completed in FY2005and eight projects considered priorities by the Administration, including the FloridaEverglades. The omnibus H.R. 4818 ( P.L. 108-447 ) increased thefunding to $4.71 billion before the rescission. The Administration asked for $970 million for FY2005 for the Department of the Interior programs included in the Energy and Water Development bill -- theBureau of Reclamation and the Central Utah Project. This would be a decrease of$11 million from the FY2004 funding level. The House bill ( H.R. 4614 )would have appropriated $1.021 billion. The omnibus bill appropriated $1.020billion, less the rescission. The FY2005 request for DOE programs in the bill was $23.148 billion, about $1.18 billion more than the previous year. The major activities in the DOE budget areenergy research and development, general science, environmental cleanup, andnuclear weapons programs. (Funding of DOE's programs for fossil fuels, energyefficiency, and energy statistics is included in the Interior and Related Agenciesappropriations bill. The FY2005 net request for these programs was $1.7 billion.) The House bill ( H.R. 4614 ) would have appropriated $22.478 billion. The omnibus bill appropriated $23.003 billion, less the rescission. The FY2005 request for funding the independent agencies in Title IV of the bill was $232 million, compared with $228 million in FY2004. The House bill( H.R. 4614 ) would have appropriated $193 million for these programs. The omnibus bill figure is $292 million. Tables 4 through 11 provide budget details for Title I (Corps of Engineers), Title II (Department of the Interior), Title III (Department of Energy), and Title IV(independent agencies) for FY2004-FY2005. The President's request for FY2005 for the civil works program of the U.S.Army Corps of Engineers was $4.12 billion, a decrease of $460 million from theenacted appropriation for FY2004. Table 4. Energy and Water Development Appropriations Title I: Corps of Engineers ($ millions) Source: Administration budget request for FY2005, H.Rept. 108-554 , and H.Rept. 108-792 . Budget justifications for FY2005 from the Corps of Engineers. Notes: a. Includes an across-the-board rescission of .59% included in the FY2004Consolidated Appropriations Act, P.L. 108-199 , enacted on January 23, 2004. b. This figure reflects amounts provided by the House Appropriations Committee;the Committee showed $35.9 million added by P.L. 108-199 . Other sourcesindicate that the supplemental appropriation was less and that the totalconstruction appropriation was $1731.3. c. This amount includes the Administration's proposed cancellation of $100 million($94 million in construction, $5 million in Mississippi River flood control, $1million in flood control and coastal emergencies) in unobligated FY2004balances for work on 41 projects that are "inconsistent with current policy." d. "Formerly Utilized Sites Remedial Action Program." e. The conference committee for FY2004 appropriations removed all funding for theFlood Control and Coastal Emergencies account because the account wasreplenished with $60 million through the Legislative Branch Appropriations Actfor FY2004, P.L. 108-83 . f. Does not include the modified rescission amount of .80% in H.Con.Res. 528 , which would produce a total of $4,667.9 million. The President's FY2005 budget request was similar in many ways to the President's FY2004 request. Again for FY2005, the President's request fundedconstruction projects that could be completed in FY2005 and projects considered bythe Administration to be priorities. The eight priority projects included the NewYork and New Jersey Harbor Deepening project, restoration projects in the FloridaEverglades and the side channels of the Upper Mississippi River system, and projectsto meet environmental requirements in the Columbia River Basin and the MissouriRiver basin. The President's budget also funded three new projects that weredetermined to have high economic and environmental return. Outside of these threeprojects, there were no other new construction starts, because of the Administration'sconcern with the funding needed to complete projects budgeted for construction. Inkeeping with the Administration's approach to reducing the agency's constructionbacklog, the President's budget limited funding for planning to five new projects. The request also focused the operation and maintenance funds for the inlandwaterways and harbors on projects supporting a high volume of traffic. The Corps announced in its budget briefing on February 2, 2004, that it did not budget for the continued renourishment of shoreline storm damage reductionprojects, indicating that it considered these costs as maintenance expenses to beborne by the non-federal project sponsors. This represented a change from theCorps' past involvement with renourishment, often at a 50% federal cost share. Thebudget also generally deemphasized shallow draft harbors and waterways with lowcommercial use. The President requested no funds for studies and "environmental infrastructure" projects in the following non-traditional mission areas: wastewater treatment,irrigation water supply, and municipal and industrial water supply treatment anddistribution. By not seeking funding for these activities, the Administrationreinforced its interest in focusing federal funding on navigation, flood control, stormdamage reduction, and ecosystem restoration projects. H.R. 4818 ( P.L. 108-447 ) increases the Corps' appropriations over FY2004 and above the President's FY2005 request; the exact increase depends onthe size of the rescission. H.R. 4818 ( P.L. 108-447 ) funds someenvironmental infrastructure projects and funds some beach renourishment activities.Furthermore, the bill states that the Corps shall not implement any changes toexisting shoreline protection policies that have not been specifically authorized byCongress. The bill does not fund the new study or construction starts requested bythe President. It does fund some controversial construction projects, including theDallas Floodway Extension and Yazoo Basin projects. According to the conferencereport, Congress provided more funds for the popular Continuing AuthoritiesPrograms than requested by the Administration; the conference report also continuedthe recent trend of identifying specific priority projects for funding under theseprograms. H.R. 4818 ( P.L. 108-447 ) contains some authorization language. Although the bill does not contain authorization of the Upper MississippiRiver-Illinois Waterway navigation and ecosystem restoration project, it provides$13.5 million in funding to proceed with the planning of the controversial navigationproject. The bill provides $17.5 million, which is less than the $28 million requestedby the Administration, for the Upper Mississippi River System's EnvironmentalManagement Program, which complements the proposed ecosystem restorationproject. Funding Level. Funding for the Corps' civil works program often has been a contentious issue between theAdministration and Congress, with final appropriations typically providing morefunding than requested, regardless of which political party controls the White Houseand Congress. The FY2003 and FY2004 appropriations bills added funds above theAdministration's request; they were, respectively, $466 million (11%) and $370million (9%) above the requested amounts. The FY2005 budget request proposed a10% cut from the enacted FY2004 appropriations; H.R. 4818 ( P.L.108-447 ) appropriates 14% more than the request. The House Transportation and Infrastructure Subcommittee on Water Resources and Environment held a hearing on the Corps' FY2005 budget on February 26, 2004. On March 10, 2004, the House Appropriations Subcommittee on Energy and WaterDevelopment held its hearing. The Senate Appropriations Subcommittee on Energyand Water held a hearing on April 20, 2004. At these hearings, some Members ofCongress raised concerns that the Administration's request represented a reductionin each of the major Corps accounts. At these hearings, Assistant Secretary of theArmy Woodley mentioned the Corps' use of a performance-based approach indeveloping the budget request (i.e., providing funding to the projects that it identifiesas having the highest economic and environmental returns). Some Membersexpressed particular concern about the application of performance-based budgetingand OMB's role in delayed use of FY2004 funds for congressionally added projects. The Administration's FY2005 funding levels for navigation operation and maintenance and beach renourishment policy changes have drawn criticism fromsome stakeholders and support from others. House and Senate Waterways Caucusesannounced their formation at a kick-off meeting on May 21, 2004. Caucus membersspoke on the importance of the nation's waterways to trade, tourism, and recreation;they also asserted a need for increased funding for the civil works program. H.R. 4818 ( P.L. 108-447 ) maintained the FY2004 spending level for O&M. The bill did not provide the $35 million reserve requested for emergencyrepairs, which had received $15 million in FY2004. O&M funding for somenavigation channels was restored by H.R. 4818 ( P.L. 108-447 ); notably, thebill increased O&M funds above the President's request for many segments of theAtlantic Intracoastal Waterway, with FY2005 appropriations for the waterwayreaching a level about 85% of previous years' appropriations. The bill also increasedthe O&M funding for the controversial waterway of the Apalachicola,Chattahoochee, and Flint Rivers from $0.1 million to $6 million. Savings and Slippage and Reprogramming. Corps appropriations include a reduction for Saving and Slippage (S&S) to account for the slip of spending on projects due todelays caused by weather, non-federal sponsor financing, or a decision not to proceed-- or to account for savings from a project costing less than estimated. TheAdministration in its budget estimate proposes an S&S rate for various Corpsaccounts; Congress maintains or modifies these rates during the appropriationsprocess. The enacted S&S rates are normally applied across the board to all projectsin an account, except for those activities specifically set forth in act language. S&Srates that exceed the actual saving and slippage experienced could contribute toappropriations constraints on the progress of projects. Over the course of the fiscalyear, the Corps reprograms funds within an account from the projects that are notproceeding as planned to those that are moving forward. There is no statutorylanguage permitting or prohibiting reprogramming of funds; however, Congressprovided specific guidance in the past with regard to reprogramming of theconstruction account in report language. The conference report for H.R. 4818 ( P.L. 108-447 ) ( H.Rept. 108-792 ) lays out for the Corps general criteria forreprogramming. The conference report shows savings and slippage rates of 20% forthe general investigations account consistent with the Administration's request fora 20% rate, and 10% for general construction, which was above the 8% rate used bythe Administration. Proposed "Reforms" of Corps Processes and Procedures. During the 106th Congress, the Corps came undercriticism for the way it evaluates and undertakes projects. Although the issuereceived media attention in the 107th Congress, it was not directly addressed throughlegislation. Corps reform was debated during consideration of Water ResourceDevelopment Act (WRDA) bills in the 108th Congress; Corps reform reportedly hasplayed a role in recent WRDAs' not being enacted. H.R. 4818 ( P.L.108-447 ) contains no Corps reform provisions. For more information, see CRS Report RL30928, Army Corps of Engineers: Reform Issues for the 107th Congress ,by [author name scrubbed], and CRS Issue Brief IB10133, Water Resources DevelopmentAct (WRDA) and Other Army Corps of Engineers Legislation, coordinated by NicoleT. Carter. Everglades. A significant addition to the Corps' mission in recent years is its growing role in large environmentalrestoration programs, raising concerns that funding for these programs could displacethe funding for other water resources activities. (See CRS Issue Brief IB10120, ArmyCorps of Engineers Civil Works Program: Issues for Congress, by [author name scrubbed]and [author name scrubbed], for more information.) The Corps plays a significantcoordination role in the restoration of the Central and Southern Florida ecosystem.The Corps is particularly involved in the planning, construction, and operation offacilities under the Comprehensive Everglades Restoration Plan (CERP) that wasauthorized by Title VI of the Water Resources Development Act of 2000 ( P.L.106-541 ). The annual Energy and Water Development Appropriations bill providesfunding for the Corps' participation in these efforts. Everglades restoration alsoreceives a significant portion of its funding through the Department of the Interiorappropriations bills. For more information on Everglades funding for Interioragencies, see CRS Report RL32306 , Appropriations for FY2005: Interior andRelated Agencies , coordinated by Carol Hardy-Vincent and [author name scrubbed]. The President's request for FY2005 included a total of $130 million for the Corps' construction projects in the region. The FY2005 request for the KissimmeeRiver restoration project and the Everglades and South Florida ecosystem restorationproject was $18.0 million and $27.0 million, respectively. For the Central andSouthern Florida project, the Administration requested $85.6 million; $67 million ofthis is for CERP. H.R. 4818 ( P.L. 108-447 ) would provide $121.25million for Everglades restoration, which is less than the $130 million requested bythe Administration, and includes $2.25 million for a Florida Keys Water QualityImprovement project. The Kissimmee River project would receive $18 million asrequested; the Everglades and South Florida ecosystem restoration project wouldreceive $26 million, and the Central and Southern Florida project $75 million. Missouri River Management. Although the Missouri River is managed by the Corps, the Missouri River receivedthe most congressional attention in 2004 in the context of S. 2804 , theInterior and Related Agencies Appropriations bill for FY2005. A provision tochange a trigger that requires the Corps to implement drought conservation measureson the Missouri River remained in S. 2804 after a debate to have itremoved during committee markup. The drought conservation measures would havesuspended navigational releases from Missouri River reservoirs if storage at thereservoirs falls below a defined level. No similar language was included in theHouse-passed bill. H.R. 4818 ( P.L. 108-447 ) does not contain a similarprovision. For more information on the Missouri River provision, see CRS Report RL32306 , Appropriations for FY2005: Interior and Related Agencies , coordinatedby Carol Hardy-Vincent and [author name scrubbed]. For more information on Missouri Rivermanagement, see CRS Issue Brief IB10120, Army Corps of Engineers Civil WorksProgram: Issues for Congress, by [author name scrubbed] and [author name scrubbed]. In the context of Energy and Water Development Appropriations, the level of funding for Missouri River mitigation measures was the main issue. H.R. 4818 ( P.L. 108-447 ) provides $19 million for Missouri River fishand wildlife recovery. The President's FY2005 budget request was for $69 million;it would have covered expenses associated with environmental measures to complywith the U.S. Fish and Wildlife Service's Biological Opinion to protect threeendangered species. The measures covered by the President's request would haveincluded shallow water habitat for the pallid sturgeon and sandbar habitat for twoshorebirds. The activities covered by the President's request, unlike previousmitigation, would not have been restricted to river segments used for navigation; theFY2005 request was for activities along the length of the Missouri River from thereservoir at Fort Peck to the confluence of the Missouri River and Mississippi Riverat St. Louis. The amount appropriated for mitigation in the Energy and Water Development Appropriations Act of FY2004 had been $18 million. (The President's FY2004request had been for $22 million.) The Corps reprogrammed $23 million in FY2004funds to provide for the environmental measures needed to implement the MissouriRiver Master Manual in the 2004 navigation season. For the Department of the Interior, the Energy and Water Development billprovides funding for the Bureau of Reclamation (BOR) and the Central Utah ProjectCompletion Account. Table 5. Energy and Water Development Appropriations Title II: Central Utah Project CompletionAccount ($ millions) a. Calculated from text of H.Rept. 108-554 . House does not give a figure for Central Utah Project Construction. b. Does not include the modified rescission amount of 0.80% in H.Con.Res. 528 . For FY2005, the President requested $48.0 million for the Central Utah Project (CUP) Completion Account, an increase of $10.0 million over the FY2004 enactedamount. The conference agreement also includes $48 million for the CUPcompletion account. Table 6. Energy and Water Development Appropriations Title II: Bureau of Reclamation ($ millions) Source: H.Rept. 108-554 . Budget justifications for FY2005 from the Bureau of Reclamation. a. Includes an across-the-board rescission of .59% included in the FY2004Consolidated Appropriations Act, P.L. 108-199 , enacted on January 23, 2004. b. In its request, the Bureau lists this as an "offset"; the House bill does not treat theCVP collections as an offset. c. The FY2005 request includes a proposal that funds be transferred to the Water andRelated Resources account of the Bureau of Reclamation from the WesternArea Power Administration (WAPA) account in Title III. The House bill doesnot include such a transfer. d. Calculated by CRS. e. Budget justifications for FY2005 from the Bureau of Reclamation show a requestof $828.5 million for the Water and Related Resources Account for FY2005 and acorresponding $956.3 million in Gross Current Authority. The request was amendedMay 6, 2004, to account for payment of the Sumner Peck settlement agreement outof other government funds. f. This item was $5M smaller in the original House table. g. Does not include the modified rescission amount of 0.80% in H.Con.Res. 528 . The FY2005 request for BOR totals $922.3 million in gross current budget authority. (1) This amount is $20.4 million less thanenacted for FY2004 in P.L.108-137 , including the rescission of $5.1 million included in the FY2004Consolidated Appropriations Act (PL. 108-199). The FY2005 request includes a $46million "offset" for the Central Valley Project (CVP) Restoration Fund, and aHydropower Direct Financing offset of $30.0 million (transferred from the WesternArea Power Administration (WAPA) account in Title III), yielding a "net" currentauthority of $846.3 million for BOR. The House bill ( H.R. 4614 )includes $973.2 million in gross current authority; the conference agreement includes$972.3 million. Neither allowance includes the transfer from the WAPA account. BOR's single largest account, Water and Related Resources, encompasses the agency's traditional programs and projects, including operations and maintenance,the Dam Safety Program, Water and Energy Management Development, and Fish andWildlife Management and Development, among others. The House bill, H.R. 4614 , includes $860 million for the Water and Related Resourcesaccount; the conference agreement includes $859.5 million. The BOR requested$794.5 million for this account for FY2005, $57.9 million less than appropriated in P.L. 108-137 for FY2004; however, BOR budget justifications for FY2005 note arequest of $828.5 million, which is approximately $24.0 million less than enacted forFY2004. The agency initially requested $34 million for part of a three-year annualpayment as part of the Sumner Peck settlement; however, a subsequent decision wasmade to fund the payment from another government account. An amendment to therequest was submitted to Congress on May 6, 2004. Background. Most of the large dams and water diversion structures in the West were built by, or with the assistanceof, the Bureau of Reclamation (BOR). Whereas the Army Corps of Engineers builthundreds of flood control and navigation projects, BOR's mission was to developwater supplies, primarily for irrigation to reclaim arid lands in the West. Today,BOR manages hundreds of dams and diversion projects, including more than 300storage reservoirs in 17 western states. These projects provide water toapproximately 10 million acres of farmland and 31 million people. BOR is thelargest wholesale supplier of water in the 17 western states and the second largesthydroelectric power producer in the nation. BOR facilities also provide substantialflood control, recreation, and fish and wildlife benefits. At the same time, operationsof BOR facilities are often controversial, particularly for their effect on sensitive fishand wildlife species and conflicts among competing water users. CALFED. Funds have not been appropriated for the California Bay-Delta Restoration Account (Bay-Delta, orCALFED) since FY2000, when the authorization for appropriations expired. However, funds were provided for FY2002, FY2003, and FY2004 for activities thatsupport the CALFED program -- but not for the CALFED program account. TheAdministration requested $15 million for this account for FY2005. For FY2005, theHouse Committee on Appropriations recommended that no funds be appropriated forCALFED, and no funds are included in the omnibus bill. Consistent with past years,the committee notes it has recommended "no funding (for CALFED) in the absenceof authorizing legislation for this multi-year, multi-billion dollar effort." Theconference agreement provides, however, a total of $8.5 million from the within theWater and Related Resources Account for certain activities that support the CALFEDprogram. This amount includes $7.5 million for activities that support CaliforniaBay-Delta Restoration, as stated in the conference report, plus an "additional" $1.0million for the Upper San Joaquin River Basin Storage investigation. Other activitiesreceiving funding from the $8.5 million include $1.0 million for Sites Reservoirplanning activities, $1.0 million for Shasta Dam enlargement evaluation, and $1.0million for Los Vaqueros expansion planning. Although the CALFED program wasreauthorized and signed into law October 25, 2004 ( H.R. 2888 , P.L.108-361 ), the appropriations language was not changed. (For more information onCALFED, see CRS Report RL31975 , CALFED Bay-Delta Program: Overview ofInstitutional and Water Use Issues , by [author name scrubbed] and Pervaze Sheikh.) Security. BOR requested $43.2 million for FY2005 for continued heightened safety and security efforts at BORfacilities. The bulk of the request is for facility operations/security. Funding coverssuch activities as administration of the security program (e.g. surveillance and lawenforcement), anti-terrorism activities, and physical emergency security upgrades.(For more information, see CRS Report RL32189 , Terrorism and Security IssuesFacing the Water Infrastructure Sector , by [author name scrubbed] and [author name scrubbed].) Beginning in FY2005, BOR has planned to assign a portion of site security costs towater users for repayment based on existing project cost allocations for operationsand maintenance activities; however, conferees have noted concern over the plan anddirect BOR to submit a report by May 1, 2005, on reimbursable andnon-reimbursable security costs before implementation of the change and that thereshould be no implementation of the change "until the Congress provides directinstruction to do so." The House Committee on Appropriations, in H.R. 4614 , recommended $43.2 million for site security, and the omnibus bill contains thatamount. The Energy and Water Development bill includes funding for most of DOE'sprograms. Major DOE activities in the bill include research and development onrenewable energy and nuclear power, general science, environmental cleanup, andnuclear weapons programs. The Administration's FY2005 request for DOE programsin the Energy and Water Development bill was $23.148 billion, about $1.18 billionmore than the amount appropriated for FY2004. (The FY2005 request for DOE'sprograms for fossil fuels, energy efficiency, the Strategic Petroleum Reserve, andenergy statistics, included in the Interior and Related Agencies appropriations bill,was $1.7 billion.) The House bill ( H.R. 4614 ) would have appropriated$22.478 billion. The omnibus bill contains $23.003 billion, less the rescission. Table 7. Energy and Water Development Appropriations Title III: Department of Energy ($ millions) Source: Department of Energy budget justifications for FY2005 and H.Rept. 108-554 . a. Includes an across-the-board rescission of .59% included in the FY2004 ConsolidatedAppropriations Act, P.L. 108-199 , enacted on January 23, 2004. b. Includes $26.1 million added to the Solar R&D account by the FY2004 ConsolidatedAppropriations Act, P.L. 108-199 , enacted on January 23, 2004. c. Includes transfer of programs funded at $113.4 million from Energy Supply -- NuclearEnergy to Other Defense Activities. d. DOE proposes to offset FY2005 appropriations with Nuclear Waste Fee collections, fora net appropriation of zero. e. Does not include the modified rescission amount of 0.80% in H.Con.Res. 528 . Renewable Energy. The FY2005 budget request aimed to promote "breakthroughs in hydrogen fuel cells," developadvanced technologies for cellulosic biomass as an energy source, and generallylower the cost of various renewable energy systems, while improving equipmentperformance and efficiency. The request also proposed competitive solicitations forapplied research on technologies that would help curb greenhouse gas emissions. The request sought $374.8 million for renewables, which is $4.3 million, or 1%, more than the FY2004 appropriation. This comparison includes the use of $13.0million in prior year balances for FY2004. The funding request included $13.3million more for Hydrogen (due to increases of $12.1 million for safety and $2.7million for renewable hydrogen), $8.3 million more for Program Direction, and $3.0million for a new National Climate Change Technology program. However, it wouldterminate Program Support (a cut of $4.9 million), cut Biomass Utilization by $15.2million (to terminate Small Modular Biopower and discontinue congressionalearmarks), and cut Concentrating Solar Power by $3.4 million. Also, the requestincluded $90.9 million for the Office of Electricity Transmission and Distribution(OETD), an increase of $9.0 million, or 11%. The primary increase in OETD wasfor High Temperature Superconductivity. For FY2005, the House in H.R. 4614 approved $343.2 million for Renewable Energy, which is $31.6 million, or 8%, less than the request. The majorpart of this reduction is a decrease of $31.0 million, or 33%, for Hydrogen. Most ofthe decrease for Hydrogen would eliminate support for hydrogen storage "centers ofexcellence," which the House Appropriations Committee's report states DOEawarded "without full and open competition." Further, the House cut $7.0 million(zero appropriation) for DOE's proposed hydrogen education initiative. Also, thereis a cut of $3.0 million (zero appropriation) for the National Climate ChangeTechnology Initiative and an increase of $2.4 million for Concentrating Solar Power. The conference committee approved $389.1 million for Renewable Energy, which is $14.3 million, or 4%, more than the request. The committee's figureincludes $9.5 million more for Biomass/Biofuels, $6.2 million more for SolarEnergy, and $3.0 million more for Intergovernmental Program Support. For OETD,the conference approved $121.2 million, which is $30.3 million, or 33%, more thanthe request. Relative to the FY2004 appropriation, the conference committee approved $31.6 million, or 9%, more for renewables. This increase includes $13.3 million more forhydrogen, $6.8 million more for Program Direction, and $3.1 million more for SolarEnergy. Further, there is a decrease of $1.5 million for Facilities and Infrastructure. Also, the committee approved $39.3 million, or 48%, more for OETD. This includesincreases of $21.8 million for R&D, $13.0 million for Electricity Restructuring, and$4.5 million for Program Direction. All these amounts would be reduced by 0.80%with approval of H.Con.Res. 528 . Nuclear Energy. For nuclear energy research and development -- including advanced reactors, fuel cycletechnology, and nuclear hydrogen production -- the conference report provides$513.3 million, about $100 million above the Administration's request and theFY2004 appropriation. The total includes $124.3 million from Other DefenseActivities and Naval Reactors for management of the Idaho National Engineering andEnvironmental Laboratory (INEEL), which is being transferred to the nuclear energyprogram from DOE's environmental management program. The House Appropriations Committee had declared the Administration's request inadequate to achieve DOE's stated goal of transforming INEEL -- to berenamed Idaho National Laboratory -- into the nation's leading center for nuclearpower research. The House approved a funding increase of $51.2 million, for a totalof $463.8 million. "The benefits of nuclear power as a clean, reliable, and affordable source of energy are a key to economic and environmental underpinnings of the U.S.,"according to DOE's budget justification. However, opponents have criticized DOE'snuclear research program as providing wasteful subsidies to an industry that theybelieve should be phased out as unacceptably hazardous and economicallyuncompetitive. Within the nuclear energy budget, the conference report provides $50.0 million for the Nuclear Power 2010 program, which "is focused on resolving the technical,institutional, and regulatory barriers to the deployment of new nuclear power plantsby 2010," according to the DOE budget justification. The Administration had sought$10.2 million for the program, about half the FY2004 appropriation and a third of theFY2003 level. According to the DOE budget justification, the Nuclear Power 2010 program "will enable an industry decision by 2005 to deploy at least one new advancednuclear power plant in the U.S." The current phase of the initiative includes siteapproval, reactor design certification, license applications, detailed design work, anddevelopment of improved construction techniques. DOE will pay up to half the costof these activities. The program is currently helping three utilities seek NRCapproval for potential nuclear reactor sites in Illinois, Mississippi, and Virginia. InMarch and April of 2004, three industry consortia filed applications seeking a totalof $650 million over the next several years to design and license new nuclear powerplants. The nuclear plant licenses under the program would test the "one step"licensing process established by the Energy Policy Act of 1992 ( P.L. 102-486 ). The House Appropriations Committee had voted to cut the Nuclear Power 2010 program to $5.0 million in FY2005, contending that NRC should not issue newreactor licenses "in the absence of a repository for spent nuclear fuel." As discussedin a later section, the Administration's funding request for DOE's waste repositoryprogram created considerable friction with the House Appropriations panel andcontributed to the absence of a Senate markup. The conference report includes $40.0 million for the Generation IV Nuclear Energy Systems Initiative, which focuses on more-advanced reactors that could bedeployed in the longer term. The conference level is about the same as the amountapproved by the House and $10 million above the Administration request. The Generation IV program is focusing on six advanced designs that could be deployed after 2010: two gas-cooled, one water-cooled, two liquid-metal-cooled, andone molten-salt concept. Some of these reactors would use plutonium recoveredthrough reprocessing of spent nuclear fuel. The Administration's May 2001 NationalEnergy Policy report contends that plutonium recovery could reduce the long-termenvironmental impact of nuclear waste disposal and increase domestic energysupplies. However, opponents contend that the separation of plutonium from spentfuel poses unacceptable environmental risks and, because of plutonium's potentialuse in nuclear bombs, undermines U.S. policy on nuclear weapons proliferation. The development of plutonium-fueled reactors in the Generation IV program is closely related to the nuclear energy program's Advanced Fuel Cycle Initiative(AFCI), for which the conference report provides $68.0 million -- about the sameas the FY2004 level and the amount approved by the House. The Administration hadproposed cutting the program to $46.3 million. According to the budget justification,AFCI will "develop advanced, proliferation-resistant nuclear fuel cycle technologies"that could reduce the long-term hazard of spent nuclear fuel and recover additionalenergy. Such technologies would involve separation of plutonium, uranium, andother long-lived radioactive materials from spent fuel for re-use in a nuclear reactoror for transmutation in a particle accelerator. The program includes longstandingDOE work on electrometallurgical treatment of spent fuel from the ExperimentalBreeder Reactor II (EBR-II) at INEEL. In support of President Bush's program to develop hydrogen-fueled vehicles, DOE is requesting $9.0 million in FY2005 for the Nuclear Hydrogen Initiative,nearly a 50% increase from the FY2004 level. The conference report followed theHouse's lead in providing the full funding request. According to DOE's budgetjustification, the program would investigate the use of high-temperature nuclearreactors to make hydrogen from water in a thermochemical process. According toDOE, "preliminary estimates . . . indicate that hydrogen produced usingnuclear-driven thermochemical or high-temperature electrolysis processes would beonly slightly more expensive than gasoline" and result in far less air pollution. An advanced reactor that would demonstrate co-production of hydrogen and electricity -- the Next Generation Nuclear Plant (NGNP) -- is allocated $25.0million from DOE's Generation IV program by the conference report. "Theconferees expect the Department to submit a budget in fiscal year 2006 that isconsistent with the goal of demonstrating hydrogen production and electricitygeneration by 2015 at the Idaho National Laboratory," according to the statement ofmanagers. DOE sought no new funding specifically for the Nuclear Energy Research Initiative (NERI), which provides grants for research on innovative nuclear energytechnologies. Instead, according to the budget justification, NERI projects will bepursued at the discretion of individual nuclear R&D programs. NERI received anappropriation of $11 million for FY2004. New funding also was not requested forthe Nuclear Energy Plant Optimization program (NEPO), which received $2.9million in FY2004. The program supports cost-shared research by the nuclear powerindustry on ways to improve the productivity of existing nuclear plants. Althoughthe House Appropriations Committee agreed to provide no new funding for NERIand NEPO, the conference report includes $2.5 million for each program. Science. The DOE Office of Science conducts basic research in six program areas: basic energy sciences,high-energy physics, biological and environmental research, nuclear physics, fusionenergy sciences, and advanced scientific computing research. Through theseprograms, DOE is the third-largest federal supporter of basic research and the largestfederal supporter of research in the physical sciences. For FY2005, DOE requested $3.432 billion for Science. The FY2004 appropriation was $3.482 billion. (2) On this basis, theFY2005 request was a decreaseof 1%. Some Administration statements asserted that the request reflected a 2%increase, if the FY2004 baseline was taken to exclude funds provided for specificcongressionally directed projects. The House bill provided $3.600 billion. Theconference agreement provided $3.629 billion. (3) After taking into account the generalreduction of 0.80%, the conference agreement represented an increase of 3% abovethe FY2004 appropriation. The requested funding for the largest program, basic energy sciences, was $1.064 billion, an increase of $53 million above the comparable FY2004appropriation. Nanoscience is a growth area in basic energy sciences. Along withother nanoscience funding, the FY2005 request included $99 million for constructionof four Nanoscale Science Research Centers. The House bill provided $1.077 billionfor basic energy sciences. Part of the $13 million increase was for additionalnanoscience research, and nanoscience center construction was fully funded at therequested level. The conference agreement provided $1.114 billion for basic energysciences. After the general reduction, this was a 9% increase above FY2004. The FY2005 request for high-energy physics was $737 million, an increase of $4 million above the comparable FY2004 appropriation. The House bill provideda further increase of $16 million, for a total of $753 million. The conferenceagreement provided $742 million. After the general reduction, this was a 3%increase above FY2004. The House report expressed support for DOE'scollaboration with the National Aeronautics and Space Administration (NASA) onthree scientific spacecraft, and encouraged NASA to maintain the planned schedulesof these missions, which are in question following the President's announcement inJanuary 2004 of a new vision for NASA. (4) Theconference agreement encouragedDOE to proceed with the Dark Energy Mission, but did not mention the other twospacecraft. The requested funding for biological and environmental research was $502 million, a decrease of $140 million below the comparable FY2004 appropriation. The request noted that the decrease corresponded to $140 million that was providedin FY2004 for congressionally directed projects. The House bill provided $572million, or $75 million more than requested, but did not include $5 million requestedfor a new laboratory facility. The House report stated that such facilities should beprocured in a more open competition that includes universities and others as well asDOE laboratories. The conference agreement provided $587 million. After thegeneral reduction, this was a 9% decrease from FY2004; almost all of the decreaseresulted from a reduction in funding for congressionally directed projects. Theconference agreement included $10 million for the new laboratory facility, but itexpressed disagreement with DOE's "strategy of restricting competition for such afacility to only the DOE national laboratories," and it directed DOE to include analternate, more competitive strategy in the FY2006 budget request. The request for nuclear physics was $401 million, an increase of $11 million above the comparable FY2004 appropriation. The House bill provided $415 million,a further increase of $14 million. The conference agreement provided $408 million,a 4% increase above FY2004 after applying the general reduction. The request for fusion energy sciences was $264 million, a $2 million increase above the comparable FY2004 appropriation. In 2003, the United States rejoinednegotiations on construction of the International Thermonuclear ExperimentalReactor (ITER), a fusion facility whose other participants include China, theEuropean Union, Japan, Russia, and South Korea. The requested FY2005 budget forfusion energy sciences included $7 million devoted directly to ITER preparations,plus another $31 million in supporting activities. The budget impact of ITER infuture years, once construction begins, will depend on the outcome of the ongoingnegotiations; the U.S. share is generally expected to be in the range of $50 millionto $100 million per year. Appropriations conference report language in FY2004cautioned DOE not to submit "any future budget requests for ITER that are fundedat the expense of domestic research." The House bill provided $276 million forfusion energy sciences, $12 million more than the request, even though site selectionfor ITER has been delayed, which the House report anticipated will result in DOEspending less than planned on ITER in FY2005. The conference agreement provided$276 million, for a 5% increase above FY2004 after applying the general reduction. Also noting the delay in site selection, the conference report directed DOE to reduceits planned expenditures on ITER in FY2005. The smallest Science program, advanced scientific computing research, was funded at $204 million in the FY2005 request, an increase of $2 million above theFY2004 appropriation. The House bill provided $234 million. The $30 millionincrease recommended by the House was for development of hardware, software, andapplied mathematics for supercomputing, and the House report encouraged DOE tomake time on the resulting supercomputer available to external users on acompetitive basis. The conference agreement also provided $234 million. After thegeneral reduction, this is an increase of 15% above FY2004. The conference reportsupported the House language regarding the $30 million increase, and directed thatno more than $25 million of it should be devoted to hardware. The House report and conference report also included general discussion of three major issues: external regulation of laboratories, competition for new facilities,and facility operating time. The House report expressed strong support for externalregulation of the DOE Science laboratories and strong displeasure with DOE's"continued intransigence" in moving from self-regulation to external regulation. Both reports advocated open competition for new research facilities and broaderparticipation by universities. Both made mention of the recently published 20-yearstrategic plan for Office of Science facilities. (5) TheHouse report commended theOffice of Science for its efforts in developing quantifiable performance measures,such as facility operating time, for which several individual Science programsreceived additional funding. The conference report encouraged DOE to requestsufficient funds for FY2006 to operate user facilities for as much time as possible. Nuclear Weapons Stockpile Stewardship. Congress established the Stockpile StewardshipProgram in the FY1994 National Defense Authorization Act ( P.L. 103-160 ) "toensure the preservation of the core intellectual and technical competencies of theUnited States in nuclear weapons." The program is operated by the National NuclearSecurity Administration (NNSA), a semiautonomous agency established by Congressin the FY2000 National Defense Authorization Act ( P.L. 106-65 , Title XXXII)within DOE. It seeks to maintain the safety and reliability of the U.S. nuclearstockpile. Most stewardship activities take place at the nuclear weapons complex, which consists of three laboratories (Los Alamos National Laboratory, NM; LawrenceLivermore National Laboratory, CA; and Sandia National Laboratories, NM andCA), four production sites (Kansas City Plant, MO; Pantex Plant, TX; SavannahRiver Site, SC; and Y-12 Plant, TN), and the Nevada Test Site. NNSA manages andsets policy for the complex; contractors to NNSA operate the eight sites. Stockpile stewardship consists of all activities in NNSA's Weapons Activities account. Appropriations were $4,908.7 million for FY2001, $5,560.2 million forFY2002, and $5,961.3 million for FY2003; Table 7 provides FY2004 and FY2005data. The three main elements of stockpile stewardship, described next, are DirectedStockpile Work (DSW), Campaigns, and Readiness in Technical Base and Facilities(RTBF); Table 7 presents funding for these elements. NNSA also manages twomajor programs outside of Weapons Activities: Defense Nuclear Nonproliferation,discussed in a subsequent section of this report, and Naval Reactors. Table 8. Funding for WeaponsActivities ($ millions) Source for FY2004 comparable appropriation and FY2005 request: U.S. Departmentof Energy. Office of Management, Budget, and Administration/ CFO. FY 2005Congressional Budget Request. volume 1, National Nuclear Security Administration. DOE/ME-0032, February 2004, p. 49. Notes: Details may not add to totals due to rounding. There was no Senate bill. a. Reflects distribution of a rescission from P.L. 108-199 , FY2004 Consolidated Appropriations Act, and adjustments to make FY2004 appropriation categoriescomparable to those of the FY2005 request. b. Figures do not reflect an across-the-board reduction of 0.80%. c. Includes Secure Transportation Asset, Nuclear Weapons Incident Response,Facilities and Infrastructure Recapitalization Program, Safeguards and Security,Safeguards and Security Charge for Reimbursable Work (an offset), use of prioryear balances, and (for omnibus bill, FY2005) transfer from Department ofDefense Appropriations. On July 18, 2003, the House passed H.R. 2754 , the FY2004 Energy and Water Development Appropriations Bill, 377-26, without amending theWeapons Activities section. Thus, the FY2004 amounts listed below that wererecommended by the House Appropriations Committee were accepted by the House. The Senate passed its version of H.R. 2754, 92-0, on September 16, 2003;it adopted no amendments to the Senate Appropriations Committee's bill thatchanged Weapons Activities funding. The conference report, H.Rept. 108-357 , wasordered to be printed on November 7, 2003. On November 18, 2003, the Houseagreed to the conference report, 387-36, and the Senate agreed to it by unanimousconsent. The President signed the measure into law ( P.L. 108-137 ) on December 1,2003. The FY2004 Consolidated Appropriations Act imposed an across-the-boardrescission of 0.59 percent; it was signed into law ( P.L. 108-199 ) on January 23, 2004. The FY2005 request includes data from NNSA's Future Years Nuclear Security Program (FYNSP), which projects the budget and components through FY2009. Table 9. NNSA Future Years Nuclear Security Program ($ millions) Source: Department of Energy, FY2005 Congressional Budget Request, vol. 1, p.50, 63. Figures for the Robust Nuclear Earth Penetrator (RNEP) for the outyearshave changed from this budget document, as discussed below. They are in flux, soare not available. RNEP is funded under DSW; this table shows DSW funding aspresented in the budget document. Notes: Details may not add to totals because of rounding. a. Includes Secure Transportation Asset, Nuclear Weapons Incident Response,Facilities and Infrastructure Recapitalization Program, Safeguards and Security,and Security Charge for Reimbursable Work. On June 18, 2004, the House Appropriations Committee reported its FY2005 Energy and Water Development Appropriations Bill ( H.R. 4614 , H.Rept. 108-554 ). The House approved the bill, as amended, on June 25, by a voteof 370-16. There were no amendments to the Weapons Activities portion of the bill. In the Senate, the Energy and Water Development Appropriations Subcommittee didnot report a bill to the full committee, so that committee did not report a bill to theSenate. The omnibus appropriations bill subsumes nine regular appropriations bills. Of the nine, the Energy and Water Development appropriations bill was the hardest toresolve. Indeed, press reports raised the prospect that that bill might have beenexcluded from the omnibus, with its programs funded instead through a year-longcontinuing resolution that would have maintained funding at the FY2004 level. Thesticking point was over funding for Yucca Mountain, an underground repository forcivilian nuclear waste, which Senator Domenici, the Chairman of the Senate Energyand Water Development Appropriations Subcommittee, favored. (For details onYucca Mountain, see the "Civilian Nuclear Waste" section in this report.) At thesame time, the House had voted to drop funding for several nuclear weaponsprograms that Representative Hobson, who chaired the House Energy and WaterDevelopment Appropriations Subcommittee, had strenuously opposed. The Senatehad favored these weapons programs in the FY2004 budget cycle. According to numerous press reports, the arrangement that broke the logjam was that several nuclear weapons programs (discussed below) were eliminated, reduced,or modified. At the same time, conferees freed up $800 million from various partsof the omnibus bill. Some of this money was used to provide $577 million for YuccaMountain instead of the $131 million provided by the House. Further, confereesprovided $40.0 million for the chemistry and metallurgy facility replacement projectat Los Alamos National Laboratory, NM, compared to $10.0 million in the Housebill, and $91.1 million for the Microsystem and Engineering Science Applicationsproject at Sandia National Laboratories, NM, compared to $53.3 million in the Housebill. Conferees also added $30.9 million for constructing a Center for IntegratedNanotechnologies, a joint venture between Los Alamos and Sandia NationalLaboratories to be located at Kirtland AFB, NM. (6) Directed Stockpile Work (DSW). This program involves work directly on nuclear weapons in the stockpile, such asmonitoring their condition, maintaining them through repairs, refurbishment, lifeextension, and modifications; R&D in support of specific warheads; anddismantlement. The FY2005 DSW request would support life extension programsfor four nuclear warheads: B61 (gravity bomb), W76 (for Trident I and IIsubmarine-launched ballistic missiles), W80 (for cruise missiles), and W87 (forMinuteman III and MX/Peacekeeper intercontinental ballistic missiles). It wouldfund surveillance and maintenance for nine warhead types, and some managementand technology work not linked to a specific warhead. The FY2004 energy and water development conference report directed DOE and the Department of Defense to prepare a report on the stockpile plan through 2012 soas to see how the stockpile would be adjusted to meet the requirements of theStrategic Offensive Reductions Treaty, which would reduce U.S. and Russianstrategic nuclear warheads to 1,700 to 2,200 by December 2012. (See CRS Report RL31448 , Nuclear Arms Control: The Strategic Offensive Reductions Treaty, fordetails on that treaty.) That classified report was delivered to Congress on June 1,2004. In its FY2005 report on energy and water appropriations, the HouseAppropriations Committee stated that the new stockpile plan "obviates the need forany programmatic acceleration in the Life Extension Program activities for the B61,W76, and W80." To this end, the committee recommended reducing DSW LifeExtension Programs by $40.0 million, to $437.4 million, with the reduction takenagainst the life extension program for the W80. As noted, the House did not amendthe Weapons Activities account. The omnibus bill provided $460.8 million, leavingB61 at the requested $117.9 million, increasing W76 to $236.4 million, and reducingW80 to $106.4 million. Following up the stockpile report, the committee directedDOE to submit a report on requirements for the nuclear weapons complex over thenext 25 years, due April 30, 2005. The House Appropriations Committeerecommended reducing DSW Stockpile Systems by $40.0 million, to $496.1 million,with the reduction taken against such activities for the W80 and W87 "to reduce thesignificant program increase over current year levels pending the recommendationsof the weapons complex review." The omnibus bill reduced DSW Stockpile Systemsto $511.1 million, with reductions to the W80 and W87. Robust Nuclear Earth Penetrator (RNEP) and Advanced Concepts Initiative (ACI). DSW also includes funds for a study of RNEP, forwhich $15.0 million was appropriated for FY2003, $15.0 million was requested and$7.5 million appropriated for FY2004, and $27.6 million requested for FY2005. RNEP is part of ACI, which was established to explore future weapons concepts andtechnologies. Earth penetrators burrow into the ground before detonating in order todestroy underground targets with less explosive yield than a surface-burst weaponwould require. (See CRS Report RL32130 , Nuclear Weapon Initiatives: Low-YieldR&D, Advanced Concepts, Earth Penetrators, Test Readiness, and CRS Report RL32347 , Robust Nuclear Earth Penetrator Budget Request and Plan,FY2005-FY2009 .) RNEP is controversial. Supporters argue that it is needed to attack hard and deeply buried targets (such as leadership bunkers or chemical weapons productionfacilities) in countries of concern, thereby deterring or defeating such nations; criticsreply that RNEP would lower the threshold for use of nuclear weapons and promptother nations to develop nuclear weapons to deter U.S. attack. Secretary Rumsfeld said in 2003 that RNEP "is a study. It is nothing more and nothing less." (7) The study is examining feasibilityand cost. Yet the FY2005 requestseems to cast serious doubt on assertions that RNEP is only a study. Beginning withthe FY2005 budget cycle, NNSA presented a detailed four-year projection along withthe current request. For RNEP, the figures are: FY2005, $27.6 million; FY2006,$95.0 million; FY2007, $145.4 million; FY2008, $128.4 million; and FY2009, $88.4million, for a five-year total of $484.7 million. (8) Along with the increase, the planshows RNEP starting -- assuming congressional authorization -- developmentengineering, in which the nuclear weapons laboratories produce a completed warheaddesign, in FY2007, and production engineering, in which the design is adapted forproduction and a system to manufacture the weapon is created, in FY2009. An NNSA manager responsible for the program maintained that the budget increase beyond FY2005 is an artifact of the budget process. (9) He stated that themoney was inserted in the out years as a "placeholder" to protect the option ofproceeding with RNEP. Were this not done, it is argued that NNSA would face twochoices that it deems unsatisfactory: (1) By the time the budget for one fiscal yearis submitted, the budget for the next fiscal year is largely fixed; without theplaceholder, a decision to proceed with RNEP could not be implemented until thesecond fiscal year. (2) Alternatively, without the placeholder, a decision to proceedwith RNEP could be implemented promptly only by taking the needed funds out ofother programs. Similarly, the move to development engineering and productionengineering reflects how the program might be expected to advance if it proceeds. The official, however, indicated that no decision has been made on whether or notto proceed with RNEP pending completion of the study. The RNEP study was initially projected to cost $45 million -- $15 million a year for FY2003-FY2005 -- but each year's numbers have changed. For FY2003,delay in submission of a DOD study required by the FY2003 National DefenseAuthorization Act ( P.L. 107-314 , Sec. 3146) delayed the start of NNSA's RNEPstudy; as a result, $6.0 million was spent of the $15.0 million appropriated. ForFY2004, Congress cut the RNEP appropriation to $7.5 million. The FY2005 requestis $27.6 million, vs. $15.0 million originally planned. Finally, FY2006, not FY2005,will be the last year of the RNEP study; NNSA estimates the FY2006 request at $30million. The four-year total is about $71 million. NNSA stated that a firm budgetestimate for RNEP beyond FY2006 must await completion of the cost study. According to NNSA, the study's cost has grown for a number of reasons. The $45 million did not take into account participation in the study by Y-12 Plant, whichwould make components of RNEP, or of Pantex Plant, which would convert existingweapons into RNEPs; their participation adds some $2 million. DOE has imposedadditional project management requirements that add $2 million. The rest of theincrease comes from a better definition of the requirements of the study, refinementof cost estimates, and an increase in surety (safety, security, and use control) of theproposed weapon. On the latter point, DOE requires that any modifications of anuclear weapon look for ways to increase its surety. (10) NNSA says it has found waysto increase RNEP surety, and plans to do so. The two Armed Services Committees recommended providing the full amount requested for RNEP for FY2005, $27.6 million, and House and Senate flooramendments to delete such funding were rejected. In contrast, the HouseAppropriations Committee eliminated RNEP and ACI funds for FY2005. It sawthese two programs as a "diversion of resources ... from the most serious issues thatconfront the management of the nation's nuclear deterrent" and "remain[ed]unconvinced" by DOE's assurances that RNEP is only a study and ACI is only todevelop weapon design skills. It found that DOE actions "left little doubt that theobjective of the program [RNEP and ACI] was to advance the most extreme newnuclear weapon goals irrespective of any reservations expressed by Congress." Accordingly, "[t]he Committee directs the NNSA to focus wholly on its primarymission of maintaining the safety, security, and viability of the existing stockpile." As a part of the compromise discussed earlier, the omnibus bill eliminated funds forRNEP and ACI. ACI has also been controversial. Critics claimed that its purpose was to develop a low-yield "mini-nuke" that would make nuclear weapons more usable; supportersresponded that ACI was not working on a mini-nuke and that ACI would helpdevelop and maintain weapons design expertise. The Administration requested $9.0million for ACI for FY2005. The House provided no funds for it for reasons justnoted. The House Appropriations Committee stated that its priorities are maintainingthe stockpile and countering WMD proliferation, and found that DOE's "obsessionwith launching a new round of nuclear weapons development runs counter to thosepriorities." While the omnibus bill provided no funds for ACI, the conference reportstated that "the same amount is made available for the Reliable ReplacementWarhead program to improve the reliability, longevity, and certifiability of existingweapons and their components." Campaigns. These are "multi-year, multi-functional efforts" that "provide specialized scientific knowledge and technicalsupport to the directed stockpile work on the nuclear weapons stockpile." ForFY2005, there are six campaigns, each of which has multiple components: Science;Engineering; Inertial Confinement Fusion and High Yield; Advanced Simulation andComputing; Pit Manufacturing and Certification, and Readiness. The House Appropriations Committee commended NNSA for "great progress in budgeting by weapons type" (e.g., the amount requested for extending the life ofthe W80 warhead). On the other hand, it expressed its concern that NNSA'saccounting system still did not provide the full cost of weapon refurbishmentsbecause it did not assign the cost of campaigns to specific warhead types. Accordingly, "[t]he Committee directs the NNSA to assign the associated lifeextension costs by weapons type associated with each campaign." Pit Manufacturing and Certification Campaign. This is perhaps the most controversial campaign at present. It may remain so for some yearsbecause one component of it is a facility that may cost several billion dollars and isscheduled to start initial operations in FY2019, and other components of thecampaign involve restoring U.S. ability to manufacture pits, a critical nuclear weaponpart. Pits are the fissile cores of nuclear warheads that trigger the thermonuclearsecondary stage. DOE has had no facility to produce pits for use in stockpiledweapons since it suspended pit production at the Rocky Flats Plant (CO) in 1989. Asa result, the United States has been unable to make all-new nuclear warheads ofexisting or advanced new designs. (See CRS Report RL31993 , Nuclear Warhead'Pit' Production: Background and Issues for Congress .) For FY2005, this campaignhas five components. (1) W88 Pit Manufacturing: When Rocky Flats suspended production, it was making pits for the W88 warhead for the Trident II missile. NNSA has established a facility at Los Alamos National Laboratory that is producingthese pits at a low rate, with a target of 10 to 20 pits a year byFY2007. (2) W88 Pit Certification: Additional scientific work is underway to provide confidence, without nuclear testing, that the Los Alamos pitswill work as intended. These pits cannot be certified for use in the stockpile untilthey meet the standards being developed. (3) Pit Manufacturing Capability. This component will establish technologies to manufacture pits other than for theW88. (4) Modern Pit Facility (MPF): NNSA maintains that pits will ultimately develop defects as a result of aging and other unanticipated problems, sothat a higher capacity will be needed in the future. Further, it is argued, since itwould take many years to complete a higher-capacity facility, work on it must beginpromptly. Accordingly, it is planning for MPF, which would be a new facility, firstoperational in FY2019, with a capacity of at least 125 pits per year. It might cost $2billion to $4 billion. Critics maintain that the plutonium component of a pit, whichis by far the most difficult to fabricate, is likely to deteriorate very slowly, andperhaps in a way that would not impair weapon performance. They further state thatthe need for the facility is unclear, given anticipated reductions in nuclear weapons,and that MPF is proceeding at too rapid a pace. To address these questions, NNSAis conducting "accelerated aging experiments," in which plutonium of the type usedin a pit is mixed with a greater-than-usual amount of a more radioactive plutoniumisotope to simulate more quickly the effects of aging. (5) Pit Campaign Support Activities at Nevada Test Site: NNSA plans to conduct certain experiments at Nevada Test Site to support W88 pitcertification. This campaign has attracted much congressional interest. For FY2002, the House Appropriations Committee asserted that DOE cannot show "that it has aviable plan to manufacture and certify pits on the schedule dictated by nationalsecurity needs," criticized the project as "years behind schedule and hundreds ofmillions of dollars over the original cost estimate," and stated that it would judgeNNSA's success on how well the pit project succeeds ( H.Rept. 107-112 ). The SenateAppropriations Committee viewed the then-current schedule, which would not certifya pit for use in the stockpile until FY2009, as "unacceptable" ( S.Rept. 107-39 ). In its FY2003 report, the Senate Appropriations Committee stated that it "remains greatly concerned about the NNSA's refusal to request funds consistentwith its own project plan submitted less than 1 year ago." Because this was not done,"the Committee has been forced to reduce other items in the budget." The finalappropriation provided more funds than requested. According to the joint explanatorystatement of the Committee of Conference, "The increase will ensure that the NNSAmaintains its commitment to produce a certifiable W88 pit by 2003 and a certifiedW88 pit by 2007." For FY2004, the Administration requested a substantial increase to items in this campaign. The House Appropriations Committee saw the campaign as proceedingtoo quickly. It recommended reducing the request for this campaign substantially. It praised NNSA and Los Alamos National Laboratory for "turning around" thiscampaign, but urged NNSA to reduce costs. It stated that the current plan would"aggressively pursue a multi-billion dollar Modern Pit Facility before the firstproduction pit has even been successfully certified for use in the stockpile" andrecommended "a less aggressive planning approach" to MPF. The SenateAppropriations Committee recommended the amount requested for this campaign. The Feinstein amendment ( S.Amdt. 1655 ) discussed under DSW, whichwas tabled, would have barred use of funds for MPF site selection. Confereesprovided the full amount requested for manufacturing and certifying the W88 pit, butreduced MPF funding from $22.8 million to $10.8 million: "The conferees agree withthe House Report that until the Congress reviews the revised future Stockpile planit is premature to pursue further decisions regarding the Modern Pit Facility." The FY2005 request (with FY2004 funding in parentheses) includes $132.0 million ($125.0 million) for W88 pit manufacturing, $101.5 million ($108.6 million)for W88 pit certification, $21.0 ($10.0 million) for pit manufacturing capability,$29.8 million ($10.8 million) for MPF, and $52.2 million ($42.4 million) for pitcampaign support activities at Nevada Test Site. The House Appropriations Committee raised concerns about proceeding with MPF until the need for that facility is validated. It "will consider a modern pitfacility design only when the [accelerated] pit aging experiments are completed andthe future MPF requirements as a function of the 2012 stockpile and the expandedTA-55 production capability are determined." (TA-55 is the facility at Los Alamosused for making pits.) In contrast, it favored accelerating efforts to expand capabilityat TA-55 as a near-term hedge. Accordingly, the committee commended LosAlamos's work to restore pit manufacturing capability at TA-55, adding $10.0million to W88 pit manufacturing to accelerate this work, and eliminated the $29.8million requested for MPF. It provided the amount requested for W88 pitcertification and for pit campaign support activities at Nevada Test Site. Iteliminated the $21.0 million requested for pit manufacturing capability on groundsthat "work on pit manufacturing should be focused on expansion of the pitproduction capability of TA-55." The omnibus bill provided the requested amountsfor W88 pit manufacturing and pit campaign support activities at NTS. It cut W88pit certification to $61.0 million and pit manufacturing capability to $13.5 million. Further, it reduced MPF to $7.0 million: "The conferees agree that funding forModern Pit Facility cannot be used to select a construction site in fiscal year 2005." Other Campaigns. The House Appropriations Committee acted on numerous other campaigns, as presented in its report on FY2005 energy andwater appropriations. Provisions in the omnibus bill are noted here as well. The Primary Assessment Technologies Campaign, a Science Campaign, seeks to develop the ability to certify the safety and performance of agedor rebuilt primaries without nuclear testing. (11) Partof the campaign is to enhance testreadiness, or to reduce the time needed to conduct a nuclear test following apresidential order to test. The request was $81.5 million; the House reduced thatfigure to $66.5 million, as discussed in more detail under "Nuclear Testing and TestReadiness," below. The omnibus bill provided $74.0 million. The conference reportstated, "Within Primary Assessment Technologies, NNSA is directed to fund theNevada Test Site [NTS] to maintain the critical personnel skills and institutionalviability in direct support of the subcritical experimentprogram." The House reduced the Nuclear Survivability Campaign, an Engineering Campaign, by $15.0 million, leaving $9.5 million. The HouseAppropriations Committee questioned its "high level of funding," given that itspurpose is "to assess the ability of weapons in the stockpile to continue to functionas designed during a massive nuclear exchange. In the post-Cold War world ... thisactivity is a waste of scarce resources." The omnibus conference report also provided$9.5 million. The National Ignition Facility (NIF) is part of the Inertial Confinement Fusion and High Yield Campaign. NIF is to be the world's largestlaser. It is under construction at Lawrence Livermore National Laboratory. TheHouse provided the amount requested for NIF construction, $130.0 million. TheHouse Appropriations Committee expressed concern that NNSA's commitment toNIF seemed uncertain because NNSA had delayed the date for ignition from 2010 to2014. Accordingly, the committee directed that no funds be spent on NIF to addcapabilities not in the project's baseline until ignition is attempted in 2010. Theomnibus conference report also provided $130.0 million for NIFconstruction. The House reduced funding for the Advanced Simulation and Computing Campaign from $741.3 million to $666.3 million. The HouseAppropriations Committee stated that it wanted to work with NNSA to developprogram products and milestones so that progress would be "transparent." TheHouse defeated an amendment by Representative Sanders that would have transferred$30.0 million from this campaign to renewable energy R&D. The omnibus billprovided $703.8 million, halfway between the request and the Houseposition. Readiness in Technical Base and Facilities (RTBF). This program provides infrastructure and operationsat the nuclear weapons complex sites. It has six subprograms. By far the largest isOperations of Facilities ($1,021.7 million adjusted appropriation for FY2004,$1,017.6 million requested for FY2005). Others include Program Readiness, whichsupports activities occurring at multiple sites or in multiple programs ($115.8 millionadjusted appropriation for FY2004, $106.2 million requested for FY2005), andMaterial Recycle and Recovery, which recovers plutonium, enriched uranium, andtritium from weapons production and disassembly ($75.7 million adjustedappropriation for FY2004, $87.0 requested for FY2005). Construction is a separatecategory within RTBF; the adjusted appropriation for FY2004 was $258.9 million,and the FY2005 request is $206.3 million. For FY2004, the House Appropriations Committee recommended a reduction of $102.4 million from the request. Details include $997.8 million for Operationsof Facilities, with an increase of $20.0 million for Pantex Plant (TX) and $5.0 millionfor Y-12 Plant (TN); $106.2 million for Program Readiness, reflecting theelimination of funds for Enhanced Test Readiness (discussed below); $76.2 million,as requested, for Material Recycle and Recovery; and $178.9 million forconstruction, with almost all the reduction resulting from eliminating funds requestedfor three projects ($20.0 million, exterior communications infrastructuremodernization, Sandia National Laboratories; $50.0 million, national securitysciences building, and $20.5 million, chemistry and metallurgy facility replacementproject, both at Los Alamos National Laboratory). The Senate Appropriations Committee recommended adding $118.1 million to RTBF for FY2004. Of the increase, $117.0 million went to Operations of Facilities,including $25.0 million for the National Center for Combating Terrorism, $10.0million for Pantex Plant, $10.0 million for Y-12 Plant, $20.0 million for Kansas CityPlant (MO), $15.0 million for Lawrence Livermore National Laboratory, $20.0million for Los Alamos National Laboratory, and $8.0 million for Sandia NationalLaboratories. Conferees provided $1,664.2 million for RTBF for FY2004, an increase of $50.8 million over the request. The main items of difference between the conferencebill and the request were Operations of Facilities (a $30.0 million increase), SpecialProjects (an increase of $8.7 million), and Chemistry and Metallurgy FacilityReplacement Project, Los Alamos National Laboratory (a $10.5 million decrease). The increase in funding for Operations of Facilities was distributed as follows: $5.0million apiece to Pantex Plant, Y-12 Plant, Kansas City Plant, and Nevada Test Site,and $10.0 million to Los Alamos. For FY2005, the House provided $1,652.5 million for RTBF, an increase of $178.0 million. Of the RTBF components, the House increased Operations ofFacilities by $134.0 million, with all but $4.0 million of that going to maintenanceof production facilities at Pantex Plant, Kansas City Plant, and Y-12 Plant. Itreduced Program Readiness by $5.0 million, to $101.2 million; provided therequested amount, $87.0 million, for Material Recycle and Recovery; and increasedConstruction from $206.3 million to $260.3 million. The omnibus bill provided$1,670.4 for RTBF. Most components were funded at the requested level; the twolargest increases were for Operation of Facilities ($1,017.6 million requested,$1,121.6 million provided) and Highly Enriched Uranium Facility at Y-12 Plant($64.0 million requested, $114.0 million provided). Other Programs. Weapons Activities includes four smaller programs in addition to DSW, Campaigns, and RTBF. Secure Transportation Asset provides for the transport of nuclear weapons, components, and materials safely and securely. It includes specialvehicles used for this purpose, communications and other supporting infrastructure,and threat response. The FY2004 adjusted appropriation was $113.5 million. TheFY2005 request is $201.3 million; the House and the omnibus bill provided thatamount. Nuclear Weapons Incident Response provides for use of DOE assets to manage and respond to a nuclear or radiological emergency within DOE, inthe United States, or abroad. Formerly a part of RTBF, it is a separate item in theFY2005 budget. The FY2004 adjusted appropriation was $89.2 million. TheFY2005 request is $99.2 million; the House and the omnibus bill provided thatamount. Facilities and Infrastructure Recapitalization Program provides for deferred maintenance and infrastructure improvements for the nuclear weaponscomplex. In contrast, RTBF "ensure[s] that facilities necessary for immediateprogrammatic workload activities are maintained sufficiently," according to NNSA. The FY2004 adjusted appropriation was $238.8 million. The FY2005 request is$316.2 million; the House and the omnibus bill provided $273.5million. Safeguards and Security provides operations and maintenance funds for physical and cyber security, and related construction, to protect NNSApersonnel and assets from terrorist and other threats. The FY2004 adjustedappropriation was $553.5 million. The FY2005 request is $707.0 million; the Houseprovided $741.0 million and the omnibus bill provided $757.7million. Nuclear Testing and Test Readiness. A key issue is whether the United States can continue to maintain its weaponsthrough the Stockpile Stewardship Program without nuclear testing. While thatprogram has sought to do so, statements in early 2002 implied a reduced commitmentto that approach. Secretary of Defense Donald Rumsfeld reportedly said that nationswith nuclear weapons have "a responsibility to see that they are safe and reliable. Tothe extent that can be done without testing, clearly that is the preference. And thatis why the President has concluded that, thus far, that is the case." (12) J. D. Crouch,Assistant Secretary of Defense for International Security Policy, stated that there is"no change in the Administration's policy at this point on nuclear testing. Wecontinue to oppose CTBT [Comprehensive Test Ban Treaty] ratification. We alsocontinue to adhere to a testing moratorium." (13) Of particular interest is readiness to conduct a nuclear test. Since FY1996, U.S. policy has been that NNSA (or DOE prior to NNSA's establishment) should be readyto conduct a nuclear test within 24 to 36 months from the time the order is given. Several studies identified work needed to reduce this time to 18 months. Thesestudies were funded by "Enhanced Test Readiness." The FY2004 budget documentstated, "The DOD and the NNSA agreed to transition to an 18-month test readinessposture while continuing to review the optimum posture. The actions necessary formoving toward an 18-month posture are expected to begin upon completion of thefinal FY 2003 appropriation." The Senate Armed Services Committee's bill forFY2004 national defense authorizations, S. 1050 , section 3132, requiredan 18-month posture unless the Secretary of Energy determined that a differentposture was preferable. NNSA, however, prepared a study in April 2003 thatconcluded that an 18-month posture was preferable. (14) Meanwhile, through FY2003,funds in the "Nevada Site Readiness" account maintained the 24- to 36-monthposture with ongoing work at the Nevada Test Site. Because no policy decision hadbeen reached on reducing the time needed to test, the Enhanced Test Readiness andNevada Site Readiness accounts had to be kept separated. With the move to an18-month test readiness posture, the enhanced posture was expected to become thecurrent posture, which would have made this separation unnecessary. Accordingly,the two accounts were expected to be merged into "Test Readiness" beginning inFY2004, depending on congressional language, though the FY2004 NNSA budgetrequest level did not reflect that merger. The FY2003 appropriation for enhanced test readiness was $15.0 million. Conferees on the Consolidated Appropriations Resolution for FY2003 directed DOEto notify the Appropriations Committees before obligating any of these funds inFY2003 ( H.Rept. 108-10 ). The FY2004 request for Test Readiness was $24.9million, and for Nevada Site Readiness was $39.6 million. In its FY2004 report, the House Appropriations Committee sharply criticized the plan for enhanced test readiness and recommended eliminating FY2004 funds forit. The committee expressed its concern over an "open-ended commitment" toenhanced test readiness "without any budget analysis or program plan to evaluate theefficiency or effectiveness of this funding increase," argued that the proposal "doesnot address the fundamental difficulties in maintaining test readiness during a testingmoratorium," and noted that it took 18-24 months to conduct a fully-instrumentedtest during the era of routine testing so that a proposal to maintain indefinitely an18-month posture during the testing moratorium "reflects a disturbing 'cost is noobject' perspective." Finally, even though NNSA and DOD decided to move to an18-month test readiness posture, "The Committee does not recognize the NNSAdeclaring a revised test readiness posture as a new requirement nor is it convincedthat the decision can be successfully implemented based on the planning informationprovided to date" ( H.Rept. 108-212 ). The Senate Appropriations Committee madeno reference to nuclear test readiness, and provided the amount requested forProgram Readiness, the component of RTBF containing test readiness funds. TheFeinstein amendment ( S.Amdt. 1655 ) discussed under DSW, which wastabled, would have barred use of funds provided by H.R. 2754 formodifying the test readiness posture to a posture of less than 24 months. Confereesprovided $24.9 million for test readiness, as requested, on grounds that test readinesshad atrophied. "However, the conferees expect the NNSA to focus on restoring arigorous test readiness program that is capable of meeting the current 24-monthrequirement before requesting significant additional funds to pursue a moreaggressive goal of an 18-month readiness posture" ( H.Rept. 108-357 ). Test Readiness had been in RTBF through FY2004, but was transferred to the Science Campaign in the FY2005 budget. (With the transfer, the name "TestReadiness" was dropped; the NNSA request refers to the program as "efforts relatedto maintaining the readiness of the Nevada Test Site to conduct underground nucleartests, if directed.") Funds for test readiness are contained in the Primary AssessmentTechnologies campaign. The FY2005 request for that campaign is $81.5 million, afigure that the House reduced by $15.0 million. The House AppropriationsCommittee report stated this reduction was made to limit the enhanced test readiness initiative to the goal of achieving a 24-month test readiness posture. The Committeecontinues to oppose the 18-month test readiness posture and refers the Department[of Energy] to the unambiguous Congressional language provided in the fiscal year2004 Conference Report requiring the Department to achieve and maintain a24-month test readiness posture. The omnibus bill provided $74.0 million for this campaign, halfway between the House figure and the request. Nonproliferation and National Security Programs. DOE's nonproliferation and national security programsprovide technical capabilities to support U.S. efforts to prevent, detect, and counterthe spread of nuclear weapons worldwide. These nonproliferation and nationalsecurity programs are included in the National Nuclear Security Administration. Funding for these programs in FY2004 was $1.3198 billion. For FY2005, the Administration requested $1.3486 billion. The House bill, H.R. 4614 ,included the requested amount, but distributed the funding differently among thevarious programs. The omnibus bill, H.R. 4818 ( P.L. 108-447 ),appropriated $1.4354 billion. In particular, the Nonproliferation and Verification R&D program, which received $232 million for FY2004, would have been funded at $220 million in theAdministration's FY2005 request, and $241.5 million in the House bill. Theomnibus bill appropriated $225.7 million. Nonproliferation and InternationalSecurity programs would have received $124 million in the request and the Housebill, compared with $110.1 million in FY2004. These programs include internationalsafeguards, export controls, and treaties and agreements. The omnibus bill fundedthem at $154 million. International Materials Protection, Control and Accounting (MPC&A), which is concerned with reducing the threat posed by unsecured Russian weapons andweapons-usable material, would have received $238 million under the President'srequest, compared to $258.5 million appropriated for FY2004. The House bill wouldhave increased that amount to $415.3 million. The final omnibus bill appropriated$322 million. Included in the MPC&A program is the "Megaports initiative," whichis intended to install radiation detection equipment at the top 20 major overseasseaports to interdict nuclear material before it arrives in the United States. TheFY2005 request for Megaports activities was $15 million; the House bill boostedfunding to $45 million. The omnibus bill appropriated the requested $15 million. Two programs in the former Soviet Union, Initiatives for Proliferation Prevention (IPP) and the Nuclear Cities Initiatives (NCI), have been combined intoa single program called "Russian Transition Initiative," aimed at findingnon-weapons employment for roughly 35,000 under-employed nuclear scientistsfrom the former Soviet weapons complex. The FY2005 request for the program was$41 million, compared to $40 million in FY2004, and that amount was included inthe final omnibus bill. Table 10. DOE Defense Nuclear Nonproliferation Programs ($ millions) *Figures do not include an across-the-board cut of 0.80%. Requested funding for the Fissile Materials Disposition program for FY2005 was $649 million, compared with $653 million in FY2004. The program's goal isdisposal of U.S. surplus weapons plutonium by converting it into fuel for commercialpower reactors, including construction of a facility to convert the plutonium toreactor fuel at Savannah River, SC, and a similar program in Russia. The House billcut that amount to $483 million. The final omnibus bill appropriated $624 million. (For details on these programs, see CRS Issue Brief IB10091, Nuclear Nonproliferation Issues , by [author name scrubbed].) Environmental Management. The conference agreement on H.R. 4818 ( P.L. 108-447 ) would provide atotal of $7.51 billion in FY2005 for DOE's Environmental Management Program,subject to an across-the-board rescission of .80%. Prior to this rescission, theappropriation in the conference agreement is $80 million more than theAdministration's request of $7.43 billion, and is $440 million more than the FY2004appropriation of $7.07 billion. The Environmental Management Program is the largest single function within DOE in terms of funding, representing approximately one third of the department'stotal budget. The primary purpose of the program is to manage radioactive andhazardous wastes, and to remediate contamination from such wastes, at former nuclear weapons sites across the country. The program also addresses wastemanagement and remediation at sites where civilian nuclear energy research wasconducted by the federal government. As such, DOE's Environmental ManagementProgram is the largest waste management and environmental cleanup programthroughout the federal government. In comparison, annual funding for the cleanupof non-radioactive contamination at Department of Defense sites has been less than$2 billion in recent years, and annual funding for the Environmental ProtectionAgency's cleanup of the nation's most hazardous private sector sites under theSuperfund program has been around $1.25 billion in recent years. DOE's Environmental Management Program has a lengthy history with many longstanding issues. Much attention has focused on the amount of time and moneyneeded to clean up environmental contamination resulting from the production ofnuclear weapons during the Cold War. Since the beginning of the U.S. atomicenergy program in the 1940's, DOE and its predecessors have been responsible foradministering the production of nuclear weapons and managing radioactive and otherhazardous wastes. In later years, DOE expanded its efforts to include theenvironmental restoration of radioactive sites and those with other hazardouscontamination in buildings, soil, and water to ensure their safety for future uses. In1989, the first Bush Administration established the Environmental ManagementProgram within DOE to consolidate the agency's efforts in cleaning upcontamination from defense nuclear waste and civilian nuclear energy research. DOE is responsible for complying with numerous federal environmental laws andregulations in administering the current program, and is subject to fines and penaltiesfor violations of these requirements. Consequently, DOE has signed numerouslegally binding compliance agreements with the Environmental Protection Agencyand the states to perform cleanup activities and dispose of wastes according tospecific deadlines. DOE reports that there are 114 geographic sites in 31 states and one U.S. territory where the production of nuclear weapons, and civilian nuclear energyresearch and development activities, resulted in radioactive and other hazardouscontamination. Together, these sites occupy approximately 2 million acres, whichis equivalent to the land area of Rhode Island and Delaware combined. DOE reportsthat all response actions were complete at 76 sites as of the end of FY2003, at a costof approximately $70 billion. DOE expects cleanup to be complete at 3 additionalsites by the end of FY2005. However, most of the sites that have been cleaned upthus far are relatively small and are among the least hazardous. The sites wherecleanup remains underway contain some of the most severely contaminated areas. DOE estimates that cleanup at the remaining sites will not be complete until 2035,at a cost of $142 billion. DOE had previously estimated that cleanup would not becomplete until a later date of 2070, at a higher cost of $192 billion. DOE has substantially revised its earlier estimates of cleanup time frames and costs, as part of its cleanup reform initiative. DOE launched this initiative in FY2003and has signed letters of intent with the Environmental Protection Agency and thestates to accelerate cleanup at its major sites. DOE also has prepared PerformanceManagement Plans for many of its sites, which outline how cleanup would beaccelerated and costs reduced. According to DOE, these goals would beaccomplished by assessing the risk of exposure to determine which cleanup remediesare selected. Risk is currently one of many factors that DOE uses to select cleanupremedies. Altering the current process to use risk as the primary factor could resultin decisions to contain waste on site as a means of preventing exposure, rather thanremoving it. Whereas containment can often be accomplished more quickly and atless cost, the possibility of future exposure remains if the method of containment failsover time. Although there has been widespread concern about the amount of time and money needed to clean up nuclear waste sites, questions have been raised as to howDOE would use a risk-based approach to accomplish its goals of faster and lesscostly cleanups without weakening environmental protection. Some have drawnattention to the possibility that more contamination may be left on site, rather thanremoved. Because of the substantial amount of time required for certain types ofradioactivity to decay, arguments have been raised that contamination left in placemay migrate in unexpected ways over the long-term, and result in pathways ofexposure that could not have been predicted when the remedy was originally selected. Others counter that completely removing radioactive contamination from all sites topermit unrestricted future land use, and eliminate all future pathways of exposure,would not be economically feasible, and in some cases would be beyond thecapabilities of current cleanup technologies. DOE's cleanup reform initiative would continue in FY2005, with funding provided under five accounts. These accounts include two for Site AccelerationCompletion, one for Defense and one for Non-defense, which fund efforts tocomplete cleanup and close contaminated facilities at a faster pace than previouslyscheduled. There also are two Environmental Services accounts, one for Defense andone for Non-defense as well, which fund activities that indirectly support the missionof accelerated cleanup and closure, such as policy development and coordination, andthe integration of mission activities across the complex of sites. A fifth account forthe Uranium Enrichment Decontamination and Decommissioning Fund supports thecleanup of uranium enrichment plants and uranium and thorium processing sites, which previously had been included in an account entitled Uranium FacilitiesMaintenance and Remediation. Defense sites have traditionally received the vast majority of funding under the Environmental Management Program. Of the $7.51 billion appropriation for theprogram in omnibus H.R. 4818 ( P.L. 108-447 ), $6.10 billion would beallocated to the Defense Site Acceleration Completion Account, and $938 millionwould be allocated to the Defense Environmental Services Account. TheNon-defense Site Acceleration Completion Account would receive $152 million, andthe Non-defense Environmental Services Account would receive $291 million. TheUranium Enrichment Decontamination and Decommissioning Fund would receive$499 million. Although the total appropriation for these five accounts would be$7.98 billion, this amount is offset by $463 million in federal contribution to theUranium fund, which yields a total amount of $7.51 billion for the EnvironmentalManagement Program in FY2005, subject to an across-the-board rescission of .80%as noted above. The most controversial issue regarding funding for the Environmental Management Program in FY2005 was DOE's "High-level Waste Proposal," forwhich the President's budget proposed to set aside $350 million out of the DefenseSite Acceleration Completion Account. Under this proposal, DOE would speed theclosure of tanks storing high-level radioactive and other chemical wastes at theHanford site in Washington state, the Savannah River site in South Carolina, and theIdaho National Engineering and Environmental Laboratory (INEEL). The volumeof these wastes is substantial. For example, DOE reports that at the Hanford site thereare over 50 million gallons of high-level radioactive and chemical wastes storedbeneath the surface in 177 tanks. The tank wastes at Hanford, and the other two sites,that are classified as "high-level" radioactive wastes must be removed and safelystored in a centralized geologic repository, as required by the Nuclear Waste PolicyAct (NWPA). For more information, see CRS Report RL32163(pdf) , Radioactive WasteStreams: An Overview of Waste Classification for Disposal , by [author name scrubbed]. DOE has proposed to speed the closure of the tanks at these three sites by classifying some of the waste as "incidental to reprocessing," and to dispose of it aslow-level waste by mixing and immobilizing it with a cement "grout" inside the tank. DOE issued this proposal under an internal agency "order" (Order 435.1). (15) SomeMembers of Congress, states, environmental organizations, and communities opposed DOE's proposal, arguing that none of the tank wastes should be allowed toremain in place because of the possibility that the grout might not mix thoroughlywith the waste to contain it safely and prevent leaks. However, others asserted thatmethods to remove all of the tank residues would generate a new hazardous wastestream that would need to be managed properly to prevent exposure. There alsocould be significant risks of exposure to workers who would remove the residues. Thus far, DOE has grouted high-level radioactive wastes in two tanks at the Savannah River site. The Natural Resources Defense Council (NRDC) legallychallenged DOE's authority to dispose of these wastes in this manner. In 2003, theU.S. District Court for Idaho ruled that DOE does not have the authority to classifythe tank wastes at the Savannah River site, or any other site, as anything other thanhigh-level radioactive waste. (16) Consequently,these wastes would have to beremoved and disposed of in a centralized geologic repository as required by theNWPA. DOE appealed the 2003 ruling, and on November 5, 2004, the U.S. Court of Appeals for the Ninth Circuit reversed the above district court opinion, ruling that thechallenge to Order 435.1 was not "ripe" for review. (17) The court found that thedistrict court decision predated DOE application of Order 435.1 to a particularsituation, and, thus, there was no present conflict with the NWPA. (18) The courtdetermined that while it was possible that DOE might violate the NWPA at somepoint, it might just as likely comply with all applicable law. (19) Thus, under the termsof the circuit court opinion, DOE may engage in activities pursuant to Order 435.1,and NRDC or others then would be free to bring suit if they believe those activitiesviolate the law. Prior to the appeals court ruling, the Secretary of Energy asked Congress to enact legislation that would provide DOE with statutory authority to classify someof the tank wastes as incidental to reprocessing at Hanford, Savannah River, and theINEEL, thereby exempting them from disposal requirements for high-levelradioactive waste in the NWPA. Whether the wastes could be left in the tanks andgrouted in place would ultimately depend on the concurrence of state regulatoryagencies who issue the permits for tank closures. Congress included authority in the Ronald W. Reagan National Defense Authorization Act for FY2005 ( P.L. 108-375 ) for DOE to grout some of the tankwastes at Savannah River and the INEEL. However, the authority was not extendedto Hanford, where most of the leaking tanks are located. As noted above, DOE stillmay pursue the grouting of tanks at Hanford under Order 435.1, but could be subjectto legal challenge at that site. (For further discussion, see CRS Report RS21988 , Radioactive Tank Wastes: Disposal Authority in the Ronald W. Reagan NationalDefense Authorization Act for FY2005 , coordinated by David Bearden.) From the appropriation for the Defense Site Acceleration Completion Account, H.R. 4818 ( P.L. 108-447 ) would provide $292 million of the $350million that the Administration requested for its High-level Waste Proposal. Of the$292 million, $163 million would be allocated to the Savannah River site in SouthCarolina for projects to prepare for the grouting of tank wastes, and $97 millionwould be allocated to the INEEL in Idaho for such projects. The remainingappropriation of $32 million would be allocated to Hanford in Washington state. However, it appears questionable whether this appropriation for Hanford would besufficient legal authority to permit the grouting of tank wastes at that site, as thewaste disposal authority in P.L. 108-375 does not include Washington state. There are differing court rulings regarding whether an appropriation of funding by Congress for a specific activity alone provides sufficient authority for an agencyto carry out that activity, absent authority provided in other statutes or in apparentcontradiction of pre-existing authority. In short, Congress can effectively validateotherwise unauthorized or unlawful action in an appropriations act by clearlyindicating that it intends to alter or repeal pre-existing law, in addition to funding anactivity. Whether an appropriation for a specific activity constitutes an authorizationmay be subject to some argument and possible legal challenge, unless Congressexplicitly addresses the authority in question. (20) The conference report languageallocating an appropriation of $32 million for "waste incidental to reprocessing"activities at the Hanford site in FY2005 does not expressly mention the grouting oftank wastes, raising the question of the authority for the use of this disposal methodat that site. In addition to the issue of how to dispose of radioactive tank wastes, there also has been ongoing concern in Congress about the feasibility of DOE's overall plansto accelerate cleanup and lower costs at the 114 sites across the country that make upthe former defense nuclear weapons complex. Prior to the conference agreement on H.R. 4818 ( P.L. 108-447 ), the House Appropriations Committee notedin its report on H.R. 4614 ( H.Rept. 108-554 ) that recent delays incleanup schedules and cost overruns of certain projects raise questions regardingDOE's ability to accelerate cleanup. The committee also raised concerns regardingDOE's delay in submitting a report to Congress on statutory changes that may benecessary to allow accelerated cleanup to proceed, and the need for agreements withthe states on all elements of the Performance Management Plans for each site. Theseplans outline how accelerated cleanup would be accomplished. In addition to funding for the Environmental Management Program, the conference agreement on H.R. 4818 ( P.L. 108-447 ) would appropriate$78 million for DOE's Office of Legacy Management. The Administration hadrequested $66 million, the same as the FY2004 appropriation. Of the amount in H.R.4818 ( P.L. 108-447 ), $47 million would be allocated to defense sites, andthe remaining $31 million to non-defense sites. Congress provided the funding forDOE to establish this office in the Energy and Water Development AppropriationsAct for FY2004 ( P.L. 108-137 ). The primary function of the office is to assesslong-term stewardship needs once cleanup is complete, to ensure that DOE's cleanupactions continue to be effective in the future. These planning assumptions arecurrently based on a time frame of 150 years. DOE previously administered theseresponsibilities under multiple elements of its Environmental Management program. Civilian Nuclear Waste. Considerable controversy erupted over the Bush Administration's FY2005 budgetrequest for the DOE civilian nuclear waste disposal program. Although theprogram's proposed budget totaled $880 million -- a 50% boost over FY2004 -- theAdministration also proposed that $749 million be offset by revenue from theexisting nuclear waste fee, so that the net appropriation would be only $131 million. The House Appropriations Committee, noting that Congress had not enacted the Administration's waste-fee offset proposal, voted to provide only the $131 millionnet appropriation request rather than cut other programs to make up the difference. The controversy contributed to a decision by the Senate Appropriations Committee'sEnergy and Water Development Subcommittee against holding a markup on theFY2005 funding bill. At one point, it appeared that the Energy and Water bill wouldbe left out of the omnibus spending bill, but a compromise was ultimately reachedto give the DOE waste program $577.0 million, the same as the FY2004 fundinglevel. The Administration's proposed spending increase was intended primarily to pay for designing a national nuclear waste repository at Yucca Mountain, Nevada, andfor developing a national waste transportation program. DOE contends that fundingfor the waste program, run by the Office of Civilian Radioactive Waste Management(OCRWM), must average $1.3 billion per year between FY2005 and FY2010 to meetthe current 2010 target date for shipping nuclear waste to Yucca Mountain. Thattarget date was largely dependent on DOE's plans to submit a repository licenseapplication to the Nuclear Regulatory Commission by the end of 2004 -- which DOErecently announced would be delayed until 2005. In addition to the $880 million request for the civilian waste disposal program, the Administration had planned in FY2005 to transfer responsibility for DOE-ownedspent fuel to a new Office of DOE Spent Fuel Management, which would report tothe OCRWM Director. The $22.5 million request for the new office brought the totalFY2005 request for OCRWM to $907.5 million. However, the conference report didnot include the proposed transfer. The Nuclear Waste Policy Act of 1982 (NWPA, P.L. 97-425 ), as amended, names Yucca Mountain as the sole candidate site for a national geologic repository. Congress passed an approval resolution in July 2000 ( H.J.Res. 87 , P.L.107-200 ) that authorized the Yucca Mountain project to proceed to the licensingphase. FY2005 funding in the conference report for the Office of Civilian Radioactive Waste Management comes from two appropriations accounts. First, $346.0 millionis appropriated from the Nuclear Waste Fund, which consists of fees paid by nuclearutilities. Second, $231.0 million would be appropriated from general revenues underthe Defense Nuclear Waste Disposal account, which pays for disposing of high-levelwaste from the nuclear weapons program in the planned civilian repository. The House Appropriations Committee excoriated the Administration for requesting a net appropriation of only $131 million and for assuming that Congresswould enact the waste-fee offset proposal in time. "At best, the Office ofManagement and Budget (OMB) made an unwise budget calculation to assume thisoffset," said the committee report. "At worst, OMB took a foolish political gambleby assuming that reclassification legislation would be enacted this year." The House panel warned in its report that the funding cutback would have "far-reaching" consequences for the nuclear waste program, but that there was nofunding available under the budget request to shift from other programs. TheCommittee report noted DOE's prediction that the funding reduction could forcelayoffs of 70% of the program's work force, place submittal of the repository licenseapplication "at risk," and cause "an indefinite delay in opening the repository." On the same day the House Appropriations Committee approved the energy and water bill, the Subcommittee on Energy and Air Quality of the House Energy andCommerce Committee approved a bill ( H.R. 3891 ) to enact theAdministration's nuclear waste fee reclassification proposal. However, the use ofwaste fees to offset appropriations for the repository program would be limited to thenext five years. No Senate action has been taken on the proposal. 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, upsetover DOE's failure to meet the 1998 disposal deadline, have won two federal courtdecisions upholding the department's obligation to meet the deadline and tocompensate utilities for any resulting damages. Utilities have also won several casesin the U.S. Court of Federal Claims. The nation's largest nuclear utility, ExelonCorporation, reached a breach-of-contract settlement with the federal government inAugust 2004 that may total $600 million if DOE does not begin taking spent fuelbefore 2015. Further delays in the Yucca Mountain program could result from a July 2004 court decision that overturned a key aspect of the Environmental Protection Agency's(EPA's) regulations for the repository. A three-judge panel of the U.S. Court ofAppeals for the District of Columbia Circuit ruled that EPA's 10,000-yearcompliance period was too short, but it rejected several other challenges to thestandards. (For more information, see CRS Issue Brief IB92059, Civilian NuclearWaste Disposal , by [author name scrubbed].) Power Marketing Administrations. DOE's four Power Marketing Administrations (PMAs) developed during the 1930sout of the construction of dams and multi-purpose water projects that are operatedby the Bureau of Reclamation and the Army Corps of Engineers. The originalintention behind many of these projects was conservation and management of waterresources, including irrigation, flood control, recreation, and other objectives. However, many of these facilities generated electricity for project needs. The PMAswere established to market the excess power; they are the Bonneville PowerAdministration (BPA), Southeastern Power Administration (SEPA), SouthwesternPower 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 generating facilities,but they generally do own transmission facilities, except for Southeastern. ThePMAs are responsible for covering their expenses and repaying debt and the federalinvestment 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 Act, P.L. 104-58 ). Therehas been no press to dispose of the remaining PMAs, and none seems likely given thebroader uncertainties governing electric utility restructuring. Congress enacted a funding level of $213.0 million in FY2004, less $22 million in Colorado River Basin revenues. The FY2005 request is $210.5, less $23 millionin Colorado River revenues, reflecting a reduction of $3.8 million for WAPA, andslight increases for the three other PMAs. The House bill included the same level offunding, as does the omnibus bill (less the 0.80% rescission). BPA receives no annual appropriation, but funds some of its activities from permanent borrowing authority, which was increased in FY2003 from $3.75 billionto $4.45 billion (a $700 million increase). BPA is not requesting additionalborrowing authority in FY2005. BPA intends to use $487 million of its borrowingauthority in FY2004, down from $528 in FY2004, to be used for generation andtransmission services, conservation, energy efficiency, fish and wildlife, and capitalequipment programs. Independent agencies that receive funding from the Energy and WaterDevelopment bill include the Nuclear Regulatory Commission (NRC), the Appalachian Regional Commission (ARC), and the Denali Commission. Table 11. Energy and Water Development Appropriations Title IV: Independent Agencies ($ millions) Source: President's budget request for FY2005, H.Rept. 108-554 and H.Rept. 108-792 . a. Does not include the modified rescission amount of .80% in H.Con.Res. 528 . Nuclear Regulatory Commission. The Nuclear Regulatory Commission (NRC) requested a total budget of $670.3million for FY2005, including $7.5 million for the NRC inspector general's office. The request is about 7% above the FY2004 funding level. Major activities conductedby NRC include safety regulation and licensing of commercial nuclear reactors,licensing of nuclear waste facilities, and oversight of nuclear materials users. Theomnibus conference report provides the full request, as did the House-passed energyand water bill. NRC proposed to spend $39.7 million -- an 18% increase -- on licensing activities for possible new commercial reactors, which are being encouraged byDOE's Nuclear Power 2010 program. According to the NRC budget justification,the funding will be used for early site permits (sites approved for future reactors),reactor pre-licensing and licensing reviews, and certification of new reactor designs. The House Appropriations Committee had approved bill language prohibiting NRC from issuing a license during FY2005 for construction or operation of a newcommercial nuclear power plant. The committee report contended: "For the NuclearRegulatory Commission to license any new reactors without a certain disposal pathfor the spent nuclear fuel would be unjustifiable and irresponsible." However, theconference report and the House-passed bill do not include the licensing restriction. In the wake of the September 11, 2001, terrorist attacks against the United States, NRC has focused additional attention on the security of nuclear power plantsand other users of radioactive material. NRC's FY2005 budget request included$56.8 million for activities related to homeland security, a 10% increase overFY2004. In FY2005, NRC intends to continue conducting force-on-force securityexercises and require nuclear plants to revise their security plans to reflect increasedbaseline threats. (For more information on protecting licensed nuclear facilities, see CRS Report RS21131 , Nuclear Power Plants: Vulnerability to Terrorist Attack , by[author name scrubbed].) To begin reviewing an anticipated DOE license application for a national nuclear waste repository at Yucca Mountain, Nevada, the NRC budget for high-levelwaste regulation would more than double from FY2004. The $69.1 million requestalso includes safety testing of full-scale casks for transporting nuclear waste by railand by truck. For the decade before FY2001, NRC's budget was offset 100% by fees on nuclear power plants and payments by other licensed activities, such as the DOEnuclear waste program. The nuclear power industry had long contended that the feestructure required nuclear reactor owners to pay for a number of NRC programs, suchas foreign nuclear safety efforts, from which they did not directly benefit. To accountfor that concern, the FY2001 Energy and Water Development Appropriations Act( P.L. 106-377 ) included an NRC proposal to phase down the agency's fee recoveryto 90% during the subsequent five years -- two percentage points per year. Therefore, 90% of the FY2005 NRC budget is to be offset by fees on licensees. Because $69.1 million is to be appropriated from the Nuclear Waste Fund to pay forwaste repository licensing, the 90% fee requirement applies to $601.2 million of thebudget, leaving a net appropriation of $60.1 million. With the Nuclear Waste Fundappropriation, NRC's total net appropriation in the conference report is $129.2million. CRS Issue Brief IB10041. Renewable Energy: Tax Credit, Budget, and Electricity Production Issues, by [author name scrubbed]. CRS Issue Brief IB92059. Civilian Nuclear Waste Disposal, by [author name scrubbed]. CRS Issue Brief IB10091. Nuclear Nonproliferation Issues, by Carl Behrens. CRS Issue Brief IB10120. Army Corps of Engineers Civil Works Program: Issues for Congress, by [author name scrubbed] and [author name scrubbed]. CRS Issue Brief IB88090. Nuclear Energy Policy , by [author name scrubbed] and Carl Behrens. CRS Report RS20702 . South Florida Ecosystem Restoration and the Comprehensive Everglades Restoration Plan, by [author name scrubbed] and [author name scrubbed]. CRS Report RL30928. Army Corps of Engineers: Reform Issues for the 107th Congress, by [author name scrubbed]. CRS Report RS20569 . Water Resource Issues in the 107th Congress, by Betsy A.Cody and [author name scrubbed]. CRS Report RS20866 . The Civil Works Program of the Army Corps of Engineers: A Primer, by [author name scrubbed] and [author name scrubbed]. CRS Report RL31116 . Water Infrastructure Funding: Review and Analysis of Current Issues, by [author name scrubbed] and [author name scrubbed]. CRS Report RL30478 . Federally Supported Water Supply and Wastewater Treatment Programs, by the Resources, Science and Industry Division. CRS Report RL32189 . Terrorism and Security Issues Facing the Water Infrastructure Sector, by [author name scrubbed] and [author name scrubbed]. CRS Report RL31098(pdf) . Klamath River Basin Issues: An Overview of Water Use Conflicts, coordinated by [author name scrubbed]. CRS Report RL30928. Army Corps of Engineers: Reform Issues for the 107th Congress , by [author name scrubbed]. CRS Report RL32131 , Phosphorus Mitigation in the Everglades , by [author name scrubbed] and Barbara Johnson. CRS Report RL31975 , CALFED Bay-Delta Program: Overview of Institutional and Water Use Issues , by [author name scrubbed] and Pervaze Sheikh. CRS Report RL32130 , Nuclear Weapon Initiatives: Low-Yield R&D, Advanced Concepts, Earth Penetrators, Test Readiness, by Jonathan Medalia. CRS Report RL32347 , Robust Nuclear Earth Penetrator Budget Request and Plan, FY2005-FY2009, by Jonathan Medalia. CRS Report RL31993 , Nuclear Warhead 'Pit' Production: Background and Issues for Congress, by Jonathan Medalia. CRS Report RL32163(pdf) , Radioactive Waste Streams: An Overview of Waste Classification for Disposal , by [author name scrubbed]. CRS Report RS21131 , Nuclear Power Plants: Vulnerability to Terrorist Attack , by [author name scrubbed]. | The Energy and Water Development appropriations bill includes funding for civil works projects of the Army Corps of Engineers (Corps), the Department of the Interior's Bureau ofReclamation (BOR), most of the Department of Energy (DOE), and a number of independentagencies. The Bush Administration requested $27.94 billion for these programs for FY2005,compared with $27.26 billion appropriated for FY2004 ( P.L. 108-137 , and rescissions included in P.L. 108-199 ). On June 16 the House Appropriations Committee reported out its bill( H.R. 4614 ) with $27.99 billion, and the bill passed the House on June 25. The Senatedid not report out a separate Energy and Water Appropriations bill, and funding for these programsof $28.49 billion was included as Division C of the omnibus Consolidated Appropriations Act( H.R. 4818 , P.L. 108-447 ). Key issues involving these programs included: funding and progress of major water/ecosystem restoration initiatives such as Florida Everglades and California "Bay-Delta" (CALFED); funding for the proposed national nuclear waste repository at Yucca Mountain, Nevada; funding for developing a new nuclear warhead, the Robust Nuclear Earth Penetrator and for a "Modern Pit Facility" to build nuclear weapons components;and plans to reduce the time necessary to prepare the Nevada Test Site to resume nuclear weapons testing. Funding for the Yucca Mountain project was a major issue that prevented passage of a stand-alone bill, and the possibility of a year-long continuing resolution for Energy and Waterprograms was widely discussed. However, appropriators agreed in the omnibus bill to fund theproject at the same level as in FY2004. Part of the funding for Yucca Mountain came from thecontroversial Nuclear Earth Penetrator and pit facility and the upgrading of the Nevada Test Site,which were cut from the budget. This report will be updated as events warrant. Key Policy Staff Division abbreviations: RSI = Resources, Science, and Industry; FDT= Foreign Affairs, Defense,and Trade. |
Traumatic brain injury (TBI) has become known as a "signature wound" of Operations Enduring Freedom and Iraqi Freedom (OEF/OIF). Several years into these operations, both Congress and the executive branch showed increased attention to the health care needs of servicemembers and veterans returning from deployments with injuries—and specifically the needs of those with TBI. For example, pursuant to the Traumatic Brain Injury Act of 2008 ( P.L. 110-206 ), the Centers for Disease Control and Prevention (CDC), the National Institutes of Health (NIH), the Department of Defense (DOD), and the Department of Veterans Affairs (VA) formed a Leadership Panel to (among other things) recommend ways for the four agencies to collaborate further to develop and improve TBI diagnosis and treatment. These four agencies have implemented many of the Leadership Panel's recommendations, and in some cases implementation is ongoing. Congressional attention to TBI among veterans has continued as well. This report focuses on current efforts of the VA's Veterans Health Administration (VHA) to understand, identify, and treat TBI among veterans. It begins with an overview of TBI as background for the subsequent discussion of VA programs and services relevant to veterans with TBI, some of which focus on (or are limited to) OEF/OIF veterans. The Brain Injury Association of America defines TBI as "an alteration in brain function, or other evidence of brain pathology, caused by an external force." In the general population, TBI results mainly from falls, motor vehicle/traffic accidents, assaults, and other instances in which the head is struck by or strikes an object. In military servicemembers, TBI may result from those kinds of events or from improvised explosive devices (IEDs), mortars, grenades, bullets, or mines. Some explosives cause a blast wave (i.e., over-pressurization force), which may result in TBI without outward physical signs of injury. TBI caused by blast waves may be accompanied by other injuries (e.g., to hearing or vision). The DOD reports that in 2013 (the most recent full-year data), a total of 27,324 servicemembers sustained TBI. The total number of veterans who have experienced TBI is not known, in part because TBI is difficult to identify, and in part because some veterans have not accessed VA health care services. Traumatic brain injury is not a specific diagnosis; the term encompasses a range of conditions. A TBI may be classified as focal or diffuse; open or closed; and mild, moderate, or severe. If the injury is localized to a small area of the brain, it is a focal injury; an injury occurring over a large area is diffuse. If the head hits, or is hit by, an object that penetrates the skull and the brain's protective coverings, the injury is open (also called penetrating); otherwise, the injury is closed and can be further classified as mild, moderate, or severe. Many methods have been used to classify TBI as mild, moderate, or severe based on one or more of the signs and symptoms that characterize TBI immediately following the injury. For example, one method determines severity based on whether an individual loses consciousness and, if so, how long the loss of consciousness persists. Another method determines severity based on the duration of post-traumatic amnesia (i.e., an inability to recall events that occur after the injury, accompanied by disorientation or confusion). The Glasgow Coma Scale takes into account multiple signs of TBI, assigning points in three areas (eye opening, verbal response, and motor response), such that the sum of points ranges from 3 to 15, with lower scores indicating greater severity of TBI. Table 1 summarizes the criteria for mild, moderate, and severe TBI using these three methods, which are among the most commonly used. Individuals with TBI may experience a range of problems, including changes in physical functioning, cognition, sensory processing, communication, and behavior. In the days or weeks following a TBI, approximately 40% of patients (including those with mild TBI) develop an array of symptoms collectively called postconcussion syndrome: headaches, dizziness, vertigo, memory problems, concentration problems, sleeping problems, restlessness, irritability, anxiety, depression, and apathy. For some people, postconcussion syndrome and other problems associated with TBI may resolve over time; for others, the problems may persist for a lifetime. Signs and symptoms may depend in part on the severity of the TBI, which part of the brain was injured, the individual's age and general health, whether there has been prior injury, and other factors. Common physical signs and symptoms of mild TBI include headaches, fatigue, lethargy, dizziness, and lightheadedness. Individuals with moderate to severe TBI may experience any of these signs and symptoms, as well as repeated nausea or vomiting, a persistent or worsening headache, seizures or convulsions, numbness or weakness in their feet or hands, and loss of coordination. Their pupils might be dilated and their speech might be slurred. Individuals with TBI may experience cognitive problems that hinder efforts to return to work or school, or, in some cases, to manage situations in everyday life. They may become easily confused or distracted. They may experience problems with memory, attention, or concentration. They may have difficulty making plans, solving problems, or exercising judgment. Moderate to severe TBI is associated with more cognitive problems than mild TBI. Repeated mild injuries—each of which might have gone unnoticed—may result in cognitive problems equal to a moderate or severe injury. Individuals with mild TBI may also experience problems with vision, hearing, taste, smell, or touch. Vision problems, the most common sensory problems, may interfere with the ability to drive a car or operate machinery. Difficulties with hand-eye coordination may cause individuals with TBI to bump into things, drop objects, or seem unsteady. More rarely, some individuals with TBI may experience ringing in the ears; a bad taste in the mouth; a persistent noxious smell; or sensations of tingling, itching, or pain. Individuals with TBI often experience communication problems that may cause confusion and frustration for them and others around them. They may have difficulty speaking and understanding what others say. They may also struggle with non-verbal communication such as body language or facial expressions. They may have problems writing and reading. Most individuals with TBI experience some behavioral problems, and their family members often find these to be the most difficult problems to handle. They may feel depressed, apathetic, anxious, paranoid, agitated, irritable, frustrated, or angry. They may experience mood swings or sleep problems. They may engage in behavior that is impulsive, socially inappropriate, aggressive, or violent. Individuals with TBI may also suffer from comorbid conditions, which include both mental and physical illnesses. Mental disorders associated with TBI include posttraumatic stress disorder (PTSD) and depression; estimates of how often such conditions co-occur with TBI vary. Although some studies have found a link between TBI and increased alcohol or drug use, a report by the Institute of Medicine (IOM) found just the opposite: limited/suggestive evidence of an association between TBI and decreased alcohol and drug use within one to three years of the injury. Individuals with TBI are at increased risk of developing epilepsy and neurodegenerative diseases such as Alzheimer's disease, Lewy body dementia, or Parkinson's disease. Repetitive blows to the head can result in chronic traumatic encephalopathy, a condition that may begin with loss of concentration, attention, or memory and may eventually progress to problems with coordination, gait, slurred speech, and tremors. Post-traumatic hypopituitarism, a neuroendocrine disorder associated with TBI, may lead to other neuroendocrine conditions, including hypothyroidism and deficiencies in growth hormone and gonadotropin. Individuals with TBI may also develop sleep disturbances, obstructive sleep apnea, incontinence, sexual dysfunction, metabolic dysfunction, or musculoskeletal dysfunction. How TBI is treated varies with the severity of the injury, along with other factors. Most cases of mild TBI resolve without medical attention; education about mild TBI can effectively "normalize symptoms and provide expectation of rapid recovery." Moderate or severe TBI requires medical attention; treatment may include surgery, medication, rehabilitation, psychotherapy, case management, and other services. In the case of severe TBI, which often co-occurs with other serious injuries, individuals often experience long-term physical or mental disabilities that require ongoing rehabilitation and nursing care. The various types of treatment may be provided in a variety of settings, from inpatient surgery in an acute care hospital to home-based rehabilitation services. Both the required types of treatment and the appropriate setting of care may change over time, as an individual with moderate to severe TBI moves from acute care to post-acute care to long-term services and supports (if needed). In general, acute care refers to short-term care for a serious illness or injury. For individuals with moderate to severe TBI, acute care may include surgical interventions (e.g., to relieve pressure inside the skull), medication (e.g., to prevent further injury), and other interventions (e.g., life support) for both the TBI and any other injuries. Acute care for individuals with moderate to severe TBI may begin at the location the injury occurred or in a medical facility; it may be delivered in a hospital's emergency department or intensive care unit, for example. Acute care generally involves a multidisciplinary team of health care providers representing neurosurgery, neurology, physical medicine, psychiatry, and neuropsychology. Some experts have suggested that the best outcomes are achieved when ancillary services (e.g., physical and occupational therapy, audiology, and optometry) begin during the acute phase of treatment rather than later during the post-acute phase, which is more typical. The duration of acute care for individuals with moderate to severe TBI may vary, depending on the severity of TBI, the level of functional impairment, comorbid conditions (e.g., other injuries or diseases), and other characteristics (e.g., age). Acute care continues until an individual is medically stable, at which point the individual may be released or transferred to post-acute care, depending on the severity of the TBI and any other medical conditions. Post-acute care generally begins when an individual is medically stable, no longer in need of acute care services, and still in need of some services. For an individual with moderate to severe TBI, post-acute care primarily takes the form of intensive rehabilitation to maximize functioning. Post-acute rehabilitation services may be provided in inpatient, outpatient, or home-based programs, among other settings. A treatment plan is tailored to meet the individual's needs in areas such as physical, occupational, and speech therapy; physical medicine (physiatry); mental health care; and social support. Over time, the treatment plan changes to address the individual's changing needs. Long-term services and supports are intended to help maintain or improve an individual's level of physical functioning and quality of life. The need for long-term services and supports is generally defined by limitations on an individual's ability to independently perform basic personal care activities—known as activities of daily living (ADLs)—over an extended period of time. (See the textbox for more information about ADLs.) In individuals with moderate to severe TBI, such limitations may be due to either physical problems (which may require hands-on assistance) or cognitive problems (which may require supervision or guidance). Services may include preparing meals, doing laundry and other housework, and helping with medication, among others. Supports may include the use of special equipment, assistive devices, or technology by a physically impaired person (e.g., a wheelchair ramp). An individual's need for long-term services and supports may change over time as his or her condition changes. Long-term services and supports may be provided in institutional settings such as nursing facilities, in community-based settings such as adult day health care centers, or in private homes. Both formal (paid) and informal (unpaid) caregivers may provide long-term services and supports. Formal caregivers may be licensed or skilled health care workers such as nurses, physical or occupational therapists, and social workers. More often, however, they are non-licensed health care workers such as certified nursing assistants, home health aides, and personal care aides. Informal (unpaid) caregivers such as family members, friends, and neighbors provide the vast majority of long-term services and supports. Although the early stages of TBI treatment may occur within the military health care system if the initial injury occurs during military service, a description of the military health care system is beyond the scope of this report, which focuses on the VA health care system. In FY2014, VA spending for TBI was $229 million (including $55 million for OEF/OIF veterans). In FY2015, VA spending for TBI is estimated to be $234 million (including $61 million for OEF/OIF veterans). The VA projects the 10-year (FY2016–FY2025) costs of TBI to be $2.2 billion (including $0.5 billion for OEF/OIF veterans). It should be noted that OEF/OIF veterans represent approximately 11% of patients treated by the VA. As discussed above, the type of treatment needed depends on the severity of the injury. The VA and the DOD have jointly developed evidence-based clinical practice guidelines treating mild TBI, which represents the majority of injuries. Most cases of mild TBI, however, resolve without medical attention. Moderate or severe TBI requires immediate treatment. In the case of servicemembers, treatment begins at the site of the event and continues at a military treatment facility. Once stabilized, servicemembers may remain at a military treatment facility or be sent to VA medical facilities for continuing treatment, rehabilitation, and transitional care. VA programs and services relevant to TBI include (1) coordinating the transition from DOD to VA care, (2) screening and evaluation, (3) acute and post-acute care provided through the VA Polytrauma/TBI System of Care (PSC), and (4) long-term services and supports. In addition, the VA conducts TBI research, both independently and collaboratively. When servicemembers transfer from DOD to VA facilities (regardless of whether they are discharged from active duty to veteran status), coordination between the two systems is necessary. Three VA and joint VA/DOD programs seek to address the transition from DOD to VA health care facilities: (1) the VA Liaison Program, (2) OEF/OIF Care Management, and (3) the Federal Recovery Coordinator Program. These programs are available to veterans with TBI as well as other qualified veterans and servicemembers. Since 2003, the VA Liaison Program has placed VA employees at military treatment facilities, where they provide onsite consultation about VA resources. Liaisons coordinate referrals with the OEF/OIF Care Management teams at local VA facilities; they maintain involvement until health care is arranged and transfer is complete. Since 2007 every VA Medical Center has had an OEF/OIF Care Management Team to coordinate, monitor, and track the care of severely ill or injured OEF/OIF servicemembers and veterans. The team consists of (at a minimum) a program manager, a clinical case manager, and a transition patient advocate. Program managers and clinical case managers are either nurses or social workers. Transition patient advocates serve as personal advocates for patients moving through the VA health care system. This service is available to all OEF/OIF veterans without referral. In 2007, the VA and the DOD jointly established the Federal Recovery Coordination Program (FRCP), which coordinates services provided by the DOD, the VA, and other public and private entities. Veterans and servicemembers with TBI (one of several qualifying conditions) can self-refer to the FRCP or be referred by clinicians, family members, veterans service organizations, and others. Each veteran (or servicemember) enrolled in the FRCP is assigned a Federal Recovery Coordinator, who coordinates care but does not provide direct services. As of December 2012, the FRCP had 24 Federal Recovery Coordinators and 902 active clients, including 412 veterans. In 2011, the Government Accountability Office (GAO) found that the FRCP faced challenges when coordinating with other programs. Because the majority of enrollees are enrolled in at least one other program for wounded servicemembers or veterans, the FRCP must coordinate the efforts of care providers and other care coordinators. Having multiple care coordinators increases the potential for duplication of effort, conflicting treatment goals, or failure to address problems (if each coordinator thinks someone else is handling the problem). In November 2012, the Interagency Care Coordination Committee (IC3) was chartered to monitor DOD and VA care coordination and case management activities for wounded, injured, or ill servicemembers and veterans (not limited to those with TBI), as well as their families and other caregivers. The IC3 found that, across the DOD and the VA, more than 50 programs were operating in accordance with more than 240 agency policies. In January 2013, the IC3 launched a feasibility assessment of a "Lead Coordinator" concept at two VA medical centers and one military treatment facility; the assessment has been expanded to include more—but still a small minority of—facilities. Moderate or severe TBI is likely to be recognized immediately at the time of the initial injury; however, mild TBI may go unnoticed if an individual walks away from an injury seemingly unharmed. Despite repeated assessments of servicemembers by the DOD, veterans may enter the VA health care system with undiagnosed TBI. Since 2007, VA policy has required that all OEF/OIF veterans receiving medical care in the VA health care system be screened for possible TBI (to identify cases of TBI that might otherwise go untreated). Those who screen positive must be offered further evaluation and specialized treatment. The VA adapted a screening instrument from one used by the DOD. This screening instrument was incorporated into the computerized patient record system, which automatically alerts providers when a screening is required and prompts them to ask a series of questions. If a veteran screens negative for possible TBI, no further action is required. If a veteran screens positive for possible TBI, a follow-up evaluation is required (unless refused by the veteran), because not all veterans who screen positive actually have TBI. Accurately diagnosing TBI is complicated by symptoms that overlap with posttraumatic stress disorder (PTSD), such as difficulty concentrating, irritability or angry outbursts, and memory loss. Because of the complexity of diagnosing TBI and differentiating symptoms of other disorders, specialized training is required to conduct the Comprehensive TBI Evaluation, which includes determining the origin of the injury, administering a 22-item neurobehavioral symptom inventory, conducting a targeted physical examination, and preparing a treatment plan. The VA Office of Inspector General found that a majority of VA staff informed veterans of TBI screening results; appropriately referred veterans who screened positive for comprehensive evaluations (or documented veterans' refusals); made sufficient attempts to reschedule when veterans failed to appear for evaluation appointments; and offered families relevant training. Of the cases the Office of Inspector General examined, 21% did not complete the comprehensive evaluation within 30 days of a positive screen (or document veterans' refusal); 21% did not have a case manager assigned at the time of the evaluation; 15% did not have care plans; and 22% had no documentation that care plans were shared with the veterans and/or their families. Veterans with moderate or severe TBI may receive care through the VA Polytrauma/TBI System of Care (PSC), which is also available to veterans with other traumatic injuries. Established in 2005 pursuant to the Veterans Health Programs Improvement Act of 2004 ( P.L. 108-422 ), the PSC is designed to function within the existing VA health care system, which is organized into 21 geographic regions, called Veterans Integrated Service Networks (VISNs). Like the larger VISN structure, the PSC is geographically dispersed, thereby making the specialized treatment more accessible to veterans, regardless of where they live. The PSC operates as a "hub and spoke" model with four components: (1) Polytrauma Rehabilitation Centers, (2) Polytrauma Network Sites, (3) Polytrauma Support Clinic Teams, and (4) Polytrauma Points of Contact. In FY2013, across all four components, the PSC served 50,516 unique patients (including both veterans and servicemembers) in outpatient clinics and 1,381 unique patients in inpatient units; however, these patients did not necessarily all have TBI. Five regional Polytrauma Rehabilitation Centers serve as regional referral centers, the "hubs" of the PSC. They provide acute inpatient medical and rehabilitation services and consultation, as well as research and education related to polytrauma and TBI. Each Polytrauma Rehabilitation Center has an interdisciplinary treatment team, which includes a rehabilitation physician (physiatrist), registered nurses, social workers, speech-language pathologists, physical therapists, occupational therapists, recreation therapists, and a neuropsychologist, among others. Twenty-three Polytrauma Network Sites extend the "spokes" of the PSC to each VISN (including one co-located with each of the Polytrauma Rehabilitation Centers) plus Puerto Rico. Polytrauma Network Sites provide continued medical care and rehabilitation services in a setting appropriate to the needs of veterans, servicemembers, and families following discharge from a Polytrauma Rehabilitation Center. Polytrauma Network Sites may also serve as entry points for rehabilitation services for those with mild to moderate TBI or polytraumatic injury. Figure 1 shows the location of each Polytrauma Network Site, including the Polytrauma Rehabilitation Centers. Eighty-six Polytrauma Support Clinic Teams extend care to VA medical facilities that do not have Polytrauma Rehabilitation Centers or Polytrauma Network Sites. In coordination with Polytrauma Network Sites, Polytrauma Support Clinic Teams allow veterans, servicemembers, and families to continue their medical care and rehabilitation services closer to home and may also serve as entry points for rehabilitation services for those with mild to moderate TBI or polytraumatic injury. Thirty-nine VA medical centers have designated Polytrauma Points of Contact, who are responsible for coordinating the treatment of veterans at facilities that lack the necessary services to provide specialized care. In addition to coordinating case management and referrals throughout the PSC, Polytrauma Points of Contact may provide a limited range of rehabilitation services. The VA provides a range of long-term services and supports through multiple programs with varying eligibility criteria. TBI may be one of many qualifying conditions for participation, rather than the focus of the programs. Long-term services and supports have historically been provided in institutional settings (e.g., nursing homes); however, if a veteran is able to live in the community and receive home or community-based treatment, this arrangement is generally preferable to institutional care. The VA has an ongoing pilot program providing assisted living services to veterans with TBI. In addition to institutional and noninstitutional services for veterans, the VA offers services for some caregivers. The VA provides institutional long-term services and supports for eligible veterans—including but not limited to those with TBI—who require a nursing home level of care (i.e., 24-hours supervision, medical care, skilled nursing care, and help with activities of daily living). This level of care may be delivered in VA Community Living Centers, private nursing homes under contract with the VA, or state veterans' homes. Veterans may stay in these institutional settings temporarily (e.g., as a transitional placement between a hospitalization and returning home) or permanently. The VA provides a range of noninstitutional long-term care services for veterans who are able to live independently if they have some assistance to accommodate their health conditions. These programs, which are available to (but not specifically for) veterans with TBI, include community residential care, adult day health care, home-based primary care, skilled home care, homemaker and home health aide services, home hospice care, respite care, and home telehealth. Table 2 summarizes these programs. The VA has an ongoing pilot program to assess the effectiveness of providing assisted living (AL) services to eligible veterans with TBI. The AL-TBI pilot program is administered through contracts with non-VA (private sector) residential care facilities that specialize in rehabilitation for individuals with TBI. In administering the AL-TBI pilot program, the VA collaborates with the Defense and Veterans Brain Injury Center, a component of the Defense Centers of Excellence for Psychological Health and Traumatic Brain Injury (which itself is a collaborative effort of the VA and the DOD). The AL-TBI pilot program was established as a five-year pilot program pursuant to Section 1705 of the National Defense Authorization Act for Fiscal Year 2008 ( P.L. 110-181 ). Section 501 of the Veterans Access, Choice, and Accountability Act of 2014 ( P.L. 113-146 , as amended) extends the pilot program through October 6, 2017. The program was further amended by the Veterans Traumatic Brain Injury Care Improvement Act of 2014 ( P.L. 113-257 ), which changed reporting requirements and modified the terminology (e.g., changing ''assisted living'' to ''community-based brain injury residential rehabilitative care''). In addition to the pilot program, the VA has authority to contract with non-VA (private sector) facilities to provide assisted living services specifically to OEF/OIF veterans with TBI whose deficits in ADLs and IADLs would otherwise require nursing home care that generally exceeds their nursing needs. This authority was established under Section 507 of the Caregivers and Veterans Omnibus Health Services Act of 2010 ( P.L. 111-163 ). Within the category of Community Residential Care (as described in Table 2 ), Medical Foster Homes (MFHs) serve more medically complex and disabled veterans by combining placement in a small adult foster home with enrollment in Home-Based Primary Care (as described in Table 2 ). Currently more than 600 VA-approved caregivers provide MFH care to more than 700 veterans in 43 states—paid by the veterans. The VA has proposed legislation authorizing payments for care in VA-approved MFHs for veterans who would otherwise need nursing home care. The VA argues that many veterans who presently reside in nursing homes at VA expense would opt for MFH instead if the VA paid for it. The VA estimates that the 10-year (FY2016–FY2025) costs would be $176 million. The Caregivers and Veterans Omnibus Health Services Act of 2010 ( P.L. 111-163 ) required the VA Secretary to establish a "program of comprehensive assistance for family caregivers" of any eligible veteran who has a serious injury incurred or aggravated in the line of duty on or after September 11, 2001, and who is in need of personal care services. For approximately 25% of program participants, TBI is the qualifying injury. For caregivers who are designated as the primary provider of personal care services for an eligible veteran, the program offers a monthly stipend, medical care, mental health care, and respite care (i.e., temporary care provided to relieve the usual caregiver). Additional services available to these and other caregivers include training in providing personal care services, payment for travel to the veterans' medical appointments, and counseling. The Government Accountability Office (GAO) found that the VA had initially underestimated demand for services in the caregiver program. More than three times the estimated number of caregivers were approved to participate in the program during its first few years, and the workload was consequently larger than anticipated, leading to delays in delivering program benefits. The VA's "program of general caregiver support services" (also established under P.L. 111-163 ) provides more limited benefits (e.g., no monthly stipend) to caregivers for a larger group of veterans (e.g., not limited to post-9/11 veterans). This program is open to caregivers for any veteran who needs personal care services because of an inability to perform one or more activities of daily living, a need for supervision or protection based on symptoms or residuals of neurological or other impairment or injury, or such other matters as specified by the VA Secretary. Under this program, caregiver support services include information about the supportive services available to caregivers from the VA and other agencies, training in providing personal care services, appropriate respite care, and counseling. Some VA services for caregivers (e.g., respite care) predate the specific programs established under P.L. 111-163 . In a 2014 report about caregivers for wounded servicemembers and veterans (termed "military caregivers"), RAND finds that post-9/11 military caregivers differ from caregivers for veterans of previous eras. In addition to being younger on average and caring for younger veterans, post-9/11 military caregivers are more likely to be veterans themselves, nonwhite, employed, and unconnected to a support network. Post-9/11 military caregivers are also more likely to care for someone with mental health or substance use disorders. RAND finds that military caregivers "consistently experience worse health outcomes, greater strains in family relationships, and more workplace problems than non-caregivers, and post-9/11 military caregivers fare worst in these areas." The RAND report includes four recommendations, summarized in the textbox below. Within the VA, TBI research is supported by two organizational units: the Office of Research and Development and the Mental Health Strategic Healthcare Group. In general, the Office of Research and Development funds intramural research by individual VA investigators and researchers. Research related to TBI includes developing and testing new treatments, as well as studying changes in the brain, thinking, and psychological well-being. Research on TBI and related conditions may also be conducted under the auspices of the VA's Mental Health Strategic Healthcare Group, which supports research efforts conducted at the National Center for PTSD, four Centers of Excellence, and 10 Mental Illness Research Education and Clinical Centers. The VA is collaborating with the Department of Education's National Institute on Disability and Rehabilitation Research (NIDRR) to develop the Traumatic Brain Injury Veterans Health Registry, which is intended to facilitate future research by providing longitudinal data on the demographics, military service, injury, and treatment of all OEF/OIF veterans with TBI. The VA is also working with the NIDRR to establish a database similar to the institute's existing TBI Model System National Database (established in 1989), which is intended to facilitate research collaboration and program evaluation. Congress has encouraged and in some cases required the VA to collaborate with other entities involved in TBI research. For example, the National Defense Authorization Act for Fiscal Year 2008 ( P.L. 110-181 ) required the VA to collaborate with the TBI rehabilitation research community, the Defense and Veterans Brain Injury Center, NIDRR grantees, and other governmental entities engaged in TBI rehabilitation. | In recent years, Congress, the Department of Defense (DOD), and the Department of Veterans Affairs (VA) have increased attention to traumatic brain injury (TBI), which is known as a "signature wound" of Operations Enduring Freedom and Iraqi Freedom (OEF/OIF). Although the early stages of TBI treatment may occur within the military health care system (if the injury occurs during military service), this report focuses on the VA health care system. In FY2015, VA spending for TBI is estimated to be $234 million. The VA projects the 10-year (FY2016–FY2025) costs of TBI to be $2.2 billion (including $0.5 billion for OEF/OIF veterans). The type of treatment needed depends on the severity of the injury. Most cases of mild TBI—representing the majority of injuries—resolve without medical attention. Moderate or severe TBI requires immediate treatment. In the case of servicemembers, treatment begins at the site of the event and continues at a military treatment facility. Once stabilized, servicemembers may remain at a military treatment facility or be sent to VA medical facilities. When servicemembers transfer from DOD to VA facilities, coordination between the two systems is necessary. Three VA and joint VA/DOD programs seek to address the transition from DOD to VA health care facilities: (1) OEF/OIF Care Management, (2) the VA Liaison Program, and (3) the Federal Recovery Coordinator Program. These programs are available to veterans with TBI as well as other qualified veterans and servicemembers. Mild TBI may go unnoticed if an individual walks away from an injury seemingly unharmed. Despite repeated assessments of servicemembers by the DOD, veterans may enter the VA health care system with undiagnosed TBI. Thus, VA policy requires that all OEF/OIF veterans receiving medical care in the VA health care system be screened for possible TBI and that those who screen positive be offered further evaluation and specialized treatment. Veterans with moderate or severe TBI may receive care through the VA Polytrauma/TBI System of Care (PSC), which is also available to veterans with other traumatic injuries. The PSC is geographically dispersed, thereby making specialized treatment more accessible to veterans, regardless of where they live. The PSC operates as a "hub and spoke" model with four components: (1) Polytrauma Rehabilitation Centers, (2) Polytrauma Network Sites, (3) Polytrauma Support Clinic Teams, and (4) Polytrauma Points of Contact. The VA provides a range of long-term services and supports, most of which are available to veterans who have TBI as well as other qualified veterans. Long-term services and supports have historically been provided in institutional settings (e.g., nursing homes); however, if a veteran is able to live in the community and receive home- or community-based treatment, this arrangement is generally preferable to institutional care. The VA has an ongoing pilot program providing assisted living services to veterans with TBI and has requested authority to pay for care in Medical Foster Homes. The VA also offers services for some caregivers for veterans with TBI. The VA conducts and collaborates on TBI research. For example, the VA is collaborating with the Department of Education's National Institute on Disability and Rehabilitation Research to develop the Traumatic Brain Injury Veterans Health Registry, and to establish a database similar to the institute's existing TBI Model System National Database. |
Genes, the fundamental code of life, are written in DNA (deoxyribonucleic acid). Before DNA was even discovered, humans sought to manipulate genes through selective breeding. Since its discovery, scientists, science fiction writers, philosophers, and others have speculated on the implications of being able to modify DNA. Over the last half century, billions of dollars and immeasurable effort have been devoted to understanding, characterizing, and controlling DNA. This report describes a gene editing technology, known as CRISPR-Cas9, with the potential to revolutionize genetic engineering and the biotechnology industry. The report then provides information on the potential economic benefits of the technology and identifies some issues for congressional consideration, including the regulation of current and future products, national security concerns, and ethical and societal issues surrounding the use of the technology. Overview CRISPR-Cas9 is a gene editing technology that offers the potential for substantial improvement over other gene editing technologies in ease of use, speed, efficacy, and cost. These characteristics led Science magazine to name CRISPR-Cas9 gene editing technology "Breakthrough of the Year" in 2015. Many in the scientific, engineering, and business communities believe that CRISPR-Cas9 may offer revolutionary advances in the investigation, prevention, and treatment of diseases; understanding of gene function; improving crop yields and developing new varieties; production of chemicals used in biofuels, adhesives, and fragrances; and control of invasive species. CRISPR is an acronym for "clustered regularly interspaced short palindromic repeats," which are unique DNA sequences found in some bacteria and other microorganisms. These sequences, along with the genes that are located next to them, known as CRISPR-associated or Cas genes, form an immune system that protects against viruses and other infectious DNA. The CRISPR system identifies, cuts, and destroys foreign DNA. Researchers have identified five different types of CRISPR systems. The most studied CRISPR system is associated with the Cas9 protein and is known as CRISPR-Cas9. During 2012 and 2013, researchers modified CRISPR-Cas9 to serve as an effective and efficient technology for editing the genomes of plants, animals, and microorganisms. Since then, CRISPR-Cas9 has been used to modify the genomes of a variety of species—ranging from mice and fruit flies to corn and yeast. Many in the scientific community believe CRISPR-Cas9 has shifted the paradigm with its simplicity and low cost relative to other methods of gene editing—removing barriers to widespread adoption and creating new research opportunities. This report focuses on the use of CRISPR-Cas9 as a gene editing technology, which is sometimes referred to as CRISPR in the report. However, other CRISPR systems are currently in development and use. Despite this promise, technical challenges to realizing the full potential of CRISPR-Cas9 remain. Researchers largely agree that efficiently delivering the technology to particular cells, tissues, or organs, and reducing off-target activity (i.e., the number of unintended genetic changes) are among the most pressing challenges. Off-target activity may increase the risk of cancer, and thus improved delivery and specificity are especially important for the development of gene therapy applications. Scientists are investigating ways to overcome these challenges and improve CRISPR-Cas9. For decades, scientists have altered genes using radiation or chemicals. These methods produce unpredictable results. The invention of recombinant DNA technology in the 1970s allowed scientists to insert new DNA into genes in a directed way, but inserting a specific gene or sequence within the genome remained technically challenging and imprecise. Gene editing is a newer technique that is used to make specific and intentional changes to DNA. Gene editing can be used to insert, remove, or modify DNA in a genome. All gene editing technologies involve an enzyme known as a nuclease for cutting the DNA, in addition to a targeting mechanism that guides the enzyme to a specific location on the DNA strand (i.e., a gene within the genome). Gene editing has traditionally involved the insertion, removal, or modification of a single gene, but with CRISPR-Cas9 multiple genes can be targeted simultaneously. Such multi-gene editing is generally referred to as genome editing. CRISPR-Cas9 is a gene editing technology that uses a combination of (1) an enzyme that cuts DNA (Cas9, a nuclease) and (2) a guiding piece of genetic material (guide RNA) to specify the location in the genome. Generally, the guide RNA targets and binds to a specific DNA sequence, and the attached Cas9 enzyme cleaves both strands of DNA at that site. This cut can be used to insert, remove, or edit the DNA sequence. The cut is then repaired and the changes incorporated ( Figure 1 ). This specificity of modification is one feature that differentiates CRISPR-Cas9 from predecessor genome editing systems. Scientists can create a guide RNA corresponding to almost any sequence within an organism's genome. This flexibility allows for the potential application of the technique to a very wide range of genomes, including microorganisms, animals, or plants. If the sequence of the desired target or gene (and its function) is known, in theory, CRISPR-Cas9 could be used to alter the function of a cell or organism. The basic CRISPR-Cas9 technology, specifically the Cas9 nuclease, has also been adapted by researchers to allow for additional modifications to the genome beyond the cutting of both strands of the DNA. For example, researchers have adapted Cas9 so that it can be used to change a single base in a gene (base editing), cut a single strand of DNA, or activate or repress the expression of a gene (i.e., increase or decrease the production of a molecule, typically a protein). CRISPR-Cas9 has led to recent breakthroughs in gene drive research. A gene drive is a system of biasing inheritance to increase the likelihood of passing on a modified gene. Offspring inherit one copy of each gene from its parents. Normally, this limits the total incidence of mutations over generations ( Figure 2 ). Gene drive components cause the modified DNA to copy itself into the DNA from the unmodified parent. The result is the preferential increase in a specific trait from one generation to the next and, in time, possibly throughout the population. CRISPR-Cas9 has allowed researchers to more effectively insert a modified gene and the gene drive components. Gene drives have been suggested as a way to eliminate or reduce the transmission of disease, eradicate invasive species, or reverse pesticide resistance in agriculture. The self-propagating nature of gene drives is also accompanied by concerns (described later in the report). CRISPR-Cas9 technology is still in its infancy, with many of the hoped-for applications potentially years in the future. However, the interest, efforts, and investments of the industrial and financial communities suggest the potential economic and other societal benefits are substantial. Among the early indicators of the potential value of CRISPR-enabled products are fees being paid to license CRISPR patents, investments in firms with potential interests in CRISPR intellectual property, the type of companies investing in CRISPR research, and early applications. This section discusses recent projections made by market research firms, select private investments, federal research and development funding, and statistics on scientific publications. A number of research firms have published market projections for gene editing, including CRISPR-Cas9 and other technologies. Application areas include human therapeutics, research tools, crops, livestock, yogurts, cheeses, and more. In August 2018, Ireland-based Research and Markets estimated that the global market for gene editing will grow at a compound annual growth rate (CAGR) of 33.26% from $551.2 million in 2017 to $3.087 billion in 2023. An earlier report projected that the North American market will account for the largest share of the gene editing market due to "increasing awareness of technology, proximity of companies, and early adoption of latest treatments." Asia was expected to be the second largest market, due to "increasing government funding of research, economic prosperity, early adoption of latest technology and the relaxed regulatory environment." The European market was projected to be the third largest market, hampered by "the stringent regulatory environment and slow growth due to the economic crisis." India-based Markets and Markets estimated that the global market for gene editing will increase from $3.19 billion in 2017 to $6.28 billion in 2022, a CAGR of 14.5%. CRISPR technology was expected to be the largest and fastest-growing segment of this market in 2017. Zion Market Research estimated that the CRISPR gene editing market in 2017 was $477 million and projected that it will reach $4.271 billion by 2024, a CAGR of 36.8%. A February 2017 projection by the U.S.-based market research firm Grand View Research anticipates the global market for gene editing will reach $8.1 billion by 2025. Private investments are a commonly used metric for assessing the economic potential of a technology. Investments are being made by and in companies of varying size and technology maturity that are conducting CRISPR research. In addition, these companies are engaging in a wide range of partnerships. Here are several examples of recent investments in CRISPR-focused gene editing firms: Editas Medicine (headquartered in Cambridge, MA) raised approximately $97.5 million in its February 2016 initial public offering. In follow-on offerings in March and December 2017, Editas raised approximately $96.7 million and $57.2 million, respectively. In January 2018, the company completed at-the-market offerings and received net proceeds of approximately $48.5 million. The firm has licensed CRISPR and other gene editing patent rights from the Broad Institute, the Massachusetts Institute of Technology (MIT), Harvard University, and others. As of November 15, 2018, the company's market capitalization was $1.34 billion. In March 2017, Editas reportedly entered into an agreement with Irish pharmaceutical company Allergan under which Editas was to receive a $90 million up-front payment for an option to license up to five preclinical programs targeting eye disease. Editas has also partnered with Juno Therapeutics for cancer-related research using CRISPR; under the terms of the agreement, Juno was to pay Editas an initial payment of $25 million and up to $22 million in research support for three programs over five years. Editas has also engaged in a three-year research and development (R&D) collaboration deal with San Raffaele Telethon Institute for Gene Therapy to research and develop next-generation stem cell and T-cell therapies for the treatment of rare diseases. CRISPR Therapeutics AG (headquartered in Basel, Switzerland, with R&D operations in Cambridge, MA), a firm founded by early CRISPR pioneer Emmanuelle Charpentier, has raised a total of almost $140 million, including a $38 million B-series round of financing in June 2016. The company raised an additional $56 million in its October 2016 initial public offering, followed by $122.6 million in January 2018 and $187.6 million in September 2018 in subsequent offerings. In addition, in August 2016, CRISPR Therapeutics and pharmaceutical company Bayer AG founded Casebia Therapeutics, a joint research venture "to discover, develop and commercialize new breakthrough therapeutics to cure blood disorders, blindness, and congenital heart disease." Bayer stated that it will be providing at least $300 million for R&D by the joint venture and that it had taken a $35 million equity stake in CRISPR Therapeutics. CRISPR Therapeutics also has collaboration and joint development agreements with Boston-based Vertex Pharmaceuticals to use CRISPR-Cas9 to discover and develop potential new treatments aimed at the underlying genetic causes of human disease. CRISPR Therapeutics and Vertex have reportedly launched the first in-human clinical trial of CRISPR genome editing technology sponsored by U.S. companies. The trial is testing an experimental therapy for the blood disorder β-thalassemia in Regensburg, Germany. As of November 15, 2018, the company's market capitalization was $1.89 billion. Caribou Biosciences, Inc. (headquartered in Berkeley, CA), a firm founded by Jennifer Doudna and other scientists from the University of California, Berkeley, based on an exclusive license to the CRISPR work of that university and the University of Vienna, raised $30 million in private financing in May 2016. Examples of other efforts focused on CRISPR technology and the development, application, and commercialization of CRISPR-enabled products include the following: The Parker Institute for Cancer Immunotherapy, a non-profit organization formed in April 2016 with a $250 million grant from the Parker Foundation, agreed to sponsor the first in-human clinical trials of CRISPR-enabled technology targeting three types of cancer. The trial, led by the University of Pennsylvania, will use CRISPR-modified T-cells, a part of the human immune system, to treat myeloma, melanoma, and sarcoma. The trial has been approved by the National Institutes of Health's Recombinant DNA Advisory Committee and is awaiting approval from review boards at the centers where the trials are to be held as well as the Food and Drug Administration. The trial was initially expected to commence in 2017, but is still awaiting final approval. In September 2016, agrochemical and agricultural biotechnology corporation Monsanto secured a worldwide non-exclusive license agreement for agricultural applications of CRISPR technology from the Broad Institute. With respect to its intended uses, Monsanto stated, "Genome-editing technology is complementary to our ongoing discovery research and provides an incredible resource to further unlock our world-leading germplasm and genome libraries." Calyxt, Inc. (formerly Cellectis Plant Sciences, Inc., headquartered in New Brighton, MN), has exclusive rights to a group of patents owned by the University of Minnesota for engineering plant genomes with a focus on products such as low trans-fat soybean oil, cold storable potato, gluten reduced wheat, and low saturated canola oil for the food and agriculture industries. The potential of CRISPR-Cas9 gene editing is further reflected in the rapid increase in CRISPR-related federal research funding and scientific publications. As shown in Table 1 , NIH funding for CRISPR-related research grew from more than $5 million in FY2011 to $1.1 billion in FY2018. Similarly, the number of CRISPR-related scientific publications increased from 87 in 2011 to 3,917 in 2018 ( Table 2 ). The fundamental federal guidance for regulating biotechnology products, including those developed using CRISPR-Cas9, is the Coordinated Framework for the Regulation of Biotechnology (the Coordinated Framework) originally published in 1986 by the White House Office of Science and Technology Policy (OSTP). A key principle in this regulatory structure is that genetically engineered products should continue to be regulated according to their characteristics and unique features, not their production method—that is, whether or not they were created through genetic engineering techniques (e.g., CRISPR-Cas9, ZFNs, and TALENs). The framework provides a regulatory approach intended to ensure the safety of biotechnology research and products, using existing statutory authority and previous agency experience. The Coordinated Framework consists of three primary agencies—the Environmental Protection Agency (EPA), the U.S. Department of Agriculture (USDA), and the Food and Drug Administration (FDA). EPA protects human health and the environment by regulating genetically engineered products that qualify as pesticides under the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. §136 et seq.); it sets guidelines on the amount of pesticidal residue that may be present in food under section 408 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. §301 et seq.); and it regulates new chemical substances derived from microbial biotechnology under the Toxic Substances Control Act (15 U.S.C. §2601 et seq.). USDA regulates biotechnology products that may pose a risk to agricultural plant and animal health under the Plant Protection Act (7 U.S.C. §7701 et seq.) and the Animal Health Protection Act (7 U.S.C. §8301 et seq.). FDA protects human health and safety by regulating human and animal drugs, human and animal foods derived from genetically engineered plants, and genetically engineered animals under the authorities of the Federal Food, Drug, and Cosmetic Act and the Public Health Service Act (42 U.S.C. §201 et seq.). New biotechnology developments, continuing opposition by consumer groups and environmentalists, and perceived inadequacies of federal regulation led the Obama Administration to issue a memorandum on July 2, 2015, to update the Coordinated Framework to ensure that the regulatory structure is capable of meeting future biotechnology risks. The memorandum observed that each of the federal agencies regulating biotechnology had developed its own regulations and guidance documents to implement its authority under current statutes, resulting in "a complex system for assessing and managing health and environmental risks of the products of biotechnology." Since a 1992 update, advances in science and technology have "dramatically altered the biotechnology landscape," according to the memorandum. CRISPR-Cas9 and other gene-editing systems were unknown when the Coordinated Framework was published in 1986, or at the time of the 1992 update. The White House memorandum stated that a new update to the Coordinated Framework was needed to "facilitate the appropriate federal oversight by the regulatory system and increase transparency while continuing to provide a framework for advancing innovation." The White House memorandum initiated a process to achieve the following objectives: (1) update the Coordinated Framework to clarify the agencies' roles and responsibilities to regulate biotechnology products; (2) formulate a long-term strategy to ensure that the regulatory system can adequately assess any risks associated with future products of biotechnology while "increasing transparency and predictability and reducing unnecessary costs and burdens"; and (3) commission an external, independent analysis of the future landscape of biotechnology products. The White House memorandum established a Biotechnology Working Group (BWG) under the Emerging Technologies Interagency Policy Coordination Committee. The working group included representatives of the White House, EPA, FDA, and USDA. The update to the Coordinated Framework by the three primary regulatory agencies overseeing biotechnology was published in January 2017 following three public comment sessions. The 2017 update discussed the roles of the three agencies and the coordination of oversight responsibilities. The update generally concluded that the existing structure of regulation among the three agencies remained sound with respect to protecting health and the environment. However, the update did note that uncertainty with respect to agency jurisdiction, and a lack of predictability of timeframes for review, imposed costs on small and mid-size companies and academe. In reinforcing the logic of the 1986 Coordinated Framework, the update also explicitly stated that the "specific regulatory path (and relevant procedures) applicable to any product, including a biotechnology product, is dependent on the nature and characteristics of the product and its application." To achieve the second objective of proposing a long-term strategy for biotechnology product regulation, the BWG published the National Strategy for Modernizing the Regulatory System for Biotechnology Products in September 2016 . The goal of the proposed national strategy is to ensure that the regulatory agencies can "efficiently assess risks of future biotechnology products while supporting innovation, protecting health and the environment, promoting public confidence in the regulatory process, increasing transparency and predictability, and reducing unnecessary costs and burdens." To assess the future landscape of biotechnology products, EPA, FDA, and USDA commissioned a study in early 2016 by the National Academy of Sciences (NAS) to identify (1) major advances and potential new types of biotechnology products over the next 5 to 10 years, (2) potential future products that might pose a different type of risk relative to existing products and organisms, (3) areas in which the risks or lack of risk relating to biotechnology are well understood, and (4) the scientific capabilities, tools, and expertise that may be useful to the regulatory agencies as they oversee potential future products of biotechnology. The NAS published its final report in February 2017, emphasizing that the new products stemming from genomic research could overwhelm the three lead regulatory agencies, and outlining a strategic approach to risk management and coordination among these regulatory agencies. Despite recent efforts to update the Coordinated Framework, CRISPR-Cas9 technology and other gene-editing systems raise substantive questions about how (or whether) the products resulting from these technologies are to be regulated, and if so, under what statutory authorities. Specifically, the 2017 NAS report found that "regulators will face difficult challenges as they grapple with a broad array of new types of biotechnology products—for example, cosmetics, toys, pets, and office supplies—that go beyond contained industrial uses and traditional environmental release." Some of the products that are likely to be developed using CRISPR-Cas9 will not fit neatly into the established categories that regulatory agencies worldwide have developed over the past 30 years. Potential issues for consideration when developing regulations for biotechnology products developed using CRISPR-Cas9 are discussed in more detail later. The following sections provide examples of the current and potential uses of CRISPR-Cas9 across a broad set of areas. Some sections include a description of issues for congressional consideration, such as the regulation of future biotechnology products, international implications, and societal, ethical, environmental, and national security concerns. Many experts assert that CRISPR-Cas9 may offer the means to prevent, treat, or cure medical conditions or disease producing substantial savings in direct and indirect economic costs, in addition to reducing the toll from pain, debilitation, and death. The following applications are intended to be exemplary, not comprehensive. The California Institute for Regenerative Medicine (CIRM) awarded a grant to researchers at Children's Hospital Los Angeles who are using CRISPR-Cas9 to develop a personalized approach for treating genetic forms of diabetes (e.g., Type I diabetes) by replacing insulin-producing cells in patients. The approach is expected to be an improvement over existing methods of treating Type I diabetes. By using the patient's own cells the risk of transplant rejection is reduced and patients would not be reliant on the limited availability of outside donors. Researchers believe that the approach may also eventually offer treatment for non-autoimmune diabetes (such as Type II). According to the American Diabetes Association, the disease affects nearly 30 million Americans. The association estimates the total economic cost of diagnosed diabetes in the United States in 2012 at $245 billion, including $176 billion in direct medical costs and $69 billion in reduced productivity. A variety of CRISPR-enabled approaches are being considered in efforts to reduce or eliminate malaria, one of the most widespread and lethal illnesses in the world. Effective modification, reduction, or elimination of the Anopheles mosquito—the primary vector for the transmission of malaria—could substantially reduce these costs and open up new economic opportunities in many of the world's poorest nations. CRISPR-enabled approaches include the use of gene drives, a genetic tool that results in a modified gene being preferentially passed to offspring. This might offer a means by which all Anopheles mosquitos could be made infertile or that would result in all offspring being male. If successful, these approaches would, in time, drastically reduce or even possibly eliminate the population being targeted. Another CRISPR-enabled approach seeks to make the Anopheles mosquito resistant to the malaria parasite. Fighting malaria is a top priority of the Bill and Melinda Gates Foundation, which among other efforts, is investing heavily in the development of CRISPR-based gene drive technologies to reduce or eradicate the Anopheles mosquito in sub-Saharan Africa. For example, the Bill and Melinda Gates Foundation has awarded approximately $75 million to Target Malaria—a non-profit research consortium—whose work is focused on reducing the number of female mosquitos in three closely related Anopheles species that are responsible for most of the malaria transmission in Africa. According to Roll Back Malaria, the disease may account for as much as 40% of public health expenditures in some countries. According to the Centers for Disease Control and Prevention, the direct costs of malaria (e.g., illness, treatment, and premature death) have been estimated to be at least $12 billion per year globally, and the cost in lost economic growth is much greater. Similar approaches are being discussed for reducing the transmission of other mosquito-borne viral diseases including, Zika, dengue fever, yellow fever, West Nile, and St. Louis encephalitis. In October 2018, the U.S. Food and Drug Administration (FDA) accepted the application of two biotechnology companies—CRISPR Therapeutics and Vertex—for an experimental gene therapy treatment for sickle cell disease (SCD). The treatment would consist of using CRISPR-Cas9 to modify stem cells that are isolated from a patient's blood and then reinfused to produce high levels of fetal hemoglobin. The higher levels of fetal hemoglobin are expected to counteract severe pain caused by the sickle cell mutation. SCD affects approximately 100,000 Americans. According to a 2009 study, the total estimated annual U.S. cost of medical care for SCD exceeded $1.1 billion. Researchers at the University of Texas Southwestern Medical Center have demonstrated the ability to use CRISPR-Cas9 to make genetic repairs in cells that allows them to produce dystrophin. Dystrophin is a protein that patients with Duchenne Muscular Dystrophy (DMD), a genetic disorder, cannot produce. The absence of dystrophin cripples those with DMD, and generally leads to heart and respiratory muscle problems, and death. According to a comprehensive cost-of-illness study sponsored by the Muscular Dystrophy Association, the annual U.S. costs for DMD are estimated at $362-$488 million per year, about $51,000 per year per patient in medical expenses, nonmedical costs, and lost income. CRISPR-Cas9 holds promise in combating antibiotic resistant pathogens. According to the Centers for Disease Control and Prevention, approximately 2 million people are infected annually with bacteria that are resistant to antibiotics and at least 23,000 people die each year as a result of such infections. CRISPR-Cas9 has been shown to effectively target and eliminate bacterial species, including antibiotic resistant strains, from a community of bacteria. This precise targeting allows the elimination of harmful bacteria, but avoids beneficial bacteria (e.g., bacteria that aid in digestion). Additionally, unlike traditional antibiotics it would be difficult for bacteria to develop resistance to CRISPR-based antimicrobials because such a resistance would likely destroy the bacteria's defense mechanisms to viruses. According to researchers, the largest obstacle to development of CRISPR-based antimicrobials is identifying an effective delivery route. Possible clinical and biomedical applications of gene editing with CRISPR-Cas9 are numerous, as noted above, and would include, among others, modification of genes in specific individuals to treat or possibly cure disease. Such a technique could also potentially be used to modify very early human embryos or gametes (eggs and sperm) to alter deleterious genes. In this case, changes made to the genetic material would be in the germline, and therefore, changes would be retained and passed on to future generations. In contrast, changes made to genetic material in other cells in the body (called somatic cells) would affect only the individual in which they were made, and would not be passed on to future offspring. This distinction—using gene editing for somatic (non-heritable) versus germline (heritable) genetic modification—is significant from an ethical and societal standpoint. This distinction is reflected in the regulatory paradigm for regulating all gene editing research, including CRISPR-Cas9, and has been relevant in discussions of all gene editing, engineering, or modification techniques that might theoretically be applied to human embryos. Progress toward carrying out clinical trials using CRISPR-Cas9 for non-heritable genetic modification is currently being made in multiple countries. China has been leading research efforts in this area, with researchers at Sichuan University carrying out the first-ever human trial of CRISPR-Cas9 in late 2016 as part of a broader clinical trial. This study, treating a total of ten advanced lung cancer patients with CRISPR-Cas9 -modified immune cells (T-cells), was primarily a study of safety and not efficacy, and was planned to monitor patients for a total of six months for adverse effects of the treatment. Since that time, researchers in China have initiated several additional clinical trials, and China continues to be in the forefront of this research. In the United States, two clinical trials (one a Phase 1 trial, the other a Phase 1/2 trial ) are underway, one targeting cancer, the other sickle cell disease (SCD). At the University of Pennsylvania, researchers have begun recruiting for a trial—similar to the 2016 trial by researchers at Sichuan University—whereby human T-cells will be modified using CRISPR-Cas9 and introduced into cancer patients. This trial received approval from the NIH's Recombinant DNA Advisory Committee (RAC) and is also small, including 18 patients, with a primary focus on safety. In addition, the FDA has recently lifted a clinical hold on an investigational new drug application (IND) submitted to the agency by Vertex Pharmaceuticals and CRISPR Therapeutics for a trial that will test CRISPR-modified cells in patients with SCD, allowing it to go forward. This study is now recruiting participants. Before clinical trials may begin in the United States, researchers must submit, and the FDA must accept, an IND outlining specific parameters of the research trial. The FDA also, on November 30, 2018, authorized a third trial sponsored by the U.S. company Editas Medicine that plans to use a CRISPR-based therapy to treat a rare genetic disease that causes blindness. CRISPR-Cas9 has also been used to make heritable modifications in both viable and non-viable human embryos in research being carried out in other countries, and, more recently, by researchers based in the United States. In May 2015, Chinese scientists were the first to use CRISPR-Cas9 in human embryos. These scientists published results of an experiment that attempted to modify the genetic make-up of non-viable human embryos using CRISPR-Cas9. This experiment attempted to modify a gene for beta-thalassemia, a fatal blood disorder. In April 2016, a second team of Chinese researchers published results of a study that used CRISPR-Cas9 to try to introduce a mutation that confers HIV-resistance into non-viable human embryos. Neither of these studies demonstrated a high success rate, nor an ability to precisely direct editing of the host genome. In August 2017, an international team led by researchers at Oregon Health and Science University (OHSU) reported using CRISPR in viable human embryos to correct a genetic defect which causes hypertrophic cardiomyopathy (HCM), a leading cause of sudden death in young athletes . The experiment reportedly showed that 72.4% of the modified embryos ended up with the healthy version of the relevant gene (vs. the expected 50% without the use of CRISPR). This research has subsequently generated debate in the scientific community, as the results—and specifically the claim that the embryo preferentially used self-directed as opposed to template-directed repair to replace the faulty gene—were called into question by some in the scientific community. Although the researchers did further testing of the embryos to resolve some of the questions, the study has yet to be replicated, and reproduction of this type of study will likely be slower due to the restrictions on federal funding of research in human embryos. Earlier in 2017, Chinese scientists had published results of a study using CRISPR-Cas9 also in viable human embryos, again targeting a gene for beta-thalassemia. Next-generation versions of CRISPR are being developed, and one of those—base editing—was recently used in a Chinese study in viable human embryos to correct a gene associated with Marfan Syndrome. The results of this study were more successful and demonstrated a repair rate of 89% with no off-target effects detected. Although the CRISPR-Cas9 platform was first described in 2012 when scientists at the University of California, Berkeley, published a study using the technique in vitro, its use in the initial 2015 Chinese study in non-viable human embryos reignited the traditional debate and highlighted concerns about engineering changes to the human germline. The concerns of scientists and others have been, to some extent, borne out by the recent unverified claim of the birth of children with CRISPR modified DNA. In addition, the initial Chinese study prompted discussion about how existing law and regulation in the United States would apply to the conduct of this type of research, its clinical testing in humans, and specifically its applications in human embryos. With the 2017 privately-funded study on human embryos in the United States, the discussion around domestic regulation has intensified. Likely in response to some of these advances and discussions, several key developments have occurred recently in U.S. regulation of this type of research. One way that CRISPR-Cas9 technology triggers federal oversight is with respect to the conduct of certain biomedical and clinical research. The federal government, both as a funder of biomedical research and as a regulator of the safety and effectiveness of medical products used to treat disease, can impose requirements on research as a condition for receiving either federal funding or FDA premarket review of a new medical product (such as a drug, device, or biologic). Regulation of clinical research pursuant to premarket requirements for a new medical product is the responsibility of the FDA. Federal oversight of government funding for biomedical research is generally the purview of NIH, as NIH is the predominant federal funder of this type of research. In addition, federal funding for biomedical research may be restricted, banned, or specifically directed by Congress through the annual appropriations process for these agencies. NIH is funded by the Departments of Labor, Health and Human Services, and Education, and Related Agencies (LHHS) appropriations bill, whereas FDA is funded by the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies appropriations bill. There are federal and congressional oversight mechanisms and regulations with respect to CRISPR-Cas9 research at FDA and NIH, and in the LHHS and Agriculture appropriations bills. As described in the following paragraphs, these mechanisms include requirements pursuant to the receipt of certain NIH funding; a LHHS appropriations rider limiting the use of federal funds for research on or involving human embryos; an appropriations provision limiting FDA's use of funding for review of certain embryo research using CRISPR-Cas9 and other gene editing technologies; and FDA regulatory requirements for certain clinical research for the eventual marketing of CRISPR-Cas9 applications. As stipulated by its policy, NIH will not fund any research using gene-editing technologies (including CRISPR-Cas9) in human embryos. The policy states that "[t]he concept of altering the human germline in embryos for clinical purposes has been debated over many years from many different perspectives, and has been viewed almost universally as a line that should not be crossed." NIH-funded research that uses CRISPR-Cas9—not in human embryos—has to comply with the NIH Guidelines for Research Involving Recombinant or Synthetic Nucleic Acid Molecules (NIH Guidelines) to receive and maintain funding. This also applies to non-NIH-funded CRISPR-Cas9 research carried out at institutions receiving NIH funding for other recombinant or synthetic nucleic acid research at the institution. For research that involves the transfer of recombinant nucleic acid molecules into human research participants, current NIH Guidelines require the research protocol to be registered, which may involve review by the NIH Recombinant DNA Advisory Committee (RAC). Per the NIH Guidelines, the RAC will not consider research proposals for germline modification. In addition, the research protocol must be approved by both the Institutional Review Board (IRB) and the Institutional Biosafety Committee (IBC). However, in August 2018, NIH published a notice in the Federal Register seeking comment on proposed changes to the NIH Guidelines. Specifically, NIH is proposing to eliminate the protocol registration and reporting requirements and also to eliminate the requirement for RAC review. The stated purpose of these changes is to streamline oversight of gene transfer clinical research trials, which many view as unnecessarily duplicative because this research has moved more into the mainstream and no longer presents unique safety concerns. NIH and FDA note in a recent article that "[i]n the view of the senior leaders of the FDA and NIH, there is no longer sufficient evidence to claim that the risks of gene therapy are entirely unique and unpredictable—or that the field still requires special oversight that falls outside our existing framework for ensuring safety." NIH also proposes to make changes to the oversight responsibilities of the IBCs so that their review of gene transfer research is no longer exceptional and instead is consistent with the review of other research protocols that come under the purview of the NIH Guidelines. NIH is proposing to maintain RAC as an advisory board to provide a forum for discussing and considering the ramifications of emerging biotechnologies, including synthetic biology, gene editing, and neurotechnology. While these proposed changes to the NIH Guidelines are being considered and finalized, NIH is not accepting submission of any new human gene transfer research protocols for registration, or any safety reports or amendments to existing human gene transfer research protocols. Since FY1996, a rider known as the Dickey-Wicker amendment has been attached to the Labor-HHS-Education appropriations bill each year in the annual appropriations process. This rider prohibits the Department of Health and Human Services (HHS) from using appropriated funds to support research in which human embryos are destroyed or in which human embryos are created for research purposes. The rider prohibits the NIH, or any other HHS agency, from using federal funds to support research involving human embryos, including the genetic modification of human embryos, and any modifications by CRISPR-Cas9. Because the FDA is funded through the annual Agriculture, Rural Development, Food and Drug Administration, and Related Agencies appropriations bill, this prohibition does not apply to the potential use of FDA funds to support activities related to research using human embryos. Taking note of this new technology, Congress has acted to prevent FDA approval of medical products based on CRISPR-Cas9 and other gene editing technologies in human embryos. In the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), Congress included a provision that prohibits the FDA from using appropriated funds to notify a sponsor or acknowledge receipt of a submission for an exemption for investigational use of a drug or biological product (i.e., an IND) for research in which a human embryo is created or modified to include a heritable genetic modification. This provision was first included in appropriations for FY2016 (the Consolidated Appropriations Act, 2016, P.L. 114-113 ). FDA regulatory requirements apply to all clinical research, regardless of funding source that is carried out to investigate new, unapproved medical products such as drugs, devices, and biologics. Although FDA has not yet reviewed and approved or disapproved a CRISPR-Cas9 application, based on recent draft guidance documents published by FDA in July 2018, CRISPR-Cas9 products would meet the definition of a human gene therapy product and are biologics. In this case, clinical research with CRISPR-Cas9 products requires FDA acceptance of an IND; this regulatory requirement derives from FDA's authority to regulate biologics. Biologics must receive a license (i.e., authorization) from FDA prior to being marketed. Somatic applications of CRISPR-Cas9 technology typically raise fewer ethical issues than do germline applications of the technology in humans. For some, the potential use of this technology in somatic cells for non-disease applications (also referred to as "enhancement") would raise ethical issues. An enhancement would be a modification to a normative non-disease trait to make an improvement to it; such traits might include, for example, strength or intelligence. Conversely, the modification of somatic cells using CRISPR-Cas9 for the purposes of treating or curing disease primarily raises issues of safety rather than of ethics. Specifically, with CRISPR-Cas9 gene editing, scientists are concerned, among other things, with the accuracy of the initial cut in the DNA; with the integration of the replacement genetic material being incorporated at the site of the cut; and with "off-target" activity (meaning unintended cuts and/or integration of replacement genetic material at additional unintended sites in the host genome). These problems have been shown to be fairly common in early research using CRISPR-Cas9. However, ethical issues could be raised secondary to safety concerns that were not adequately addressed prior to use of the technology in humans, and there may be differing perspectives on whether a safety concern has been adequately addressed, potentially compounding any ethical concerns. Ethical considerations with respect to the use of CRIPSR-Cas9 arise predominantly with respect to the potential use of the technology to modify human embryos. However, ethical concerns about the genetic modification of the human germline are not new. Bioethicists, scientists, and others have debated the ethics of introducing changes to the human germline beginning with the advent of recombinant DNA technology and in the context of first human gene therapy and then human gene transfer research. Generally, the ethical concerns have centered on three main issues or variants of these issues: that the technology could create inherent inequities due to differential access by those with resources and those without; that changes to the germline would be passed on to future generations and therefore might alter the genetic makeup of the population in unintended or unforeseen ways and without the permission of those affected; and that modification might be used for enhancement purposes rather than only for curing or treating disease or restoring lost function. Research that does not intend to modify human embryos, but rather that uses CRISPR-Cas9 to study genes involved in early development, may avoid some of these ethical quandaries. In addition, scientists have conducted some of the early research using CRISPR-Cas9 to modify non-viable embryos in an attempt to mitigate some of the ethical concerns with this type of research. The publication of the first study using CRISPR-Cas9 in human embryos prompted the debate over germline modification to re-emerge in the scientific community, intensified by the perception that the new technology may be promising in ways not previously seen with respect to its ease of use and precision of editing. In response to this and other related research, members of the scientific community gathered at the International Summit on Human Gene Editing in December 2015—co-hosted by the National Academy of Sciences (NAS), the National Academy of Medicine, the Chinese Academy of Sciences, and the United Kingdom's Royal Society—to "discuss the scientific, ethical and governance issues associated with human gene-editing research." At the conclusion of the International Summit, the members of the organizing committee released a statement related to both basic research on and clinical use of gene editing (whether for therapy or research, and whether somatic or germline). The summit participants were supportive of basic research, including research using human embryos that would not be used to establish a pregnancy. They also supported the potential for the clinical use of human germline gene editing, with qualifications, stating that, "as scientific knowledge advances and societal views evolve, the clinical use of germline editing should be revisited on a regular basis." In early 2017, the NAS released a report titled Human Genome Editing: Science, Ethics, and Governance . The findings in this report largely align with those of the International Summit. The report does not propose an outright prohibition on germline genetic modification. Rather, it proposes a number of criteria that would have to be met for such research or clinical applications to move forward (e.g., after receiving societal consensus, only under strict oversight, and only for "compelling" reasons). In practical terms, these criteria have not been met yet. The position put forward both at the International Summit and in the 2017 NAS report on potential modification of the human germline represents a departure from earlier views on the subject, with this application of technology previously "viewed almost universally as a line that should not be crossed." More recently, a July 2018 Nuffield Council on Bioethics report, titled Genome Editing and Human Reproduction : Social and Ethical Issues , seems to generally agree with the NAS report, stating that "the potential use of genome editing to influence the characteristics of future generations could be ethically acceptable in some circumstances, but only if certain conditions are met." In November 2018, the Second International Summit on Human Genome Editing was held amidst the claim of the birth of the first genetically modified babies, and although that development was denounced, summit participants rejected a moratorium on germline gene editing research and instead recommended a "translational pathway to germline editing." While the CRISPR-Cas9 technology and other genome-editing tools have generated substantial international interest in their potential for biomedical research and clinical innovations, the versatile technology may also make significant contributions to global agriculture. CRISPR-Cas9 permits the introduction or deletion of genetic sequences with much greater precision than traditional plant and livestock breeding techniques or earlier methods of genetic engineering (GE). Plant biotechnologists see the CRISPR-Cas9 technology as offering the capacity to engineer changes in major food crops by substituting existing plant DNA sequences with desired ones, or by enhancing or suppressing particular gene expression. Conventional plant breeding for desired traits often involves cross-breeding with related wild species of the target plant. However, this approach also introduces genes that are not wanted. CRISPR-Cas9 allows the breeder to take only the gene of interest from the wild species and insert it at a precise location in the target organism to produce a new plant variety. In addition, this precision also reduces the plant breeding cycle by years through eliminating the time-consuming backcrossing procedure in conventional plant breeding and older GE techniques. Through more precisely altering DNA, CRISPR-Cas9 and other genome engineering technologies have the potential to provide a level of control over plant genetic material that is unprecedented. Future crops created through these technological systems could include those with higher degrees of plant-pest control, plants with new and enhanced nutritional characteristics, and varieties that could be grown on marginal lands or in poor quality soils. Transgenesis—the introduction of foreign DNA into a plant genome—has characterized most commercial plant biotechnology innovation over the past 25 years. Most of the global acreage planted to GE crops today is in corn, cotton, soybean, and canola production. Pest resistance and/or herbicide tolerance traits are the dominant features engineered into these GE crops. While CRISPR-Cas9 permits similar transgenic manipulation, it does so with greater precision in the genome, and can involve more than a single gene insertion. New genetic variation can be created by identifying the precise DNA sequence modifications that are wanted in the cultivated variety, and then introducing them via the CRISPR-Cas9 system. By controlling the specific genetic variation introduced into the cultivated plant, CRISPR-Cas9 opens up a fundamentally new method of creating novel plant cultivars. For example, in 2014, Chinese researchers published a paper claiming the development of a strain of wheat that is resistant to powdery mildew, a fungal disease that affects a wide range of plants. CRISPR has also been used to modify the genes of a variety of other agricultural products, including rice, soybeans, potatoes, sorghum, oranges, and tomatoes. CRISPR-Cas9 is also being used to alter the genes of livestock. If successful, these efforts could yield substantial economic benefits. One application is focused on reducing the loss of livestock to disease by providing immunity to a virulent hemorrhagic virus that causes a deadly form of swine flu. A trial is underway in which a particular gene in domestic pigs is replaced by a gene present in warthogs that is believed to provide resistance to the virus. Other CRISPR-enabled livestock work includes more beefy and tender Brazilian cattle, chickens that produce only female chicks for egg-laying, cattle that reproduce only males for greater feed-to-meat efficiency, and hornless dairy cattle, an innovation that could result in economic benefits, increased safety for farm workers, and improvements in animal welfare. Under the Coordinated Framework for the Regulation of Biotechnology (see " The Coordinated Framework for the Regulation of Biotechnology ," above), the three lead agencies involved in the regulation of agricultural biotechnology are the U.S. Department of Agriculture's Animal and Plant Health Inspection Service (APHIS), which regulates the importation, interstate movement, and field testing of GE plants and organisms that are or might be plant pests under the Plant Protection Act (PPA; 7 U.S.C. §7701 et seq.); the Food and Drug Administration, which regulates GE foods and GE animals mainly under the Federal Food, Drug and Cosmetic Act (FFDCA; 21 U.S.C. §301 et seq.); and the Environmental Protection Agency. The environmental safety of plants engineered to express a pesticidal protein fall under EPA's regulatory authority through the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA; 7 U.S.C. §136 et seq.). Over 30 applications for genetically modified plants, including those created through the CRISPR-Cas9 and other gene-editing systems, have been submitted to APHIS for approval since 2011. The regulatory question for APHIS is whether these plants are or could become plant pests, and thereby subject to regulation under the PPA. Genetically engineering a plant has largely been accomplished through the use of a soil bacterium— Agrobacterium tumefaciens — as the vector through which foreign DNA is introduced into the target plant. The genus Agrobacterium was long on the APHIS list of regulated items because of its natural ability to invade a plant and introduce its own DNA. That characteristic made it a very efficient way to genetically engineer a new plant variety. In practice, DNA sequences from A. tumefaciens were almost universally used in GE plant engineering. The use of A. tumefaciens in the transgenic process, and often the presence of A. tumefaciens DNA in the resulting plant, would generally be enough to subject the GE plant to regulation under the PPA. Uncertainty in the regulatory process governing genome editing has been described as an impediment to innovation. On the one hand, plants created through the CRISPR-Cas9 system could be tightly regulated in similar fashion to the older GE technologies for trait development. Alternatively, CRISPR-Cas9 could be treated similarly to plants developed through traditional plant breeding and/or mutagenesis and remain unregulated articles. To address this uncertainty, Secretary of Agriculture Perdue issued a statement in March 2018 that USDA has no plans to regulate plants that could otherwise have been developed through traditional breeding techniques as long as they are not plant pests or developed using plant pests. This would include plant varieties with the following changes: Deletions—modification of the plant is solely a genetic deletion of any size; Single base pair substitutions—modification of the plant is a single base pair substitution; Insertions from compatible plant relatives—modification of the plant is solely the introduction of a nucleic acid sequence from a compatible relative that could otherwise cross with the recipient organism and result in viable progeny through traditional plant breeding; Complete Null Segregants—progeny of genetically engineered plants that do not retain the change of the parent line. For example, CRISPR-Cas9 was recently used to create a genetically modified mushroom that resists browning and a variety of specialty corn with unique starch characteristics ("waxy" corn). The two crops were created by using CRISPR-Cas9 "gene knock-out" technology to achieve the genetic transformation. Because the crops did not contain inserted genetic material from a donor organism, recipient organism, or vector agent meeting the definition of a plant pest, or was an unclassified organism or organism whose classification was unknown, APHIS asserted there was no basis to believe that the crops were or could become a plant pest within the meaning of the PPA. On this basis, APHIS determined in April 2016 that the agency had no regulatory authority under the PPA. The mushroom and waxy corn varieties thus became the first crops created by CRISPR-Cas9 to be approved by APHIS. Genomic editing for trait development in animals also introduces new regulatory uncertainties. FDA has regulatory authority over GE animals under its new animal drug protocol. To date, the agency has overseen the regulatory approval process of two species: a GE salmon and a GE mosquito. In 2017, the agency proposed guidelines for the genome-editing industry stating that each specific edit of an animal's genome would be treated as a new drug whose safety (and environmental impact) would have to be individually assessed. Researchers, particularly in smaller firms and academics, have asserted that such a regulatory approach could inhibit U.S. innovation in animal genomic research. In October 2018, FDA released the Plant and Animal Biotechnology Innovation Action Plan , which indicates the agency's intent to release a set of guidance documents over the next year that "will more clearly describe how the FDA is applying its regulatory oversight based on the risk profile of different types of products." According to the plan, the set of guidance documents will include (1) guidance for industry related to the "regulation of intentional genomic alterations in animals"; (2) guidance to clarify the agency's regulatory approach to gene edited animals used in research; and (3) guidance for industry "to establish an alternative type of file as a repository for information exchanges with the FDA's Center for Veterinary Medicine (CVM) for products that are in early development stages or that are developed for pure research and that may never progress to a marketable product." Additionally, FDA announced the establishment of a new pilot program, the Veterinary Innovation Program, which will provide "intensive assistance" to "increase the predictability of the regulatory pathway, facilitate a lower number of review cycles, and reduce the overall time to approval." In some respects, current discussions of CRISPR-Cas9 are reminiscent of discussions over advances in genetic engineering in the 1980s. For example, at that time there were highly optimistic projections of being able to control photosynthesis, genetically engineer nitrogen fixing into plants, create "designer" foods with unique health properties, and cultivate plants on poor quality soils (e.g., aluminum toxicity). Potential social and environmental issues were noted in passing (e.g., weed and pest resistance, safety questions), but the technology's impressive promise and the fact that other countries were pushing ahead aggressively with development (e.g., Japan, Germany) left such issues largely in the background at the time. However, as products reached the market these issues resurfaced. Some issues remain unresolved as demonstrated by current debate over whether GE foods should be labeled for consumers. CRISPR-Cas9 is unlikely to escape similar social and ethical concerns as its use increases and evolves. For example, the use of CRISPR-Cas9 to create "gene-drive"—a method for spreading modified traits through wild populations over a few generations—has already sparked debate (discussed in more detail in " Gene Drives and Environmental Concerns ," below). In 2014, a study by a group of biologists noted that gene drives based on CRISPR-Cas9 "could potentially prevent the spread of disease, support agriculture by reversing pesticide and herbicide resistance in insects and weeds, and control damaging invasive species." The study's authors noted that unwanted ecological effects would require careful assessment of each potential application. How such assessments would be done is an important policy issue. Those opposed to "genetic engineering" regardless of the differences—or perhaps because of the differences—between CRISPR-Cas9 technology and conventional GE technologies are likely to continue raising issues surrounding human and environmental safety. The increased precision of genome engineering observed in the laboratory using CRISPR-Cas9 may have unknown effects when a CRISPR-modified plant is introduced into open environments with different agro-ecological characteristics. These concerns may need to be addressed systematically if the technology is to garner wider social acceptance. National and individual perceptions of risk vary and will continue to influence the development of CRISPR-Cas9 as they have with earlier technologies. Whether gene-edited plants will require specific labeling has not been decided. USDA's bioengineered food disclosure policy has yet to be finalized. However, the fact that USDA has stated it will not regulate genome edited plants suggests that foods containing such material may not be subject to disclosure. The past 25 years of conventional GE agriculture may suggest how crop production based on CRISPR-Cas9 and gene editing could evolve in the coming years. The United States is the leading country in planting GE crops, accounting for more than 40% of acres growing GE crops worldwide. Elsewhere in the world the acceptance and cultivation of GE crops by both producers and consumers has been mixed. In the European Union (EU), for example, GE crops account for about 1% of crop acreage, all in a single variety of pest-resistant GE corn. This GE corn is cultivated mostly in Spain, with Portugal, the Czech Republic, Slovakia, and Romania having much smaller GE acreage. Several EU countries have completely banned the cultivation of GE crops in their territories or have specific rules on the trade of GE seeds. Only EU-approved varieties of GE commodities can be imported. All GE-derived food and feed must be labeled as such. Public opinion in most EU member states remains strongly opposed to GE food and crops. Opposition in the EU may have influenced acceptance in other countries. Nine of the 14 developing countries that have approved commercial planting of GE crops are in Latin America. Most African countries have largely followed the EU in restricting or banning the cultivation of GE crops. South Africa, Egypt, Burkina Faso, and Sudan are the only African countries where GE crops are grown commercially. India, China, and Pakistan are major producers of GE cotton. The Philippines is the only Asian country to have approved a GE crop other than cotton for cultivation. In contrast to the U.S. Secretary of Agriculture's recent statement that the United States will not regulate plants created through genomic editing (as long as they are developed without using a plant pest as the donor or vector, nor are plant pests themselves), the EU appears to be headed in the opposite direction, although in a direction similar to the one it has followed with transgenic organisms over nearly 20 years. On July 25, 2018, the Court of Justice of the European Union ruled that organisms obtained by mutagenesis are GMOs and are in principle within the scope of the obligations laid down in the GMO Directive, which governs the deliberate release into the environment of genetically modified organisms. While conventional mutagenesis techniques with a long safety record and used in a range of applications are not subject to the GMO Directive, the Court considers that risks posed by new mutagenesis techniques such as CRISPR-Cas9 might prove similar to risks from transgenesis. The Court considers that excluding organisms created from new mutagenesis techniques would compromise the objectives of the GMO Directive to avoid adverse effects on human health and the environment, and would also fail to respect the precautionary principal which the Directive seeks to implement. In addition to variance in approval processes by different countries, trade negotiations concerning agricultural biotechnology also involve labeling issues for GE products and the difficulty of keeping GE material and non-GE material completely segregated in commodity supply chains. Harmonization of international trade regulations for products created through CRISPR-Cas9 could be as difficult to achieve as for conventional GE production. Intellectual property issues surrounding CRISPR-Cas9 agricultural organisms are likely to continue to be a controversial issue in international agriculture. Given the dominance of a few agro-food corporations in seed development, questions related to who owns the raw material produced through gene editing and how the genome editing of global food crops is to be shared may be expected to continue. Agricultural productivity depends in part on the availability of biodiversity for the development of improved cultivars. Because genes can receive intellectual property protection, the emergence of CRISPR-Cas9 suggests that whole genomes could one day receive intellectual property protection as well. The objectives of the International Treaty on Plant Genetic Resources for Food and Agriculture (PGRFA), which was ratified by the U.S. Senate in September 2016, are the conservation and sustainable use of all plant genetic resources for food and agriculture, and the fair and equitable sharing of the benefits of their use. The purpose of the Multilateral System of the PGRFA is to facilitate access to plant genetic resources to ensure food security and fair distribution of the benefits from their use. CRISPR-Cas9 could add considerable complexity to implementing the PGRFA particularly in its stipulation of the right of contracting parties to save, use, exchange, and sell farm-saved seed. The potential impact of CRISPR-Cas9 on industries that rely on bacteria, fungi, and yeast is broad. First, CRISPR-Cas9 is broadening the number of microorganisms that could be used for industrial production. Second, CRISPR-Cas9 technology has been used to make industrially relevant strains resistant to viruses, to increase the production of chemicals used in biofuels, manufacturing, and to engineer probiotics. For example, researchers at the University of California, Riverside, have developed a yeast strain that can produce useful lipids and polymers, a development that some say may lead to the development of new precursors for biofuels, specialty polymers, adhesives and fragrances. This innovation is described as the first step to create long-chain hydrocarbons using yeast rather than synthetic processes. This approach offers the potential to replace non-renewable raw materials produced in petroleum refining processes with less expensive raw materials produced using a more efficient, safer bio-manufacturing process. CRISPR gene editing has been suggested as a potential control method to address the challenges posed by invasive species (e.g., spotted knapweed, Japanese beetles, and zebra mussels) and agricultural pests (e.g., Palmer amaranth). Specifically, the use of a gene drive has been proposed as a means to reduce populations of invasive or other unwanted species. As described above, a gene drive forces a trait that is present in a single individual to spread through an entire population in only a few generations. A CRISPR-based gene drive could be used in various ways, including making an invasive species or an agricultural pest more susceptible to an herbicide or rodenticide, which would enable the species to be managed effectively by chemical control agents. It could also be used to bias the gender ratio of the invasive population towards males and therefore facilitate a decline in the population. For example, a sex-determining gene drive for invasive non-native species has been suggested as a method to preserve island biodiversity. Invasive species are the leading cause of extinction for native island species, and more than 80% of the world's islands have one or more invasive rodent species. Conventional control methods (i.e., trapping, the introduction of a predatory or parasitic species, and rodenticide application) are often labor intensive, cost-prohibitive, and indiscriminate (i.e., in many cases, native species can also be negatively affected by the control). A CRISPR-based gene drive is viewed by some as advantageous because it can be designed to be specific to the invasive species or targeted organism. Conversely, some researchers have announced plans to use CRISPR-Cas9 to recreate extinct species, including the wooly mammoth and the passenger pigeon. These de-extinction projects would compare the DNA of the extinct species to that of its modern relative and then edit the DNA of the contemporary animal to include the lost traits. For example, in the case of the wooly mammoth, the DNA of an Asian elephant would be altered to increase hair growth and subcutaneous fat. Anticipation of potential benefits of CRISPR-Cas9-enabled gene drives to human health, agriculture, and the environment is accompanied by concern over potential negative consequences to other species and ecosystems. According to a 2016 report by the National Academy of Sciences: The fast moving nature of this field is both encouraging and concerning. While gene-drive modified organisms hold promise for addressing difficult to solve, persistent challenges, such as the eradication of vector-borne diseases and the conservation of threatened and endangered species, these proposed applications are based on limited proof-of-concept studies. The presumed efficiency of gene-drive modified organisms may lead to calls for their release in perceived crisis situations, before there is adequate knowledge of their ecological effects, and before mitigation plans for unintended harmful consequences are in place. Moreover, organisms that are invasive pests in one area (e.g., gray squirrels in Great Britain or mute swans in the United States) may be normal or even at risk in their native habitats (the eastern United States and western Europe, respectively). Transfer of organisms bearing the inserted genes from the target area to a non-target area could have unpredictable effects. Some experts have called for regulatory reform and clarity in how federal agencies will regulate the use of gene drives. The environmental release of gene-drive modified organisms will likely fall under the Coordinated Framework for the Regulation of Biotechnology (see previous section) with the responsible federal agency—the Environmental Protection Agency, the Food and Drug Administration, or the U.S. Department of Agriculture—identified based on the agencies' existing authorities and the intended use of the product (e.g., suppressing a target species or lowering disease transmission). Specifically, FDA regulates genetically engineered animals under the new drug provisions of the Federal Food, Drug and Cosmetic Act (FFDCA; 21 U.S.C. §301 et seq.); EPA regulates pesticides through the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA; 7 U.S.C. §136 et seq.); and the USDA Animal and Plant Health Inspection Service regulates genetically-engineered organisms that are noxious weeds or might be plant pests under the Plant Protection Act (PPA; 7 U.S.C. §7701 et seq.) However, according to the National Academy of Sciences and others, the Coordinated Framework does not clearly distinguish which agency should regulate the various applications of gene-drive modified organisms. Additionally, the National Academy indicates that some uses will likely result in jurisdictional overlap and recommends the development of an interagency process to quickly determine which agency should be the lead for a particular application area. In October 2017, FDA released guidance that clarifies when a genetically modified mosquito is considered a new animal drug and therefore regulated by FDA and when the modified mosquito is considered a pesticide and regulated by EPA. If the intended use of the genetically modified mosquito is to reduce the population of mosquitos (i.e., cause sterility or change the sex ratio of the population) then it is to be treated as a pesticide; however, if the use of the modified mosquito is to reduce the viral or pathogen load of the population of mosquitos—reducing disease transmission—it is to be treated as a new animal drug. According to the Brookings Institution, FDA's guidance should be expanded to cover not just mosquito populations, but all animal populations, as it is likely that CRISPR-enabled gene drives may be used in similar animal population management efforts in the future (i.e., to control the spread of invasive species or the transmission of disease through other insects or animals). Assessing environmental risk associated with the release of a gene-drive-modified organism into an open environment is determined by the federal agency tasked with the responsibility for regulating the organism. Specifically, FDA and USDA are required to examine environment risks under processes defined by the National Environmental Policy Act (NEPA, 42 U.S.C. 4321 et seq.), while EPA is required to conduct an ecological risk assessment process under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA; 7 U.S.C. §136 et seq.). NEPA requires the preparation of an environmental impact statement (EIS) for any major federal action significantly affecting the quality of the human environment. An EIS provides a description of the proposed action and the existing environment, as well as analysis of the anticipated beneficial and adverse environmental effects of all reasonable alternatives. NEPA requires some level of analysis when environmental impacts are uncertain or thought not to be significant. Projects for which it is not initially clear whether impacts will be significant require the preparation of an environmental assessment (EA). An EA is a concise public document that analyzes the environmental impacts of a proposed federal action and provides sufficient evidence to determine the level of significance of the impacts. It is followed by either a Finding of No Significant Impact (FONSI) or a decision to prepare an EIS. Judicial interpretation of NEPA ultimately determined that the act did not require agencies to elevate environmental concerns over other considerations. Rather, the courts determined, NEPA requires only that the agency take a "hard look" at a project's environmental consequences before taking action. If the adverse environmental effects of the proposed action are adequately identified and evaluated, the agency is not constrained by NEPA from deciding that other benefits outweigh the environmental costs. According to the National Academy of Sciences: Some of the key strengths of [the] NEPA process are that it is a standard approach required by legislation, supports the collection of large amounts of information about a proposed activity, it has clear reporting requirements, and includes provisions for public input. The NEPA process is also widely recognized by the stakeholder community. The disadvantage of the NEPA process, however, is that it is a regulatory process and not a decision science approach. Neither an EA nor an EIS requires a clear formulation of the problem that provides a quantitative cause-effect model. Analyses conducted as part of the NEPA process are not required to be probabilistic or report quantitatively on uncertainty. These gaps would make it very difficult to [a] create testable hypothesis to conduct further research on gene-drive modified organisms and inform decision making. In contrast, according the National Academy of Sciences, ecological risk assessment allows for the quantification of probable outcomes and the ability to trace cause-effect pathways. Both of these, in addition to the ability of ecological risk assessment to identify sources of uncertainty, likely make it a more thorough tool for supporting public policy decisions about the use of gene drive technologies. However, some in industry may argue that the NEPA process is sufficient and that requiring ecological risk assessments has the potential to lengthen the approval process, leading to unnecessary delays and costs that could have a negative effect on public health. According to the National Academy of Sciences, "there is insufficient evidence available at this time to support the release of gene-drive modified organisms into the environment," and a considerable amount of research and evaluation is still necessary. These experts also indicate that any decision to release a gene-drive modified organism into the environment must be accompanied by a "reasonable level of assurance" that the potential risks have been adequately identified and studied and are outweighed by the potential benefits. For example, a gene drive could be constructed to suppress the population of an invasive plant species so that native plant species would be able to re-populate the ecosystem. However, the invasive plant may have assumed a critical role in the ecosystem, and its suppression may result in the sudden loss of habitat or a food source for native animals even if native species are eventually able to assume their previous ecological roles. If the native animal is an endangered or threatened species, then reducing its habitat (i.e., reducing the invasive plant species) could have negative consequences for the native animal and its recovery as required by the Endangered Species Act. Additionally, while the desired benefit of suppressing the invasive species is re-population by the native species, it could actually create an opportunity for an even more resilient invasive species to take its place. In another scenario, a gene drive could be developed to modify a population of mosquitos so they can no longer host the Zika virus and thereby reduce the number of infants with serious defects at birth or emerging later in life. However, an unintended consequence of modifying the mosquito population could be that it then becomes a more susceptible host for a new or existing virus that may have an even greater negative impact on human health. Some scientists have called for the development of reversal or immunization gene drives as a means to counter any unintended consequences with the open environment release of a gene drive-modified organism. These gene drives could be designed to revert the targeted organism back to its original genetic state or incorporate a genetic change into the organism that would prevent it from being susceptible or "immune" to the original gene drive. Besides the scientific questions of risk in making changes to complex and interwoven ecosystems, these examples raise a number of questions about the use of gene drives and what may be considered socially acceptable. Some may view the use of gene drives to benefit public health, especially in a time of crisis (i.e., an outbreak of a harmful virus), as appropriate. Others may view the possibility of eradicating a species as morally objectionable, regardless of the potential benefits to human health. Others may object to the use of gene drives entirely, and view any attempt to "control" nature as unwarranted. These views may also vary by community. For example, a society that is plagued by a serious disease may be more tolerant of the use of gene drives and the potential unintended consequences that may result than a community not affected by the disease being targeted. Variation in societal and ethical views suggest the need for public engagement and dialogue before any field testing or open environmental release of a gene-drive modified organism. Concerns about environmental justice and who will be responsible for addressing unanticipated public health or environmental harms may also be an issue as developing countries may be primary locations for the use of gene drives. According to the National Academy of Sciences: Engagement can facilitate mutual learning and shared decision making, support democracy and justice, help identify and assess potential benefits and harms, and provide a mechanism to explore difficult-to-articulate questions, such as the human relationship to nature…. The question is not whether to engage communities, stakeholders, and publics in decisions about gene drive technologies, but how best to do so. The outcomes of engagement may be as crucial as the scientific outcomes to decisions about whether to release of a gene-drive modified organism into the environment. Thus, engagement cannot be an afterthought; it requires effort, attention, resources, and advanced planning. The United Nations Convention on Biological Diversity (CBD), as implemented through the Cartagena and Nagoya Protocols, is the primary international agreement governing the development and use of genetically modified organisms. The CBD entered into force in 1993 and, at present, 168 nations have signed onto the treaty; the United States is not signatory to the CBD. The treaty states as major objectives the conservation of biological diversity and sustainable use of its components; fair and equitable sharing of the benefits arising out of the use of genetic resources; and appropriate transfer of relevant technologies. The Cartagena Biosafety Protocol, completed in 2000, applies to the transboundary movement, handling, and use of genetically modified organisms that may affect human health, the environment, or biological diversity. Under Article 17 of the protocol, a party to the agreement is required to take appropriate action to notify a potentially affected party "when it knows of an occurrence under its jurisdiction resulting in a release that leads, or may lead, to an unintentional transboundary movement of a living modified organism that is likely to have a significant adverse effect on the conservation and sustainable use of biological diversity." The Cartagena Protocol was developed mainly due to concerns related to genetically modified crops, but extension of the protocol and the CBD to synthetic biology, and similarly to gene drives, has recently been examined. In November 2018, at a meeting to update the CBD, government officials considered (but ultimately rejected) a resolution that would have prohibited the release of organisms modified using gene drives, including experimental releases. The proposed moratorium on gene drives caused some in the scientific community to issue a letter in opposition to the ban, stating that, "closing the door on research by creating arbitrary barriers, high uncertainty, and open-ended delays will significantly limit our ability to provide answers to the questions policy-makers, regulators, and the public are asking. The moratorium suggested at CBD on field releases would prevent the full evaluation of the potential uses of gene drives." On the other hand, some environmental groups supported the ban on gene drives, stating that, "gene drives threaten natural systems. If released experimentally into the environment they may spread engineered genes uncontrollably through wild and domesticated species. This could alter ecological systems and food webs, harm biodiversity and eradicate beneficial organisms such as pollinators." The CBD is predicated on the precautionary principle, which is generally understood to mean that if definitive scientific certainty is lacking, it is better to err on the side of caution. This approach is a source of concern for critics, who worry about the possible erection of trade restrictions that might be justified by the application of this concept. The United States is generally more tolerant than many other nations of scientific uncertainty and risk as they relate to innovation and emerging technologies; it does not operate its regulatory systems according to the precautionary principle. The National Academy of Sciences indicates that since the United States is not a party to the CBD, it lacks a clear policy for engaging with other countries with different systems of governance in the release of gene-drive modified organisms. The NAS report also expresses concern that many of the countries where field testing and the environmental release of gene-drive organisms is likely to occur lack independent capacity to assess the safety of gene drive research, to undertake public engagement and societal dialogue, and to maintain regulatory institutions. CRISPR-Cas9 gene editing provides flexibility and new opportunities in basic research. For example, the modeling of disease in animals is an important tool in fundamental understanding of disease and the development of therapeutics. CRISPR-Cas9 has made the development of animal models of disease less labor intensive, more cost-effective, and more precise. Before CRISPR-Cas9, creating a new mouse disease model took approximately a year and cost tens of thousands of dollars, but with the CRISPR technology a new mouse model can be created within a month and at a fraction of the previous cost. CRISPR-Cas9 is also expanding the types of animals that can be used for basic research. For example, neurobiologists are using CRISPR-Cas9 to develop the tree shrew as a model for the human brain. Additionally, some countries, including China and Japan, are using the technology to position themselves as leaders in primate-related research, especially neuroscience. For example, scientists in China have used CRISPR-Cas9 to create monkey models of autism and cardiovascular disease. Beyond editing the genome (i.e., deleting and/or inserting genes), CRISPR-Cas9 is being used to regulate the expression of genes and the proteins they produce—providing additional insight into cellular systems and disease. The study of changes in gene expression without the modification of the underlying DNA is termed epigenetics. CRISPR-Cas9 offers researchers the first tool to precisely alter the epigenome, the chemical compounds attached to DNA. With this technique, researchers modify the CRISPR-Cas9 technology so that it does not cut the target gene, but instead attaches itself to the gene in a way that promotes or prevents gene expression. The modified technology can also be coupled with other components to create on-off switches and fluorescent molecules to allow visualization of gene expression in living organisms. In 2016, then-Director of National Intelligence James Clapper stated that advances in genetic engineering may raise significant national security concerns: Research in genome editing conducted by countries with different regulatory or ethical standards than those of Western countries probably increases the risk of the creation of potentially harmful biological agents or products. Given the broad distribution, low cost, and accelerated pace of development of this dual-use technology, its deliberate or unintentional misuse might lead to far-reaching economic and national security implications. In 2017 and 2018, Director of National Intelligence Daniel Coats also highlighted national security concerns associated with genome editing and advances in biotechnology. In 2018, Director Coats stated: "New biotechnologies are leading to improvements in agriculture, health care, and manufacturing. However, some applications of biotechnologies may lead to unintentional negative health effects, biological accidents, or deliberate misuse." Just as CRISPR-Cas9 technology is lowering the cost and technological expertise required for biological research in general, the technology could do the same for biological weapons programs. In theory, advances in gene editing could be used to create novel pathogens or change the hardiness, resistance, infectivity, pathogenicity, or specificity of existing pathogens. However, current understanding of many of these traits and how they interact in particular pathogens may complicate making desired changes without also causing undesired changes. A 2016 conference concluded that "with regards to weapons relevance, the implications of gene editing technology are probably modest. But should a biological weapons program be started today, these technologies would likely become a part of it." Additionally, the concerns discussed above regarding potential inadvertent effects of ecological use of CRISPR-Cas9 linked gene-drive technology equally apply to the potential effects of its deliberate malign use. In general, the United States addresses dual-use technologies by controlling proliferation through export controls and international agreements when possible and by mitigating the risks of proliferation through other activities such as deterrence, disruption, and preparedness. Given the current global availability of CRISPR-Cas9 technology and knowledge, export control regimes and international agreements designed to limit proliferation may be ill-suited for addressing national security concerns raised by gene editing. Current efforts aimed at mitigating the risks of biological weapons in general will also help mitigate the risks of biological weapons developed by gene editing. However, it may be possible to use gene editing to circumvent current mitigation strategies. Demonstrating its dual-use nature, this technology is likely to play an important role in improving the development of medical countermeasures against both traditional and genetically engineered biological weapons. Thus, this technology may simultaneously address some national security concerns while raising others. In July 2017, the Defense Advanced Research Projects Agency (DARPA) announced that the agency would invest $65 million over four years in a program called "Safe Genes" with the goal being to "gain a fundamental understanding of how gene editing technologies function; devise means to safely, responsibly, and predictably harness them for beneficial ends; and address potential health and security concerns related to their accidental or intentional misuse." According to DARPA, each of the funded research teams will pursue one or more of the following technical objectives: develop genetic constructs—biomolecular "instructions"—that provide spatial, temporal, and reversible control of genome editors in living systems; devise new drug-based countermeasures that provide prophylactic and treatment options to limit genome editing in organisms and protect genome integrity in populations of organisms; and create a capability to eliminate unwanted engineered genes from systems and restore them to genetic baseline states. | Scientists have long sought the ability to control and modify DNA—the code of life. A gene editing technology known as CRISPR-Cas9 offers the potential for substantial improvement over other gene editing technologies in that it is simple to use and inexpensive and has a relatively high degree of precision and efficiency. These characteristics have led many in the scientific and business communities to assert that CRISPR-Cas9 will lead to groundbreaking advances in many fields, including agriculture, energy, ecosystem conservation, and the investigation, prevention, and treatment of diseases. Over the next 5 to 10 years, the National Academy of Sciences projects a rapid increase in the scale, scope, complexity, and development rate of biotechnology products, many enabled by CRISPR-Cas9. Concomitant with the promise of potential benefits, such advances may pose new risks and raise ethical concerns. For example, a Chinese researcher recently claimed that he had created the first genetically engineered human babies. According to the researcher, he used CRISPR-Cas9 to disable a gene that will make it harder for the twin girls, who were born in November 2018, to contract human immunodeficiency virus (HIV). The as yet unsubstantiated claim has sparked outrage and ethical debates by the international scientific community and others. Prior use of CRISPR-Cas9 gene editing in human embryos was generally limited to non-viable embryos, in part, to address ethical concerns such as the fact that the genetic change would affect not only the immediate patient, but also future generations who would inherit the change. Additionally, CRISPR-related approaches (gene drives) are being considered to reduce or eliminate the mosquito that serves as the primary vector for the transmission of Zika or malaria, thereby improving public health. Some scientists and environmental groups have raised ethical questions and expressed concerns about the unintended ecological consequences of eliminating a species or introducing a genetically modified organism into an open environment. Some experts assert that the current system for regulating biotechnology products—the Coordinated Framework for the Regulation of Biotechnology—may be inadequate, with the potential to leave gaps in oversight. Regulatory gaps may lead to increased uncertainty that could affect the development of future biotechnology products or a loss of public confidence in the ability of regulators to ensure that such products are safe. In the 116th Congress, policymakers may want to examine the potential benefits and risks associated with the use of CRISPR-Cas9 gene editing, including the ethical, social, and legal implications of CRISPR-related biotechnology products. Congress also may have a role to play with respect to regulation, research and development, and economic competitiveness associated with CRISPR-Cas9 gene editing and future biotechnology products. |
Depending on one's point of view, new chemicals legislation in the European Union (EU) is likely to vastly improve environmental and public health protections and serve as a model for future U.S. law, or it might unnecessarily burden commercial enterprises with regulations and interfere with international trade. The subject of such conjecture is an EU law for Registration, Evaluation, Authorization, and Restriction of Chemicals (REACH) in EU commerce, which went into force June 1, 2007. This report summarizes REACH and progress in its implementation. For information about U.S. chemical law, see CRS Report RL34118, The Toxic Substances Control Act (TSCA): Implementation and New Challenges , by [author name scrubbed]. On June 1, 2007, the EU began to implement a new approach to the management of chemicals in EU commerce. The REACH directive simplifies and consolidates more than 40 former regulations in an effort to balance two EU goals: to protect public health and the environment from hazardous chemicals and to ensure the continuing competitiveness of European industry. Although certain chemicals are exempt entirely, and requirements for the other chemicals are being phased in over 11 years, the law generally will apply to nearly all chemicals in EU commerce, including imported chemicals, chemical mixtures, and certain articles that release chemicals to the environment. The REACH legislation is based on a proposal developed by the EU General Directorates for Enterprise and Environment, which was adopted by the European Commission in February 2001. The draft law was revised several times in response to public comments and amendments adopted by the European Parliament and Council of Ministers (which is comprised of the executive officers of EU member states). The final regulation is binding on all member states. REACH requires all chemical producers and importers of more than one metric ton (t) per year of any chemical to register the product by submitting a technical dossier of information about the properties of that chemical and its uses to a new agency created by the law, the European Chemicals Agency (ECHA). The dossier also must contain information about how any risks associated with use of that chemical should be managed. Downstream users of chemicals are required to manage their risks in the manner indicated by producers. Information requirements for the dossier increase as production volume increases beyond 10 t, 100 t, and 1,000 t. Since June 1, 2008, when the ECHA began to function, registration has been required for new chemicals before they enter commerce. Companies had between one year and 18 months to pre-register existing chemicals. Pre-registration ended November 30, 2008. The first registration deadline for existing chemicals was on November 30, 2010, and applied only to "substances of very high concern," or substances produced in volumes greater than 1,000 t annually or greater than 100 t annually if they are very toxic to aquatic life. A total of 4,632 substances reportedly were registered by the first deadline. The second registration deadline for existing chemicals is May 31, 2013, and applies to substances produced in the 100 to 1,000 t range annually. A total of 2,998 substances reportedly were registered by the second deadline. The final deadline is May 31, 2018, by which point all substances produced or imported in small quantities, between 1 and 100 t annually, must be registered. Member states (i.e., the nations of the EU) evaluate the dossiers based on guidelines provided by the ECHA, and may require additional data, if such data are needed to assess health and environmental effects of potential chemical exposure. Member states also may determine that action should be taken to authorize or restrict particular chemical uses. The list of substances currently under evaluation is published and updated in the REACH Community Rolling Action Plan (CoRAP). On February 29, 2012, ECHA announced that it had used the information submitted in the first round of data collection for substances produced in high volumes to identify 90 high-priority substances for risk evaluation by Member States. These will be the first chemicals subject to the evaluation stage of REACH, because ECHA suspects that use of these substances might pose a risk to human health or the environment. The evaluations will aim to clarify such risks to determine whether additional data should be collected and whether authorizations or restrictions may be necessary. On March 20, 2013, ECHA published an update to the CoRAP stating that it will evaluate 115 substances in the next two years. Fifty-three substances were transferred from the 90 high-priority substances previously identified. Producers of "substances of very high concern" may be required to apply for authorization of each particular use, demonstrate that the risks can be adequately controlled (e.g., through labeling or worker training), and justify such uses by submitting additional information to authorities. Companies will not be allowed to manufacture, import, or use a chemical after a specified date unless they have obtained an authorization for a use. In addition, producers will be required to submit an analysis of possible substitutes, a "substitution plan" if substitutes are available, or a research and development plan if no suitable substitute exists. As of October 23, 2013, 22 substances have been identified as substances of very high concern (SVHC) that are effectively banned from use in the EU unless such use is authorized under the law. In all, ECHA has identified 144 chemicals or chemical groups as SVHC candidates for authorization, with many more chemicals being evaluated for this designation, including approximately 1,350 chemicals known or likely to be carcinogens, mutagens, or chemicals toxic to reproductive systems; persistent, bioaccumulative, and toxic chemicals (PBTs); or very persistent and very bioaccumulative chemicals (vPvBs). According to the law, no use of PBTs or vPvBs is to be authorized unless there is no suitable alternative, and the socioeconomic benefits of the use outweigh the risks. If a chemical use presents unacceptable risks, that chemical use may be restricted. High-production-volume chemicals routinely will be subject to the authorization process. The authorization and restriction processes also may be applied to chemicals produced or imported in volumes less than 1 t. The U.S. government was actively engaged throughout the development of REACH. The Bush Administration expressed concerns about its trade implications for U.S.-produced chemicals. Specific concerns included increased costs of and timelines for testing chemicals exported to the EU; placement of responsibility on businesses (as opposed to governments or consumers) to generate data, assess risks, and demonstrate the safety of chemicals; possible inconsistency with international rules for trade adopted by the World Trade Organization (WTO); and the effect of the legislation on efforts to improve the coherence of chemical regulatory approaches among countries in the Organization for Economic Cooperation and Development (OECD). Some U.S. chemical industry representatives believe that REACH is "impractical." Industry has expressed objections to the proposed list of "high concern" chemicals, some of which are essential building blocks for the manufacture of other chemicals. The EU chemical industry is concerned about the cost of compliance, and what it might mean to innovation and international competitiveness. Some national governments of the EU also are concerned about the impact of REACH on their economies and employment, especially if REACH leads to companies relocating outside the EU (i.e., no longer producing or selling products in the EU). The EU has estimated that about 12% of chemicals in commerce will be withdrawn by chemical producers, because continued production under REACH will be costly and distribution not sufficiently profitable to recoup costs. In cases where no substitute is available, loss of a production source might leave some end users without the chemicals they need. Many environmental, health, and U.S. and EU labor organizations strongly supported the original proposal for REACH, but some are less enthusiastic about the final regulation, which retains its basic purpose and shape but exempts some chemicals from requirements. Nevertheless, these groups agree that REACH addressed some of what they saw as flaws in older EU laws covering chemicals. For example, REACH reduces and coordinates EU regulatory requirements for providing health and safety information about chemicals new to the EU market (as well as the number of new chemicals subject to such requirements), while at the same time increasing collection of such information for chemicals already in the EU market, thus potentially removing disincentives to innovation and encouraging substitution of less toxic for more toxic chemicals in various chemical applications. In addition, to address concerns about the slow pace of chemical risk assessment and management by the EU government, REACH shifts responsibility for assessing and managing the safety of chemicals away from the government and onto chemical manufacturers, importers, and users. Some public interest groups are urging U.S. legislators to adopt a similar legislative approach. For more discussion of the perceived flaws of U.S. law, see CRS Report RL34118, The Toxic Substances Control Act (TSCA): Implementation and New Challenges , by [author name scrubbed]. | On June 1, 2007, the European Union (EU) began to implement a new law governing chemicals in EU commerce: Registration, Evaluation, Authorization, and Restriction of Chemicals (REACH). It is intended to protect human health and the environment from hazardous chemicals while at the same time protecting the competitiveness of European industry. REACH evolved over eight years and reflects compromises reached among EU stakeholders. The final regulation reduces and coordinates EU regulatory requirements for chemicals new to the EU market and increases collection of such information for chemicals already in the EU market, thus potentially removing disincentives to innovation that existed under the former law. It also shifts responsibility for safety assessments from government to industry and encourages substitution of less toxic for more toxic chemicals in various chemical applications. Some U.S. chemical industry representatives believe that REACH is "impractical," in part due to the large number of chemicals and difficulties of identifying end uses of chemicals in many products. In contrast, some public-interest groups are urging U.S. legislators to adopt a similar legislative approach. |
Since 1984, Congress has designated 49 national heritage areas (NHAs) to recognize and assist efforts to protect, commemorate, and promote natural, cultural, historic, and recreational resources that form distinctive landscapes. Congress has established heritage areas for lands that are regarded as distinctive because of their resources, their built environment, and the culture and history associated with these areas and their residents. A principal distinction of these areas is an emphasis on the interaction of people and their environment. Heritage areas seek to tell the story of the people, over time, where the landscape helped shape the traditions of the residents. In a majority of cases, NHAs now have, or have had, a fundamental economic activity as their foundation, such as agriculture, water transportation, or industrial development. The attributes of each NHA are set out in its establishing law. Because they are based on distinctive cultural attributes, NHAs vary in appearance and expression. They are at different stages of developing and implementing plans to protect and promote their attributes. Table 1 identifies the NHAs established by Congress. Congress designated the first heritage area—the Illinois and Michigan Canal National Heritage Corridor—in 1984. This area was located in one of the nation's most industrialized regions and sought to combine a diversity of land uses, management programs, and historical themes. A goal was to facilitate grassroots preservation of natural resources and economic development in areas containing industries and historic structures. The federal government would assist the effort (e.g., through technical assistance) but would not lead it. The idea of linking and maintaining a balance between nature and industry, and encouraging economic regeneration, resonated with many states and communities, especially in the eastern United States. Interest in establishing heritage areas was commensurate with growing public interest in cultural heritage tourism. Since the creation of the first NHA in 1984, interest in additional NHA designations has grown considerably. For example, from 2004 to 2009 (108 th -111 th Congresses), the number of heritage areas more than doubled. Further, during this period, dozens of proposals to designate heritage areas, study lands for heritage status, or amend laws establishing heritage areas were introduced, and Congress held many hearings on heritage bills and issues. The number of measures to study or establish heritage areas has been smaller in the 112 th -114 th Congresses than in earlier Congresses. One factor accounting for the decline might be the establishment of a relatively large number of NHAs in the 108 th -111 th Congresses. Another factor could be changes in House and Senate rules and protocols regarding introduction and consideration of legislation containing earmarks, including a House Republican Conference "standing order" expressing conference policy that no Member request an earmark. The sizeable number of existing NHAs, along with proposals to study and designate new ones, fostered interest by some Members and Administrations in establishing a standardized process and criteria for designating NHAs. (See " Legislative Activity ," below.) However, the absence over the decades of such a systemic law has provided legislative flexibility in the creation of new NHAs and the modification of existing ones. Further, some opponents of NHAs believe that they threaten private property rights, are burdensome, or present other problems and challenges, so Congress should oppose any efforts to designate new areas and/or to create a "system" of NHAs. (See " Support, Opposition, and Challenges ," below.) NHAs reflect an evolution in roles and responsibilities in protecting lands. The traditional form of land protection for the National Park Service (NPS) has been through government ownership, management, and funding of lands set aside for protection and enjoyment. By contrast, NHAs typically are nonfederally owned, managed by local people with many partners and NPS advice, funded from many sources, and intended to promote local economic development as well as to protect natural and cultural heritage resources and values. The NPS provides technical and financial aid to NHAs, but these areas are not part of the National Park System. Congressional designation of heritage areas is commonly viewed as a less expensive alternative to creating and operating new units of the National Park System. That system now has 409 diverse units: national parks, national monuments, national historic sites, national battlefields, national preserves, and other designations. Heritage areas consist mainly of private properties, although some include publicly owned lands. In most cases, the laws establishing NHAs do not provide for federal acquisition of land, and once designated, heritage areas generally remain in private, state, or local government ownership or a combination thereof. However, in a few cases Congress has authorized federal acquisition of land in heritage areas. For instance, Congress authorized creation of the Cane River Creole National Historical Park (LA) within the Cane River NHA. Many laws establishing national heritage areas contain provisions intended to address concerns about potential loss of, or restrictions on use of, private property as a result of NHA designation. For example, P.L. 111-11 , which established the nine newest NHAs, stated for each area that the law does not abridge the right of any property owner; require any property owner to permit public access to the property; alter any land use regulation; or diminish the authority of the state to manage fish and wildlife, including the regulation of fishing and hunting within the NHA. P.L. 111-88 , the Department of the Interior, Environment, and Related Agencies Appropriations Act, 2010, contained a more general provision allowing any private property owner within an NHA to opt out of participating in any plan, project, program, or activity conducted within the area. There is no comprehensive statute that establishes criteria for designating NHAs or provides standards for their funding and management. NHA designation is often a two-step process, involving first a study of the suitability and feasibility of designating an area and then enactment of legislation to designate the NHA. However, although legislation authorizing an NHA might follow a positive study recommendation, an area study is not a requirement for enacting legislation to designate an NHA. When directed by Congress, the NPS prepares studies as to the suitability and feasibility of designating an area as an NHA. Such studies typically address a variety of topics, including whether an area has resources reflecting aspects of American heritage that are worthy of recognition, conservation, interpretation, and continued use. They usually discuss whether an area would benefit from being managed through a public-private partnership, and if there is a community of residents, businesses, nonprofit organizations, and state and local agencies that would work to support a heritage area. They also often identify a potential management entity and the extent of financial resources for the area. In other cases, a study is undertaken by another entity, such as a local nonprofit organization, community members, or state or local government. The NPS does not fund these studies, but provides guidance to these efforts. For instance, the agency recommends that these studies evaluate the importance of the resources, opportunities to increase public access to and understanding of the resources, capacity of an organization to coordinate activities in the area, and support for the region for a heritage designation. The NPS often assists communities interested in attaining the NHA designation by reviewing studies and helping them craft a regional vision for heritage preservation and development. The particulars for establishment and management of a heritage area typically are provided in its enabling legislation. Whereas there tended to be more variety in the creation and operation of earlier heritage areas, the establishment and management of heritage areas have become somewhat more standardized through the inclusion of some similar provisions in their enabling legislation. Common understandings and characteristics are discussed below. NHAs usually involve partnerships among the NPS, states, and local interests. In establishing heritage areas, Congress typically designates a management entity to coordinate the work of the partners. Management entities could include state or local government agencies, nonprofit corporations, and independent federal commissions. The management entity usually develops and implements a plan for managing the NHA, in collaboration with partners and other interested parties. Although the components of the plans vary, in accordance with the authorizing legislation and local needs, they often identify resources and themes; lay out policies and implementation strategies for protection, use, and public education; describe needed restoration of physical sites; discuss recreational opportunities; outline funding goals and possibilities; and define the roles and responsibilities of partners. Once the Secretary of the Interior approves a plan, it essentially becomes the blueprint for managing the heritage area and is implemented as funding and resources are available. Implementation of management plans is accomplished primarily through voluntary actions. The NPS may provide a variety of types of assistance to areas once designated by Congress—administrative, financial, policy, technical, and public information. Following an area designation, the NPS typically enters into a cooperative agreement, or compact , with the designated management entity, often comprised of local activists, to help plan and organize the area. The compact outlines the goals for the heritage area and defines the roles and contributions of the NPS and other partners, typically setting out the parameters of the NPS's technical assistance. It also serves as the legal vehicle for channeling federal funds to nongovernmental management entities. NHAs might receive funding to prepare and implement their plans from a wide array of sources, including philanthropic organizations, endowments, individuals, businesses, and governments. Congress and the NPS do not ordinarily want to provide NHAs with full and permanent federal funding, but rather encourage NHAs to develop alternative sources of funding. Any federal appropriations for the area typically are provided to the management entity. Federal funds might be used to help rehabilitate an important site, develop tours, establish interpretive exhibits and programs, increase public awareness, and sponsor special events to showcase an area's natural and cultural heritage. Although heritage areas have not been funded entirely by federal monies, typically they have received some federal financial assistance each year since their establishment. Some Members and the Obama Administration have expressed interest in having heritage areas become financially self-sufficient. In 2011, the NPS provided a series of training courses for heritage area managers and organizations to assist with long-term organizational sustainability. Courses addressed topics including entrepreneurial funding strategies, strategic planning, business planning, and fundraising. The NPS seeks to evaluate heritage areas before the expiration of the authorization for federal funds. At least three years before this expiration, the NPS evaluates a heritage area to make recommendations on the future NPS role (if any). For example, P.L. 110-229 required the NPS to evaluate nine heritage areas designated in 1996. The law required an evaluation of the "accomplishments" of the areas; an assessment of the management entity in achieving the purposes of the law designating the area and the goals and objectives of the management plan for the area; an analysis of the impact of investments in the area; and a review of the management structure, partnership arrangements, and funding for the area so as to identify components required for sustainability. The law also required the NPS to report its results and recommendations to Congress. To aid with these evaluations, the NPS developed a methodology to assess the strengths and weaknesses of NHAs. The NPS has completed and submitted to Congress its evaluations for the nine areas: America's Agricultural Heritage Partnership, also known as Silos and Smokestacks; Augusta Canal NHA; Essex NHA; Hudson River Valley NHA; National Coal Heritage Area; Ohio and Erie National Heritage Canalway; Rivers of Steel NHA; South Carolina National Heritage Corridor; and Tennessee Civil War Heritage Area. The NPS is continuing to evaluate other heritage areas. Some believe that the benefits of heritage areas are considerable and thus Congress should expand its assistance for creating and sustaining heritage areas. Supporters view NHAs as important for protecting history, traditions, and cultural landscapes, especially where communities are losing their traditional economic base (e.g., industry or farming), facing a loss of population, or experiencing rapid growth from people unfamiliar with the region. Advocates see NHAs as unifying forces that increase the pride of people in their traditions, foster a spirit of cooperation and unity, and promote a stewardship ethic among the general public. Advocates of NHAs assert that they foster cultural tourism, community revitalization, and regional economic development. Heritage areas are advertised as entertaining and educational places for tourists, and may involve activities such as stories, music, food areas, walking tours, boat rides, and celebrations. Through increased tourism, communities benefit locally when services and products are purchased. In some cases, increased heritage tourism, together with an emphasis on adaptive reuse of historic resources, has attracted broader business growth and development. Some supporters see NHAs as generally more desirable than other types of land conservation. They often prefer the designation of NHAs, because the lands typically remain in nonfederal ownership, to be administered locally. Other NHA backers view establishing and managing federal areas, such as units of the National Park System, as too costly, and observe that small federal investments in heritage areas have been successful in attracting funds from other sources. Some proponents also see NHAs as flexible enough to encompass a diverse array of initiatives and areas, because the heritage concept lacks systemic laws or regulations, while others favor a standardized program and process. Property rights advocates take the lead in opposing heritage areas. They contend that some national heritage areas lack significant local support. These opponents promote routine notification of private property owners when their lands fall within proposed heritage areas, on the grounds that the NPS could exert a degree of federal control over nonfederal lands by influencing zoning and land-use planning. Some fear that any private property protections in legislation would not be routinely adhered to by the federal government. They are concerned that localities have to obtain the approval of the Secretary of the Interior for heritage area management plans and believe that some plans are overly prescriptive in regulating details of private property use. Another concern of opponents is that NHA lands may one day be targeted for purchase and direct management by the federal government. The lack of a general statute providing a framework for heritage area establishment, management, and funding has prompted criticism that the process is inconsistent and fragmented. Some see a need to establish and define the criteria for creating NHAs, specify what NHAs are and do, and clarify the federal role in supporting these areas. They are concerned that the enactment of additional heritage bills could substantially increase the administrative and financial obligations of the NPS. Some detractors assert that federal funds would be more appropriately spent on NPS park units and other existing protected areas rather than on creating new heritage areas. Still others cite a need for a mechanism to hold the management entities accountable for the federal funds they receive and the decisions they make. Some observers recommend caution in creating NHAs, because in practice NHAs may face an array of challenges to success. For instance, heritage areas may have difficulty providing the infrastructure that increased tourism requires, such as additional parking, lodging, and restaurants. Other areas may need additional protective measures to ensure that increased tourism and development do not degrade the resources and landscapes. Still other NHAs may require improvements in leadership and organization of the management entities, including explaining their message and accomplishments. Some NHAs may experience difficulty attracting funds because the concept is not universally accepted as a sustainable approach to resource preservation or economic development. Some conservationists think the protective measures are not strong enough and some economic development professionals think the heritage idea does not fit the traditional framework for development. Also, achieving and maintaining appropriate levels of public commitment to implementation may be challenging. Each Congress typically considers a number of bills to designate heritage areas or authorize the study of areas to determine the suitability and feasibility of designating the study area as a heritage area. Such proposals introduced in the 114 th Congress as of February 9, 2016, are reflected in Table 2 . Other legislation in the 114 th Congress pertains to existing NHAs. One issue is the expiration of funding authorizations for some NHAs. The laws establishing heritage areas typically contain provisions explicitly authorizing the Secretary of the Interior to provide financial assistance to the areas for certain years. Were the authorization for federal funding to expire, the NHA itself would not necessarily cease to exist. For example, the area could continue to be managed with funding from other sources (unless the authority for the managing entity also expired). P.L. 114-113 extended the authorizations for three NHAs—the South Carolina National Heritage Corridor, the Augusta Canal NHA, and the Tennessee Civil War Heritage Area—through September 30, 2017. P.L. 114-113 also increased the maximum lifetime funding for three NHAs—the Rivers of Steel NHA, the Essex NHA, and the Ohio & Erie Canal National Heritage Corridor—from $15 million to $17 million, and increased the maximum lifetime funding for the Wheeling NHA from $11 million to $13 million. Another 114 th Congress bill, S. 936 , would repeal the limitation on the total amount of funding that may be appropriated for the Ohio & Erie Canal National Heritage Canalway. Other 114 th Congress measures would make various types of changes to existing NHAs. For instance, H.R. 2879 and S. 1662 would expand the boundary of the Abraham Lincoln National Heritage Area in Illinois by adding one county and two cities to the NHA. H.R. 3004 would extend the authorization for the management entity of the Gullah/Geechee Heritage Corridor (the Gullah/Geechee Cultural Heritage Corridor Commission) through October 12, 2021. H.R. 581 in the 114 th Congress would establish a National Heritage Areas System governing the designation, management, and funding of NHAs. The system would be composed of existing NHAs and future NHAs designated by Congress. The bill sets out the relationship between the NHA System and the National Park System, stating explicitly that NHAs are not to be considered units of the Park System nor subject to the authorities applicable to that system. The NHA System would expire 10 years after enactment of H.R. 581 . For areas under consideration for NHA designation, the Secretary of the Interior would be required to conduct feasibility studies, when directed by Congress, or to review and comment on such studies prepared by others. The bill sets out criteria by which areas would be evaluated, including inclusion of resources associated with nationally significant themes and events; selection of a local managing entity; and demonstration of support by local governments, residents, businesses, and nonprofit organizations. The bill provides a procedure for developing NHA management plans and specifies components of such plans. The planning process is to provide opportunities for stakeholders to be involved in developing, reviewing, and commenting on the draft plan. A management plan is to include an inventory of the resources related to the nationally significant themes and events that should be "protected, enhanced, interpreted, managed, or developed"; identify goals, strategies, policies, and recommendations; outline a strategy for the local managing entity to achieve financial sustainability; and contain an implementation plan, among other components. Designation of an NHA by Congress is to be contingent on the prior completion of a management plan, as well as a determination by the Secretary of the Interior that the area meets the criteria established under the act. The bill outlines the responsibilities of the local managing entity, such as developing and submitting the management plan to the Secretary of the Interior for approval/disapproval, as well as submitting an annual report. It also lists the purposes for which the entity can use federal funds, with the prior approval of the Secretary of the Interior, such as for making grants, entering into cooperative agreements, hiring staff, and supporting activities of partners. The bill seeks to protect private property owners—for instance, by not requiring their participation in NHA plans and activities. It also seeks to protect existing regulatory authorities—for example, by not altering any "duly adopted" land use regulation, approved land use plan, or other regulatory authority. For each NHA, the bill authorizes appropriations for various purposes. Authorizations include $0.3 million per year for all NPS feasibility studies, of which not more than $0.1 million could be used for any one study, and $0.7 million per year for the activities of each local managing entity. The provision of federal funds is contingent on specified matching requirements. The Secretary of the Interior would be required to evaluate and report to Congress on NHAs. The evaluation would assess the progress in achieving the purposes in the establishing law and the goals and objectives in the management plan, determine the leverage and impact of investments in the area, and identify the components for sustaining the area. The report is to include recommendations on the future role of the NPS, including whether federal funding should be continued or eliminated. The Obama Administration has expressed support for developing systemic NHA program legislation that would establish criteria for evaluating areas for heritage designation and set out processes for designating and administering heritage areas. For instance, in testimony on systemic NHA legislation ( H.R. 445 ) in the 113 th Congress , a National Park Service representative stated that the Department of the Interior has "long supported legislation to establish a National Heritage Area program within the National Park Service that standardizes timeframes and funding for designated national heritage areas and formally establishes criteria for establishing new heritage areas." Obama Administration representatives also have testified in favor of deferring action on certain bills to study or establish heritage areas until heritage program legislation is enacted. The development of systemic heritage area legislation also has been advocated by an independent commission and the George W. Bush Administration, among others. Opposition to an NHA system, as with opposition to individual NHAs, has come primarily from advocates of private property rights. These opponents have expressed concerns that, even with legislative provisions to safeguard property rights, NHA system legislation would lead to restrictive regulations and loss of private land ownership. For example, they have stated that heritage area management entities—though themselves lacking power to make regulatory changes—could influence local legislators to change zoning laws and other regulations. A different concern is the expanded federal funding commitment that could accompany a system of NHAs. Some of the testimony on H.R. 445 in the 113 th Congress, which would have authorized appropriations for NHAs for a period of 25 years, addressed such concerns. As part of its annual budget justification, the Administration submits to Congress its desired funding level for the NPS Heritage Partnership Program. Appropriations for heritage areas typically have been provided in the annual Interior, Environment, and Related Agencies Appropriations laws. In general, the laws establishing NHAs require a 1:1 match in funding by the managing entities. NHAs can use funds for varied purposes including staffing, planning, and implementing projects. In recent years, Congress has provided direction to the NPS as to how the total appropriation should be allocated among NHAs. The NPS has indicated that since FY2009, funds have been allocated to heritage areas using formula-based criteria. For FY2016, the total appropriation for heritage areas was $19.8 million. In its explanatory statement on FY2016 appropriations, Congress allocated this funding to NHAs under a three-tier system. This included $150,000 for each authorized area that is developing its management plan, known as Tier I areas; $300,000 for Tier II areas, which are those with recently approved management plans; and FY2015 funding levels for "longstanding areas." The total FY2016 appropriation for heritage areas was $0.5 million (2%) less than the FY2015 appropriation of $20.3 million. During the five-year period from FY2012 through FY2016, funding for the NPS for national heritage areas rose and fell but ended up $2.4 million (14%) higher (in current dollars). During this period, no new NHAs were created. The Administration had sought a reduction to $10.0 million for the NPS for heritage areas for FY2016. The FY2016 budget request provided little explanation of the proposed cut, while noting that the NPS continued to work with heritage areas on sustainability efforts such as development of fundraising and financial resource plans. Prior Obama Administration requests also often called for reduced NHA funding. In its explanatory statement on FY2016 Interior appropriations, Congress directed the NPS to submit a plan that provides alternatives to implement proposed funding allocation changes in future fiscal years so as to minimize impacts on existing heritage areas. | Over more than 30 years, Congress has established 49 national heritage areas (NHAs) to commemorate, conserve, and promote areas that include important natural, scenic, historic, cultural, and recreational resources. NHAs are partnerships among the National Park Service (NPS), states, and local communities, in which the NPS supports state and local conservation through federal recognition, seed money, and technical assistance. NHAs are not part of the National Park System, in which lands are federally owned and managed. Rather, lands within heritage areas typically remain in state, local, or private ownership or a combination thereof. Heritage areas have been supported as protecting lands and traditions and promoting tourism and community revitalization, but opposed as potentially burdensome, costly, or leading to federal control over nonfederal lands. There is no comprehensive statute that establishes criteria for designating NHAs or provides standards for their funding and management. Rather, particulars for each area are provided in its enabling legislation. Congress designates a management entity, usually nonfederal, to coordinate the work of the partners. This entity typically develops and implements a plan for managing the NHA, in collaboration with other parties. Once approved by the Secretary of the Interior, the management plan becomes the blueprint for managing the area. NHAs might receive funding from a wide variety of sources. Congress typically determines federal funding for NHAs in annual appropriations laws for Interior, Environment, and Related Agencies. NHAs can use federal funds for many purposes, including staffing, planning, and projects. The FY2016 appropriation for the NPS for assistance to heritage areas was $19.8 million. The Obama Administration has expressed interest in having NHAs become financially self-sufficient. Some appropriators and other Members have emphasized self-sufficiency for these areas as well. One role of the NPS is to evaluate heritage areas at least three years before the expiration of the authorization for federal funds. The NPS has completed evaluations of nine NHAs designated in 1996 and continues to evaluate others. Each Congress typically considers bills to establish new heritage areas, study areas for possible heritage designation, and amend existing heritage areas. Bills with similar purposes are pending in the 114th Congress. Other 114th Congress measures seek to extend the authorizations for NHAs to receive financial assistance. The sizeable number of existing NHAs and proposals in recent years to study and designate new ones has fostered legislation to establish a system of NHAs, and to provide criteria for their designation, standards for their management, and limits on federal funding support. In the 114th Congress, one such measure (H.R. 581) has been introduced. The Obama Administration has supported such systemic NHA legislation. Some opponents believe that NHAs present numerous problems and challenges and that Congress should oppose efforts to designate new areas and to create a system of NHAs. |
The Prevent All Cigarette Trafficking Act (PACT Act) requires remote retailers of cigarettes and smokeless tobacco—that is, retailers who sell cigarettes and smokeless tobacco without a face-to-face transaction with the buyer—to pay all state and local taxes before delivering the purchased goods. Three remote retailers have challenged the PACT Act on the ground that it violates the Due Process Clause. In Quill Corp. v. North Dakota , the Supreme Court held that the Due Process Clause of the Fourteenth Amendment "requires some definite link, some minimum connection, between a state and the person, property, or transaction it seeks to tax and that the income attributed to the State for tax purposes must be rationally related to values connected with the taxing State." In Red Earth LLC v. United States and Gordon v. Holder , the federal district courts for the Western District of New York and the District of Columbia, respectively, granted preliminary injunctions concluding, among other things, that the plaintiffs were likely to prevail in demonstrating that the PACT Act's requirement that remote retailers pay the state and local taxes of the jurisdictions to which they send cigarettes and smokeless tobacco violates due process because it does not require minimum contacts. The U.S. Court of Appeals for the Second Circuit upheld the preliminary injunction in Red Earth , and the U.S. Court of Appeals for the D.C. Circuit will consider the preliminary injunction in Gordon on appeal in the coming months. In Musser's Inc. v. United States , the federal district court for the Eastern District of Pennsylvania rejected the due process argument because, it concluded, the PACT Act is merely a federal statute that requires compliance with state and local laws and does not implicate due process. The PACT Act, the court determined, is no different in principle from other federal statutes that incorporate state law. Moreover, the court determined, the plaintiff had minimum contacts with the jurisdictions into which it shipped tobacco products because it transacted business through its interactive website. The Supreme Court stated in Quill : "While Congress has plenary power to regulate commerce among the states and may thus authorize state actions that burden interstate commerce, it does not similarly have the power to authorize violations of the Due Process Clause." It seems from this statement that Congress may not be able to require remote retailers to pay taxes to jurisdictions with which they do not have minimum contacts. It appears, therefore, that the constitutionality of the PACT Act would depend on what constitutes minimum contacts for remote retailers. In Quill , in the context of catalogue retailers, the Supreme Court noted that in connection with jurisdiction to adjudicate lawsuits against out-of-state defendants, it has said that the existence of minimum contacts depends on the degree to which the retailer has "purposefully avail[ed] itself of an economic market in forum State" or "purposefully directed" activities at the state's residents. Moreover, in Quill , the Supreme Court wrote that due process requires that the tax paid must be rationally related to "values connected with the taxing State." In another case, the Supreme Court wrote that this requirement means that the state must give something for which it can ask return. Among the purposes of the PACT Act were to require remote sellers of cigarettes and smokeless tobacco to abide by the same laws that apply to law-abiding brick and mortar retailers; to increase the collection of federal, state, and local excise taxes; to discourage cigarette smuggling; and to reduce youth access to inexpensive cigarettes and smokeless tobacco. To increase the taxes collected on remote sales of cigarettes and smokeless tobacco, the PACT Act does two things. First, the PACT Act in effect deems interstate sales to be intrastate sales: With respect to delivery sales into a specific State and place, each delivery seller shall comply with— All state, local, tribal, and other laws generally applicable to sales of cigarettes or smokeless tobacco , as if the delivery sales occurred entirely within the specific state and place , including laws imposing— excise taxes; licensing and tax-stamping requirements; restrictions on sales to minors; and other payment obligations or legal requirements relating to the sale, distribution, or delivery of cigarettes or smokeless tobacco. Second, the PACT Act requires that prior to delivery, a remote seller pay to the state and local government all taxes that apply to sales of cigarettes and smokeless tobacco in the buyer's locality and apply required stamps or other indicia to indicate that the taxes have been paid. Two constitutional provisions govern state taxation of out-of-state businesses doing business within the state: the Commerce Clause and the Due Process Clause of the Fourteenth Amendment. Under the Commerce Clause, state taxes may not be imposed in a manner that unduly burdens or discriminates against interstate commerce. Under the Due Process Clause, states may not impose taxes on a foreign business unless the business has a sufficient connection to the state and the taxes reasonably relate to value that the taxpayer receives from the state. Congress may authorize state activities that would otherwise violate the Commerce Clause, but it may not authorize state activities that would violate the Due Process Clause. The Commerce Clause and the Due Process Clause, therefore, are "analytically distinct." The remote retailers have challenged the PACT Act under the Due Process Clause. The due process issue is governed by the Supreme Court's opinion in Quill . In Quill , the Court considered whether the State of North Dakota could require an out-of-state mail order retailer to collect a use tax on merchandise sold in the state. The retailer argued that the Due Process Clause required that it have a physical presence in the state in order to satisfy the requirement of minimum contacts. Concluding that the reasoning for state taxation of out-of-state businesses was "comparable" to reasoning for jurisdiction over out-of-state defendants, the Court quoted its opinion in Burger King Corp. v. Rudzewicz , in which the Court upheld the jurisdiction of Florida courts over an out-of-state franchisee who remotely conducted business in Florida and had a contract with a Florida corporation: Jurisdiction in these circumstances may not be avoided merely because the defendant did not physically enter the forum State. Although territorial presence frequently will enhance a potential defendant's affiliation with a State and reinforce the reasonable foreseeability of suit there, it is an inescapable fact of modern commercial life that a substantial amount of business is transacted solely by mail and wire communications across state lines, thus obviating the need for physical presence within a State in which business is conducted. So long as a commercial actor's efforts are purposefully directed toward residents of another State, we have consistently rejected the notion that an absence of physical contacts can defeat personal jurisdiction there. Because the retailer in Quill had directed a "deluge of catalogues" to North Dakota residents, the Court concluded that the retailer had "fair warning" that it would be subject to the tax and that it had purposefully directed its activities at North Dakota residents, unquestionably satisfying the requirement for minimum contacts. Under Quill , therefore, the issue is whether the out-of-state business has directed its activities at the taxing state and whether, as a result, it has fair warning that it would be liable for the taxes. In Red Earth , the plaintiffs, members of the Seneca Nation of Indians who own and operate tobacco retail businesses that advertise on the Internet and take telephone and mail orders, sought a preliminary injunction against, among other things, enforcement of the PACT Act's requirement that they pay taxes on their sales of tobacco products. The plaintiffs claimed that the PACT Act violates the Due Process Clause because "it subjects them to the taxing jurisdiction of state and local governments without regard to whether they have sufficient minimum contacts with those taxing jurisdictions." The United States argued that there was no due process problem with the PACT Act because minimum contacts were satisfied by the fact that the plaintiffs maintain websites advertising their products for sale and the fact that plaintiffs ship their goods into the taxing jurisdictions. The district court rejected these arguments. The court found two problems with the argument that maintaining a website provided minimum contacts. First, not all the plaintiffs have websites. The PACT Act, however, applies to all the plaintiffs whether they have websites or not. Second, the websites are "passive." The court noted that, "The website is akin to a virtual mail order catalog of cigarettes and smokeless tobacco, available for interested customers to view from their home computer (if they specifically seek out the website by doing an Internet search), but with no ability to consummate the purchase over the Internet." Purchasers can merely get information off the website but the purchase is not consummated until the retailer receives a money order. Therefore, a passive website, the court determined, did not satisfy the requirement for minimum contacts. The court also rejected the United States' argument that a shipment into a state satisfied the minimum contacts requirement. As the court put it, "it would appear that the defendants are urging this Court to conclude that each sale itself creates the minimum contacts necessary to impose a duty to collect taxes on an out-of-state seller." While conceding that such a bright-line rule was appealing, the court rejected it because the Supreme Court and the federal courts of appeals have not adopted the rule and "existing cases suggest the opposite—that a single, isolated sale may not be enough to subject a seller to a foreign jurisdiction." The court could find no cases holding that a single sale satisfied the minimum contacts requirement but found a number of cases holding that a single sale did not satisfy the requirement. Moreover, the court wrote, if a single sale were sufficient, the Supreme Court in Quill would likely have based its decision on the defendant's sale into the state instead of the defendant's "continuous and widespread solicitation of business" within North Dakota, including a "deluge of catalogues" sent into the state. Ultimately, the court wrote: By failing to require any minimum contacts before subjecting the out-of-state retailer to "all state, local, tribal, and other laws generally applicable to sales of cigarettes or smokeless tobacco," Congress is broadening the jurisdictional reach of each state and locality without regard to the constraints imposed by the Due Process Clause. That it cannot do. It would appear that the PACT Act seeks to legislate the due process requirement out of the equation. The district court granted the plaintiffs' motion for a preliminary injunction. The government appealed to the U.S. Court of Appeals for the Second Circuit, challenging the district court's conclusion that the PACT Act violated the Due Process Clause. The Court of Appeals characterized the issue as "whether Congress can, consistent with constitutional due process, require a vendor to submit to the taxing jurisdiction of any state into which it makes at least one sale, without regard to the extent of that vendor's contact with the state." The court upheld the district court's preliminary injunction: The PACT Act requires a seller to collect state and local taxes based on its making of one delivery, but the federal courts have for decades steered away from the question of whether a single sale is enough to satisfy the requirements of due process. The Supreme Court has never found that a single isolated sale is sufficient. Nor has it held that a single sale into a state is insufficient for due process purposes, although its previous holdings suggest as much. Where the underlying constitutional question is close, a court reviewing the issuance of a preliminary injunction should uphold the injunction and remand for trial on the merits. Because the district court reached a reasonable conclusion on a close question of law, there is no need for us to decide the merits at this preliminary stage. In Musser 's , the plaintiff was a tobacco retailer who did business in all 50 states through an interactive website and the telephone. Like the plaintiffs in Red Earth , the plaintiff in Musser's sought a preliminary injunction on the ground that the PACT Act requires retailers to pay state and local taxes even though they do not have minimum contacts with the jurisdictions, in violation of the Due Process Clause. The district court denied the injunction under two alternative analyses. First, the court rejected the Red Earth district court's analysis because it concluded the court in that case erred in analyzing the PACT Act as if the taxes were imposed by a state: [T]he Act's tax-payment requirement is not being imposed by a state, acting unilaterally, but by Congress, and the legislative due process analysis must reflect the federal character of the legislation. In regulating interstate commerce, Congress has for decades required interstate businesses to comply with state and local law. For example, firearms, distributors, online pharmacies, farmers, distributors of explosives, inter alia , have all been required by Congress to ensure that the sale of their products are in compliance with all state and local laws of the states in which they distribute/deliver the products. Federal requirements like these have been found not to offend due process. Interstate businesses are subject to the legislative jurisdiction of Congress, which is free to require compliance with state and local law as a condition of engaging in interstate commerce. The court's analysis could be interpreted as conflating Congress's authority under the Commerce Clause to allow state regulation of interstate commerce with the separate issue of Congress's authority to allow state taxation of out-of-state businesses that do not have minimum contacts with the taxing jurisdiction. Second, the court concluded that the plaintiff had minimum contacts in all 50 states because of the interactive nature of its website. The court employed the sliding scale approach developed by the court in Zippo Mfg. Co. v. Zippo Dot Com, Inc. : At one end of the spectrum are situations where a defendant clearly does business over the Internet. If the defendant enters into contracts with residents of a foreign jurisdiction that involve the knowing and repeated transmission of computer files over the Internet, personal jurisdiction is proper. At the opposite end are situations where a defendant has simply posted information on an Internet website which is accessible to users in foreign jurisdictions. A passive website that does little more than make information available to those who are interested in it is not grounds for the exercise of personal jurisdiction. The middle ground is occupied by interactive websites where a user can exchange information with the host computer. In these cases, the exercise of jurisdiction is determined by examining the level of interactivity and commercial nature of the exchange of information that occurs on the website. In Musser's , the court concluded the plaintiff had purposefully availed itself of doing business in all 50 states because, "[i]ts website does more than post information, or exchange information. Customers can place orders over the Internet, pay for the products over the Internet, and have those products delivered to states in which they live.… [S]elling products over the Internet and knowingly conducting business through the Internet in a state is a sufficient contact to satisfy due process concerns." Thus, it appears that under the court's reasoning, minimum contacts would be satisfied by a single sale if that sale were transacted through an interactive website. Gordon, a member of the Seneca Nation of Indians, owns a store and a telephone order business that sells cigarettes and other tobacco products. He has a passive website that directs viewers to call his store to place an order. Like the plaintiffs in Red Earth and Musser's , Gordon sought a preliminary injunction against enforcement of the PACT Act's requirement that he pay the state and local taxes of the jurisdictions to which he sends tobacco products on the ground that it violates due process because it does not require minimum contacts. Initially, the district court denied Gordon's motion because it determined it was untimely. Gordon appealed the denial to the U.S. Court of Appeals for the D.C. Circuit (D.C. Circuit). The Court of Appeals reversed and remanded the case to the district court, concluding that the motion was timely. The Court of Appeals offered the following observation to the district court: The government's suggestion that there can be no Due Process violations when Congress authorizes state levies based on minimum contacts collapses the Due Process and Commerce Clause aspects of Gordon's claims. As the Supreme Court has explained, the inquiries are analytically distinct and should not be treated as if they were synonymous. Even national legislation which can permissibly sanction burdens on interstate commerce—cannot violate Due Process principles of "fair play and substantial justice." Although Quill did not deal with excise taxes, there remains an open question whether a national authorization of disparate state levies on e-commerce renders concerns about presence and burden obsolete: Quill 's analytical approach is instructive. Before the district court on remand, the government made two arguments in response to Gordon's due process claim: "(a) because the PACT Act is a federal law, Gordon need only have minimum contacts with the United States, not any individual state; and (b) even if minimum contacts with each state are required, each of Gordon's tobacco sales into a state satisfies minimum contacts with that state." In support of the first argument, the government cited Supreme Court cases in which, it claimed, the Court found that in situations in which Congress required interstate businesses to comply with the laws of the jurisdiction to which they shipped their products, the interstate businesses were not subject to the jurisdiction of any particular states. The court distinguished those cases because the statutes at issue "merely required individuals to comply with existing state laws, [but] the PACT Act appears to impose a new, independent duty on the delivery seller by requiring that they ensure that the applicable state and local taxes are paid." Furthermore, the court believed the U.S. Court of Appeals for the D.C. Circuit had rejected this argument by stating, in remanding the case back to the district court, that "'while Congress has plenary power to regulate commerce among the States and thus may authorize state actions that burden interstate commerce, it does not similarly have the power to authorize violations of the Due Process Clause.'" The court discussed the opinion in Musser's and wrote that, in concluding that the PACT Act was like federal statutes requiring compliance with state law, the Musser's court "collapses the Due Process and Commerce Clause aspects" of the PACT Act challenge, as the D.C. Circuit found the government did when the court rejected the government's similar argument. Before addressing the government's argument that each of Gordon's sales establishes minimum contacts, the court reviewed "the seminal due process cases setting forth the personal jurisdiction law upon which Quill built." The court reviewed International Shoe Co. v. Washington , in which "the Supreme Court framed the relevant [due process] inquiry as whether a defendant had minimum contacts with the jurisdiction such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice." Next, the court outlined the reasoning in Burger King Corp. v. Rudzewicz , in which the Court held that personal jurisdiction can be found "[s]o long as a commercial actor's efforts are purposefully directed toward residents of another State." The district court quoted the Supreme Court's opinion in Burger King : Jurisdiction is proper … where the contacts proximately result from actions by the defendant himself that create a substantial connection with the forum State. Thus where the defendant deliberately has engaged in significant activities within a State, or has created continuing obligations between himself and residents of the forum, he manifestly has availed himself of the privilege of conducting business there, and because his activities are shielded by the benefits and protections of the forum's laws it is presumptively not unreasonable to require him to submit to the burdens of litigation in that forum as well. The district court wrote that the Burger King Court "noted that a single act can support jurisdiction so long as it creates a substantial connection with the forum." However, acts which "create only an attenuated affiliation with the forum" are not sufficient because litigation in the forum is not reasonably foreseeable. The district court explained that in World-Wide Volkswagen Corp. v. Woodson , the Supreme Court elaborated "that the foreseeability that is critical to due process analysis … is that the defendant's conduct and connection with the forum state are such that he should reasonably anticipate being haled into court there." This focus on foreseeability, the Supreme Court wrote, "gives a degree of predictability to the legal system that allows potential defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit." Finally, the district court discussed Quill : Addressing Quill's due process challenge, the Supreme Court summarized its earlier due process jurisprudence, stating that "[t]he Due Process Clause requires some definite link, some minimum connection, between a state and the person, property or transaction it seeks to tax … and that income attributed to the State for tax purposes must be rationally related to values connected with the taxing State." In Quill , "[t]he Court found that Quill's mail order business had minimum contacts with North Dakota sufficient to meet the requirement of due process because there was no question that Quill purposefully directed its activities at North Dakota residents, that the magnitude of those contacts is more than sufficient for due process purposes, and that the use tax is related to the benefits Quill receives from access to the State." The district court found that the Quill standard was not met in Gordon . "[T]he Court cannot say that Gordon's business purposefully avails itself of the benefits of [the] economic market of the states into which he sells his products or that it purposefully directed its activities at residents of these states." Moreover, even if a single sale in a state could provide the requisite "minimum connection," the district court did not "find that the tax on Gordon's products is rationally related to the values connected with the taxing State." Quoting the Supreme Court in MeadWestvaco Corp. v. Illinois Dept. of Revenue , the district court stated that fulfillment of this requirement depends on "whether the taxing power exerted by the state bears fiscal relation to protection, opportunities and benefits provided by the state—that is, whether the state has given anything for which it can ask return." "The Court cannot determine what, if any, protection, opportunities, [or] benefits Gordon receives from the state into which he delivers his products, aside from the fact that his buyer resides there." Accordingly, the court found that the PACT Act may violate due process. "In sum, this Court concludes that Gordon has a likelihood of success on his claim that due process is not satisfied by a single sale of cigarettes into a state." In authorizing state taxation of out-of-state businesses in the PACT Act, Congress appears to have exercised its authority under the Commerce Clause to subject out-of-state businesses to state laws that would otherwise violate the Commerce Clause. However, if the PACT Act subjects out-of-state businesses to the taxing authority of states with which they do not have minimum contacts, it appears that its provisions may not comport with the requirements of the Due Process Clause. The courts in Red Earth and Gordon analyzed the constitutionality of the PACT Act under the Due Process Clause exclusively and considered whether the PACT Act authorized state taxation of retailers that do not have minimum contacts with the taxing jurisdiction. The opinion in Musser's may be interpreted as conflating the Commerce Clause and the due process analyses to conclude that the PACT Act does not implicate due process. Even applying the due process analysis exclusively, however, it is not clear whether higher courts will conclude that a single sale into a jurisdiction satisfies the due process requirement of minimum contacts. As the U.S. Court of Appeals for the Second Circuit noted in reviewing the preliminary injunction in Red Earth , whether one sale into a jurisdiction satisfies the due process requirements for minimum contacts is a "close question." | The Jenkins Act requires out-of-state sellers of cigarettes to register and file a report with the states in which they sell cigarettes listing the name, address, and quantity of cigarettes sold to state residents. In the past, the states would use this information to collect taxes from the buyers directly. However, with the rise of Internet sales of cigarettes, compliance with the Jenkins Act was very low, and it was estimated that billions of dollars of state and local taxes went unpaid. In 2010, Congress passed the Prevent All Cigarette Trafficking Act (PACT Act), which amends the Jenkins Act, to address this problem. The PACT Act requires remote retailers of cigarettes and smokeless tobacco—that is, retailers who sell without an in-person transaction with the buyer—to pay the state and local taxes of the jurisdiction in which the buyer receives the goods. Three remote retailers have challenged the PACT Act in federal courts seeking to enjoin enforcement of the act, claiming that forcing remote sellers to pay state and local taxes violates due process. The Supreme Court held in Quill Corp. v. North Dakota that the Due Process Clause of the Fourteenth Amendment "requires some definite link, some minimum connection, between a state and the person, property, or transaction it seeks to tax and that the income attributed to the State for tax purposes must be rationally related to values connected with the taxing State." In Red Earth LLC v. United States and Gordon v. Holder, the federal district courts for the Western District of New York and the District of Columbia, respectively, issued preliminary injunctions, concluding that the plaintiffs were likely to succeed in demonstrating that the PACT Act violates due process because it subjects the retailers to the taxing authority of foreign states regardless of whether they have the required minimum contacts with the taxing jurisdictions. The Court of Appeals for the Second Circuit upheld the Red Earth preliminary injunction, and the United States has appealed the preliminary injunction issued in Gordon to the U.S. Court of Appeals for the D.C. Circuit. In Musser's Inc. v. United States, the federal district court for the Eastern District of Pennsylvania rejected the due process argument, concluding that because the PACT Act is federal legislation, the due process requirements of the Fourteenth Amendment, which applies to states, do not apply. The PACT Act, the Musser's court determined, is not different in principle from other federal statutes that incorporate state laws. In any event, the court determined, because the plaintiff took orders over the Internet, it had minimum contacts in the jurisdictions into which it shipped tobacco products. The Supreme Court stated in Quill: "While Congress has plenary power to regulate commerce among the states and may thus authorize state actions that burden interstate commerce, it does not similarly have the power to authorize violations of the Due Process Clause." In Gordon, the district court for the District of Columbia characterized the issue as whether one sale into a taxing jurisdiction satisfied the due process requirement for minimum contacts, and concluded it did not. The U.S. Court of Appeals for the Second Circuit, in upholding the preliminary injunction in Red Earth, described the issue as a "close question." |
On May 7, 2009, President Obama submitted his FY2010 budget to Congress, including a request for $163.8 billion in discretionary funds for programs covered in the Labor, Health and Human Services, and Education, and Related Agencies (L-HHS-ED) appropriations bill. On July 22, 2009, the House Committee on Appropriations reported H.R. 3293 ( H.Rept. 111-220 ), its proposal for FY2010 L-HHS-ED appropriations. The bill was debated in the House on July 24 and was passed, with several amendments, by a vote of 264-153. The bill would have provided $165.6 billion in discretionary funds for L-HHS-ED. On August 4, 2009, the Senate Committee on Appropriations reported its version of H.R. 3293 ( S.Rept. 111-66 ). The committee recommended $165.4 billion in discretionary L-HHS-ED funds. On October 1, 2009, the President signed into law H.R. 2918 , the FY2010 Legislative Branch Appropriations Act ( P.L. 111-68 ), which also, in Division B, provided temporary funding at the FY2009 rate of operations for most government agencies for the period October 1 through October 31, 2009, unless regular FY2010 appropriations measures were enacted sooner. On October 30, 2009, the President signed into law a second CR, Division B of P.L. 111-88 , which amended P.L. 111-68 to extend the temporary funding to December 18, 2009. Division B had been added on October 28 to the conference report on Interior-Environment appropriations ( H.R. 2996 , H.Rept. 111-316 ). On December 8, 2009, a conference report was filed for a consolidated FY2010 appropriations act, covering six of the seven regular appropriations measures that had not yet been enacted (Defense appropriations were enacted separately). H.R. 3288 , the Transportation, and Housing and Urban Development, and Related Agencies Appropriations Act, 2010, was used as the vehicle for the Consolidated Appropriations Act, 2010. The conference agreement and explanatory statement ( H.Rept. 111-366 ) had a division for each of the six appropriations measures. Division D of the agreement provided the FY2010 L-HHS-ED appropriations, including $165.8 billion in discretionary funding. The conference report was adopted by the House on December 10 and by the Senate on December 13, and was signed by the President on December 16, 2009, as P.L. 111-117 . Table 1 summarizes the legislative status of FY2010 L-HHS-ED appropriations. In this report, unless stated otherwise, data on FY2009 and FY2010 appropriations are based on the December 9, 2009, table from the House Committee on Appropriations. The data for FY2009 appropriations primarily reflect enactment of P.L. 111-8 (FY2009 Omnibus Appropriations, enacted March 11, 2009) and P.L. 111-5 (the American Recovery and Reinvestment Act of 2009, ARRA, enacted February 17, 2009). In addition, amounts for certain HHS programs reflect FY2009 funding provided by either the Consolidated Appropriations Act for FY2009 ( P.L. 110-329 , enacted September 30, 2008) or the Supplemental Appropriations Act, 2009, ( P.L. 111-32 , enacted June 24, 2009). The data for FY2010 reflect the President's budget request, House passage of H.R. 3293 , the Senate committee recommendations on H.R. 3293 , and enactment of P.L. 111-117 , the Consolidated Appropriations Act, 2010. In most cases, data represent net funding for specific programs and activities, and take into account current and forward funding and advance appropriations; however, all data are subject to additional budgetary scorekeeping. Except where noted, data refer only to those programs within the purview of L-HHS-ED appropriations, and not to all programs within the jurisdiction of the relevant departments and agencies. Funding from other appropriations bills, and entitlements funded outside of the annual appropriations process, are excluded. This report describes the highlights of President Obama's proposals for FY2010 appropriations for L-HHS-ED programs, as submitted to Congress on May 7, 2009, and the congressional response to those proposals. Discussions focus primarily on discretionary programs. The report does not follow specific funding issues related to mandatory L-HHS-ED programs—such as Medicare or Social Security—nor does it follow any authorizing legislation related to the President's budget initiatives. For a glossary of budget terms and relevant websites, see the Appendix , "Terminology and Web Resources." The L-HHS-ED bill typically is one of the more controversial of the regular appropriations bills, not only because of the size of its funding total and the scope of its programs, but also because of the continuing importance of various related issues, such as restrictions on the use of federal funds for abortion, human embryonic stem cell research, and needle exchange programs. This bill provides discretionary and mandatory funds to three federal departments and 13 related agencies, including the Social Security Administration (SSA). Discretionary funding represents less than one-quarter of the total in the bill. Among the various appropriations bills, L-HHS-ED is the largest single source of discretionary funds for domestic (non-defense) federal programs (the Department of Defense bill is the largest source of discretionary funds among all federal programs). This section presents several overview tables on funding in the bill, particularly discretionary funding, and discusses related issues such as 302(b) allocations and advance appropriations. Later sections provide details on individual L-HHS-ED departments and agencies. Table 2 summarizes the L-HHS-ED appropriations enacted for FY2009 and FY2010, including both discretionary and mandatory appropriations. The table shows various aggregate measures of L-HHS-ED appropriations, including the discretionary program level, current year level, and advance appropriations, as well as scorekeeping adjustments. Program level discretionary appropriations reflect the total discretionary appropriations in a given bill, regardless of the year in which they will be spent, and therefore include advance funding for future years. Unless otherwise specified, appropriations levels in this report refer to program level amounts . Current year discretionary appropriations represent discretionary appropriations in a given bill for the current year, plus discretionary appropriations for the current year that were enacted in prior years—for example, FY2010 appropriations that were enacted in the FY2009 act. As the annual congressional appropriations process unfolds, current year discretionary appropriations, including scorekeeping adjustments (see below), are measured against the 302(b) allocation ceilings (discussed later in this report). Note that media reports and comments from the Administration about appropriations activities typically cite figures representing the current year discretionary totals rather than the program levels in the bill. Advance appropriations are funds that will not become available until after the fiscal year for which the appropriations are enacted (for example, funds for certain education programs like Title I Part A Grants to Local Educational Agencies for the Education of the Disadvantaged that were included in the FY2009 act that could not be spent before FY2010 at the earliest). Scorekeeping adjustments are made to account for special funding situations, as monitored by the Congressional Budget Office (CBO). Because appropriations may consist of mixtures of budget authority enacted in various years, both of the summary measures mentioned above are frequently used: program level appropriations and current year appropriations. How are these measures related? For an "operational definition," program level funding equals (a) current year, plus (b) advances for future years, minus (c) advances from prior years, and minus (d) scorekeeping adjustments. Alternatively, current year funding is derived by taking the program level (total in the bill), subtracting the advances for future years, adding in the advances from prior years, and applying the scorekeeping adjustments. Table 2 shows each of these amounts for discretionary funding, along with current year funding and program level funding for mandatory programs, and the grand total for L-HHS-ED. The L-HHS-ED appropriations bills include both mandatory and discretionary funds; however, the Appropriations Committees fully control only the discretionary funds. Mandatory funding levels for programs included in the annual appropriations bills are modified through changes in the authorizing legislation. Typically, these changes are accomplished through authorizing committees by means of reconciliation legislation, and not through appropriations committees in annual appropriations bills. Table 3 shows the trend in discretionary budget authority enacted in the regular L-HHS-ED appropriations for FY2002 through FY2010. During the past nine years, L-HHS-ED discretionary funds have grown from $127.2 billion in FY2002 to $165.8 billion in FY2010, an increase of $38.6 billion, or 30.3%. The annual L-HHS-ED appropriations act typically includes five titles. The first three provide appropriations and program direction for the Department of Labor (Title I), the Department of Health and Human Services (Title II), and the Department of Education (Title III). Each of the three titles includes some sections of "General Provisions" for the department; they provide specific program directions, modifications, or restrictions that the appropriators wish to convey in bill language, not just in report language. Title IV covers funding for 13 related agencies, the largest of which is the Social Security Administration. Title V contains general provisions with broader policy application than those in the department titles. Occasionally, the act has one or more additional titles, which may be legislative (authorizing) language rather than appropriations provisions. The FY2008 L-HHS-ED appropriations act (Division G of P.L. 110-161 ) included a Title VI that provided for establishment of a National Commission on Children and Disasters, while the FY2009 L-HHS-ED appropriations act (Division F of P.L. 111-8 ) included the Afghan Allies Protection Act of 2009 (relating to special immigrant status of certain persons) as Title VI. The FY2010 act included only five titles. Table 4 summarizes by title the program level discretionary spending that was provided for FY2009 and FY2010 L-HHS-ED appropriations and compares the program level totals with the current year discretionary totals. The Congressional Budget Act of 1974 (Titles I-IX of P.L. 93-344 ), as amended, provided for a two-stage process through which the maximum budget authority for annual appropriations acts is determined (the two stages are named after sections of the Budget Act). In the first stage, Congress establishes the 302(a) allocations —the maximum spending totals for a given fiscal year that are allowed for each House and Senate committee with jurisdiction over spending legislation, including both authorizations and appropriations. This task is typically accomplished through the annual concurrent resolution on the budget, where spending totals are specified through the statement of managers in the conference report. In years when the House and Senate do not reach a budget agreement, these totals may be set through leadership arrangements in each chamber. The 302(a) allocations determine the spending totals for each of the various committees, including the total discretionary budget authority available for enactment in annual appropriations through the House and Senate Committees on Appropriations. Congress reached agreement on the FY2010 budget resolution on April 29, 2009, when the Senate and the House agreed to the conference report ( H.Rept. 111-89 ) accompanying S.Con.Res. 13 . The resolution established 302(a) discretionary budget allocations to the Appropriations Committees of $1,082.5 billion for the House and $1,082.3 billion for the Senate. The resolution allowed the Budget Committees to increase those amounts if certain conditions relating to funding of specific programs were met. On June 3, 2009, the Budget Committees increased their 302(a) allocations by $3,766 million to $1,086.3 billion (House) and $1,086.0 billion (Senate). Subsequent additional adjustments have been made by both committees. For the purpose of comparison, the 302(a) discretionary allocation originally agreed to for FY2009 was $1,011.7 billion. In the second stage of the annual congressional budget process, the House and Senate Committees on Appropriations separately establish the 302(b) allocations —the maximum discretionary budget authority available to each of the 12 subcommittees for each annual appropriations bill. The total of these allocations must not exceed the 302(a) discretionary total. This process creates the basis for enforcing discretionary budget discipline, since any appropriations bill reported with a total above the ceiling is subject to a point of order. The 302(b) allocations can and often do get adjusted during the year as the various appropriations bills progress toward final enactment. Table 5 shows the 302(b) discretionary allocations for the FY2010 L-HHS-ED appropriations determined by the House and Senate Committees on Appropriations, together with the comparable amount for the FY2009 appropriations. Both the 302(a) and 302(b) allocations regularly become contested issues in their own right. Advance appropriations occur when funds enacted in one fiscal year are not available for obligation until a subsequent fiscal year. For example, P.L. 110-161 , which enacted FY2008 L-HHS-ED appropriations, provided $420 million for the Corporation for Public Broadcasting (CPB) for use in FY2010. Advance appropriations may be used to meet several objectives. These might include the provision of long-term budget information to recipients, such as state and local educational systems, to enable better planning of future program activities and personnel levels. The more contentious aspect of advance appropriations, however, involves how they are counted in budget ceilings. Advance appropriations avoid the 302(a) and 302(b) allocation ceilings for the current year, but must be counted in the year in which they first become available for obligation. This procedure uses up ahead of time part of what will be counted against the allocation ceiling in future years. For FY2002, President George W. Bush's budget proposed eliminating advance appropriations for federal discretionary programs, including those for L-HHS-ED programs. Congress rejected that idea, and the proposal has not been repeated. For more information, see CRS Report RS20441, Advance Appropriations, Forward Funding, and Advance Funding , by [author name scrubbed]. FY2009 discretionary appropriations for the Department of Labor (DOL) were $12,411 million. For FY2010, the Obama Administration requested $13,280 million, $869 million (7.0%) more than the FY2009 amount, as shown in Table 6 . H.R. 3293 , as approved by the House, included $13,256 million in discretionary funding, an increase of $845 million (6.8%) over FY2009. The Senate Appropriations Committee recommended $13,268 million in discretionary funding, $12 million more than approved by the House and an increase of $857 million (6.9%) over FY2009. The FY2010 conference agreement, as enacted in P.L. 111-117 , provided discretionary appropriations of $13,534 million, an increase of $1,123 million (9.0%) over FY2009. Mandatory DOL programs were funded at $2.7 billion for FY2010 and consist of Federal Unemployment Benefits and Allowances ($1,818 million), the Black Lung Disability Trust Fund ($300 million), Special Benefits for Disabled Coal Miners ($214 million), Employment Standards Administration (ESA) Special Benefits ($187 million), Advances to the Unemployment Insurance and Other Trust Funds ($120 million), and administrative expenses for the Energy Employees Occupational Illness Compensation Fund ($52 million). The following are some highlights for DOL of President Obama's FY2010 budget request, the House bill, the Senate Appropriations Committee's recommendations, and the conference agreement, as enacted in P.L. 111-117 . See Table 7 for details. All comparisons of funding levels with FY2009 appropriations are based on FY2009 regular appropriations only. The President requested $3,257 million to administer the Unemployment Compensation program, an increase of $424 million (14.9%) above the $2,833 million provided for FY2009. The House, the Senate Appropriations Committee, and the conference agreement approved the President's request and provided the additional funding. The President requested $5,544 million for Workforce Investment Act (WIA) programs, an increase of $230 million over the $5,314 provided for FY2009. The House approved an increase of $203 million, while the Senate Committee approved an increase of $201 million. The conference agreement provided $5,545 million, an increase of $232 million (4.4%). The President requested an additional $51 million for the Occupational Safety and Health Administration (OSHA), which would have increased funding from $513 million for FY2009 to $564 million for FY2010. The House approved a $42 million increase; the Senate Committee agreed to a $49 million increase. The law provided $559 million, a $46 million (8.9%) increase over FY2009. The Administration requested $228 million for the Wage and Hour Division, an increase of $35 million above the $193 million approved for FY2009. The House approved $220 million, while the Senate Committee recommended $226 million. The conference agreement provided $225 million, an increase of $32 million (16.7%). The President requested a $3 million increase, from $572 million to $575 million, for Community Service Employment for Older Americans programs. The House approved a $43 million increase. The Senate Committee agreed to the President's request of $575 million. The law provides $825 million, an increase of $254 million (44.3%). The Administration proposed replacing the Community-Based Job Training Grants (CBJTG) program with a Career Pathways Innovation Fund. The Career Pathways program would continue support for community college education, but fund programs with a sequence of coursework leading to a career in a particular field. For FY2009, CBJTG was funded at $125 million. The President requested $135 million for the Career Pathways program. The House agreed to the President's request. The Senate Appropriations Committee recommended $125 million. The conference agreement provided $125 million for the Career Pathways Innovation Fund. ARRA provided an additional $4.8 billion in discretionary funding for FY2009, some of which will be obligated in FY2010. DOL developed program-specific plans for spending the money, indicating how much it expected to obligate in FY2009 and FY2010. The plans are available at http://www.dol.gov/recovery , together with other DOL Recovery Act reports. DOL budget materials may be found at http://www.dol.gov/dol/aboutdol/main.htm#budget . Table 7 shows the appropriations details for offices and major programs of DOL. FY2009 discretionary appropriations for the Department of Health and Human Services (HHS) were $71,385 million. For FY2010, the Obama Administration requested $71,758 million, $373 million (0.5%) more than the FY2009 amount, as shown in Table 8 . As passed by the House, H.R. 3293 included $73,722 million in discretionary funding, an increase of $2,337 million (3.3%) over FY2009. The Senate Appropriations Committee recommended $74,054 million in discretionary funding, $332 million more than approved by the House, and an increase of $2,669 million (3.7%) over FY2009. The FY2010 conference agreement, as enacted in P.L. 111-117 , provided discretionary appropriations of $73,958 million, an increase of $2,573 million (3.6%) over FY2009. Mandatory HHS programs included in the L-HHS-ED act were funded at $529.8 billion in FY2010, and consist primarily of Medicaid Grants to States ($307.8 billion), Payments to Health Care Trust Funds ($207.3 billion, including Medicare Part B and Part D), Foster Care and Adoption Assistance State Payments ($7.4 billion), Family Support Payments to States ($4.7 billion), and the Social Services Block Grant ($1.7 billion). Note that some other large mandatory HHS programs are not funded through the L-HHS-ED act. The Children's Health Insurance Program (CHIP) and the Temporary Assistance for Needy Families (TANF) program receive their funding directly in authorizing statutes, while Medicare Part A is funded primarily through payroll taxes. The following are some highlights for HHS of President Obama's FY2010 budget request, the House bill, the Senate Appropriations Committee's recommendations, and the conference agreement, as enacted in P.L. 111-117 . See Table 9 for details. All comparisons of funding levels with FY2009 appropriations are based on FY2009 regular appropriations only. The President requested an additional $92 million (54.0%) for nursing workforce programs, which would have increased funding from $171 million for FY2009 to $263 million for FY2010. The House agreed to the President's request. The Senate committee recommendation was $217 million, $47 million less than the House. The law appropriated $244 million, $73 million (42.6%) more than in FY2009. No funding was requested for the Health Care-Related Facilities and Activities account, which supported $310 million in non-competitive grants in FY2009. The House provided $179 million, the Senate committee recommended $157 million, and the law appropriated $338 million, $28 million (8.9%) more than in FY2009. For the Centers for Disease Control and Prevention (CDC), the President requested an additional $72 million (3.7%) for the Infectious Diseases programs, which would have increased funding from $1,935 million for FY2009 to $2,007 million for FY2010. The House approved an increase of $82 million; the Senate committee recommended $1,969 million, $48 million less than the House. The law appropriated $1,996 million, $61 million (3.2%) more than in FY2009. The President requested a decrease in funding for CDC Buildings and Facilities of $122 million (80.2%), from $152 million to $30 million. The House agreed with the proposed decrease. The Senate committee recommended $108 million (a decrease of 28.5%), $78 million more than the House and the request. The law appropriated $69 million, $82 million (54.4%) less than in FY2009. The President requested a $442 million increase (1.5%) for the National Institutes of Health (NIH), which was funded at $30.3 billion in FY2009. The House approved an increase of $942 million (3.1%), $500 million above the request, for a total of $31.3 billion in FY2010. The Senate committee recommended the same level as the request, $30.8 billion. The law appropriated $31.0 billion, $692 million (2.3%) more than in FY2009. NIH had also received $10.4 billion in stimulus funding through ARRA, about half of which remained to be obligated in FY2010. At the Centers for Medicare and Medicaid Services (CMS), a Fraud and Abuse Control Initiative, first funded in FY2009, was proposed for a $113 million increase (57.1%), from $198 million to $311 million. The House bill, the Senate committee, and the conferees agreed to that amount. The President also requested a $160 million increase (4.8%) for CMS Program Management, from $3.3 billion in FY2009 to $3.5 billion. The House substantially agreed, providing an increase of $158 million, while the Senate committee recommended an increase of $126 million, $32 million less than the House. The law appropriated $3.5 billion, $165 million (5.0%) more than in FY2009. The President requested a decrease of $1.9 billion (37.3%) in discretionary funding for the Low-Income Home Energy Assistance Program (LIHEAP), which was funded at $5.1 billion in FY2009. A legislative proposal was offered to provide additional mandatory LIHEAP funding if energy prices increased significantly. Both the House bill and the Senate committee disapproved the decrease to $3.2 billion and recommended that discretionary funding be maintained at $5.1 billion. The law provided $5.1 billion, the same as in FY2009. The House, the Senate committee, and the conferees agreed with the President's request to increase funding for Head Start by $122 million (1.7%), from $7.1 billion in regular FY2009 appropriations to $7.2 billion. The program had also received $2.1 billion in stimulus funding through ARRA. No funding was requested for the Community-based Abstinence Education program in the Administration for Children and Families (ACF); the program received $95 million in FY2009. Instead, $110 million was requested in ACF for a new Teenage Pregnancy Prevention initiative. The House approved the proposal as requested. The Senate committee agreed to elimination of the ACF abstinence education program, but placed a new $100 million Teen Pregnancy Prevention program in the Office of the Secretary, to be administered by a newly established Office of Adolescent Health The conference agreement adopted the Senate approach, providing $110 million to the Office of the Secretary for the new initiative. Both committee reports, as well as the conferees' explanatory statement, discussed an emphasis on funding evidence-based programs. Within the Office of the HHS Secretary, the Public Health and Social Services Emergency Fund (PHSSEF) supports a number of preparedness, response, and related public health security functions. Overall funding for the PHSSEF account, which received $1.4 billion in FY2009, was increased in the President's request by $1.3 billion to $2.7 billion. The House approved $2.1 billion, $578 million below the request. The Senate committee recommended a total of $2.6 billion for the Fund, $57 million less than the request. The law appropriated $2.3 billion for the PHSSEF, $909 million (65.0%) more than in FY2009. Among its activities funded within the PHSSEF, HHS has responsibility for procuring and stockpiling emergency medical countermeasures. To better align programmatic and financial responsibilities, the President and Congress agreed to transfer all of the remaining balances in the Project BioShield Special Reserve Fund (SRF) from the Department of Homeland Security (DHS) to HHS. The funds were originally appropriated as multi-year money to DHS in FY2004, to remain available until FY2013. According to the FY2010 L-HHS-ED conference report, "As of October 31, 2009, data from HHS indicate that $3,033 million remains unobligated and available in the Project BioShield SRF" ( H.Rept. 111-366 , p. 1045). As one portion of countermeasures funding, the President requested availability in FY2010 of $1,264 million of the SRF money. The House approved $764 million, choosing to transfer $500 million of the BioShield money to NIH. The Senate committee agreed with the request for $1,264 million. The law provided $960 million for the activities, and transferred $304 million to NIH. Also within the PHSSEF, pandemic influenza preparedness was funded at $585 million in regular FY2009 appropriations. The President and Congress agreed to decrease the amount by $231 million, to $354 million for FY2010. HHS also has $7.7 billion in supplemental FY2009 funds for pandemic influenza contingencies, available until expended, that were provided in P.L. 111-32 in June 2009. L-HHS-ED acts since FY1998 have barred federal funding for needle and syringe exchange programs set up to prevent HIV infection in intravenous drug users. The House bill as passed replaced the ban with a restriction on such programs being located within 1,000 feet of facilities used by children. The Senate bill as reported retained the prior ban. The conference agreement prohibited funding for such programs in any location that local public health or law enforcement agencies determine to be inappropriate (§505 of P.L. 111-117 , Division D). ARRA provided HHS with an additional $21.9 billion in discretionary funding for FY2009, including $10.4 billion for NIH. Unlike most regular appropriations, ARRA made the stimulus funds available for obligation for two years, until the end of FY2010. HHS agencies developed implementation plans for spending the money, including expected obligations in FY2009 and FY2010. The plans are available at http://www.hhs.gov/recovery/reports/index.html , together with subsequent HHS Recovery Act reports on the funding. HHS budget materials may be found at http://www.hhs.gov/asrt/ob/docbudget/ . Annual L-HHS-ED appropriations regularly contain restrictions that limit—for one year at a time—the circumstances under which federal funds can be used to pay for abortions. Restrictions on appropriated funds, popularly referred to as the "Hyde Amendments," generally apply to all L-HHS-ED funds. Medicaid is the largest program affected. As evidence of the perennial volatility of this issue, these provisions have been subject to periodic revision during the annual consideration of L-HHS-ED appropriations. From FY1977 to FY1993, abortions could be funded only when the life of the mother was endangered. The 103 rd Congress modified the provisions to permit federal funding of abortions in cases of rape or incest. The FY1998 L-HHS-ED appropriations, P.L. 105-78 , extended the Hyde provisions to prohibit the use of federal funds to buy managed care packages that include abortion coverage, except in the cases of rape, incest, or life endangerment. The FY1999 L-HHS-ED appropriations, P.L. 105-277 , continued the FY1998 Hyde Amendments with two added provisions: (1) a clarification to ensure that the restrictions apply to all trust fund programs (namely, Medicare), and (2) an assurance that Medicare + Choice plans (now Medicare Advantage) cannot require the provision of abortion services. No changes were made from FY2000 through FY2004. The FY2005 L-HHS-ED appropriations, P.L. 108-447 ( H.Rept. 108-792 , p. 1271), added a restriction, popularly referred to as the "Weldon Amendment," that prevents federal programs or state or local governments that receive L-HHS-ED funds from discriminating against health care entities that do not provide or pay for abortions or abortion services. The FY2006 through FY2010 L-HHS-ED appropriations retained the Weldon amendment language and the Hyde restrictions. The current provisions can be found in §507 and §508 of P.L. 111-117 , Division D. For additional information, please see CRS Report RL33467, Abortion: Legislative Response , by [author name scrubbed]. On March 9, 2009, President Barack Obama signed an executive order that reversed the nearly eight-year-old Bush Administration restriction on federal funding for human embryonic stem cell research. Research using human embryonic stem cells raises ethical issues for some because embryos are destroyed in order to obtain embryonic stem cells. The Obama decision directed NIH to issue new guidelines for the conduct of embryonic stem cell research. Draft guidelines were released on April 23, 2009, and final guidelines were issued on July 6, 2009. In December 2009, NIH created a new registry of human embryonic stem cell lines that are eligible for use in research supported by federal funds under the 2009 guidelines. As of February 1, 2010, a total of 43 stem cell lines were listed in the new registry. Under the Bush Administration, only 21 cell lines were available for use in federally funded research. In 1996, Congress prohibited NIH from using appropriated funds to create human embryos for research purposes or for research in which human embryos are destroyed ( P.L. 104-99 , §128). Since FY1997, annual appropriations acts have extended the prohibition to all L-HHS-ED funds, with NIH as the agency primarily affected. The restriction, popularly referred to as the "Dickey Amendment," has not changed significantly since it was first enacted. The current provision is found in §509 of P.L. 111-117 , Division D. For additional information, please see CRS Report RL33540, Stem Cell Research: Federal Research Funding and Oversight , by [author name scrubbed] and [author name scrubbed]. Table 9 shows the appropriations details for offices and major programs of HHS. FY2009 discretionary appropriations for the Department of Education (ED) equaled $63,533 million. For FY2010, the Obama Administration requested $64,692 million, $1,159 million (1.8%) more than the FY2009 amount, as shown in Table 10 . As passed by the House, H.R. 3293 included $64,674 million in discretionary funding, an increase of $1,141 million (1.8%) over FY2009. The Senate Appropriations Committee recommended $63,962 million in discretionary funding, $713 million less than approved by the House, and an increase of $428 million (0.7%) over FY2009. The FY2010 conference agreement, as enacted in P.L. 111-117 , provided discretionary funding of $64,278 million, an increase of $744 million (1.2%) over FY2009. A single mandatory ED program is included in the L-HHS-ED bill, the Vocational Rehabilitation State Grants program. It was provided funding of $3.1 billion in FY2010. The following are some highlights for ED of President Obama's FY2010 budget request, the House bill, the Senate Appropriations Committee's recommendations, and the conference agreement, as enacted in P.L. 111-117 . See Table 11 for details. All comparisons of funding levels with FY2009 appropriations are based on FY2009 regular appropriations only. The President's FY2010 budget requested increased funding for several programs, and several new education programs were proposed. While President Obama's budget requested an increase in discretionary funding for education of $1.1 billion over the FY2009 funding level, it proposed eliminating funding for 12 existing programs. The President's budget proposed adopting two new early childhood initiatives. Funding of $500 million was requested for Early Childhood Grants, intended to encourage local educational agencies (LEAs) to use Title I-A funding to implement or expand high-quality early childhood education programs. An additional $300 million was requested for The Early Learning Challenge Fund, intended to provide competitive grants to states to improve the standards and quality of early learning programs serving children from birth to age five. Neither the House nor the Senate Committee on Appropriations recommended funding for Early Childhood Grants or for the Early Learning Challenge Fund. No funding was provided for these programs in the conference agreement, as enacted in P.L. 111-117 . The Administration also recommended funding for four new smaller programs in FY2010—a Promise Neighborhoods Initiative at $10 million, a Teach for America Initiative at $15 million, a High School Graduation Initiative at $50 million, and a Gulf Coast Recovery Initiative at $30 million. Both the House and the Senate Appropriations Committee recommended funding the Promise Neighborhoods Initiative at $10 million in FY2010. The House recommended providing up to $15 million for the proposed Teach for America Initiative; the Senate Committee on Appropriations recommended $20 million for the initiative. Both the House and the Senate Committee on Appropriations supported funding the High School Graduation Initiative at the Administration's proposed funding level of $50 million. The Senate Committee recommended $30 million for the Gulf Coast Recovery Initiative; the House did not recommend funding for the initiative. The conference agreement, as enacted in P.L. 111-117 , provided $18 million for Teach for America and $50 million for the High School Graduation Initiative. Within the Fund for the Improvement of Education account, it included $10 million for Promise Neighborhoods and $12 million for competitive grants to Gulf Coast schools. The budget proposal recommended funding Title I-A grants at $13.0 billion for FY2010, a decrease of $1.5 billion from FY2009 appropriations. The House recommended level funding of $14.5 billion and the Senate Committee on Appropriations recommended funding of $13.8 billion. The conference agreement, as enacted in P.L. 111-117 , provided $14.5 billion for Title I-A grants. The budget request for Title I School Improvement Grants was for $1.5 billion for FY2010, an increase of $1 billion over FY2009. Both the House and the Senate Committee on Appropriations recommended FY2010 funding for the program at $546 million. The conference agreement, as enacted in P.L. 111-117 , provided $546 million for School Improvement Grants in FY2010. The budget proposal requested funding for an expanded Striving Readers program of $370 million for FY2010, $335 million more than FY2009 funding. The House recommended funding the Striving Readers program at $146 million for FY2010. The Senate Committee on Appropriations recommended funding of $263 million; its Striving Readers proposal would have eliminated the Early Reading First Program as a separate program, instead incorporating it into the Striving Readers Program. The conference agreement, as enacted in P.L. 111-117 , eliminated Early Reading First as a separate program; it increased the funding for the Striving Readers program to $250 million and expanded it to cover children from birth through high school. The budget proposal requested $487 million in FY2010 funding for the Teacher Incentive Fund, an increase of $390 million over FY2009. The House recommended funding the Teacher Incentive Fund at $446 million for FY2010; the Senate Committee on Appropriations recommended funding of $300 million. The conference agreement, as enacted in P.L. 111-117 , provided $400 million for the program in FY2010. The Administration proposed making all Pell Grant funding mandatory in FY2010, with a maximum award of $5,550. For FY2009, the maximum total grant award was $5,350, consisting of a maximum award from discretionary funds of $4,860 and a maximum award from mandatory funds of $490. The FY2010 House bill and the Senate Appropriations Committee recommendation did not accept the proposal to make all Pell Grant funding mandatory. Under both versions of H.R. 3293 , the maximum Pell Grant would have equaled $4,860 in discretionary funding plus a maximum of $690 in mandatory funding for a maximum total award of $5,550. Using the congressional assumption that the Pell Grant program would continue to have discretionary funding, the budget proposal would have supported discretionary funding of $17.5 billion in FY2010, an increase of $207 million over FY2009. (If the program were to have become mandatory, discretionary funding would have equaled zero.) The House would have provided $17.8 billion in discretionary funding for FY2010; the Senate committee would have funded the program at $17.5 billion. The conference agreement, as enacted in P.L. 111-117 , continued the Pell Grant program as a discretionary program with funding of $17.5 billion for FY2010. A number of programs were proposed for elimination. The largest program proposed for elimination was the Safe and Drug Free Schools and Communities Act State Grants program, funded at $295 million in FY2009. Both the House and the Senate Committee on Appropriations concurred with the recommendation to eliminate this program. The Even Start program was among the other programs proposed for elimination in the budget request. The House recommended continuing the program in FY2010 at level funding of $66 million; the Senate committee recommended no funding for the program in FY2010. As in FY2009, no funding was requested for the Reading First Program; the House and the Senate Appropriations Committee concurred. The conference agreement, as enacted in P.L. 111-117 , provided FY2010 funding of $66 million for the Even Start program, but no funding for either the Safe and Drug Free Schools and Communities Act State Grants program or for the Reading First program. ARRA provided an additional $98.2 billion in discretionary funding for FY2009. The Department has established an ARRA website that provides detailed guidance. See http://www.ed.gov/policy/gen/leg/recovery/index.html . Department of Education budget materials may be found at http://www2.ed.gov/about/overview/budget/index.html . Table 11 shows the appropriations details for offices and major programs of ED. FY2009 discretionary appropriations for Related Agencies were $12,748 million. For FY2010, the Obama Administration requested $14,028 million, $1,280 million (10.0%) more than the FY2009 amount, as shown in Table 12 . H.R. 3293 , as passed by the House, included $13,989 million in discretionary funding, an increase of $1,240 million (9.7%) over FY2009. The Senate Appropriations Committee recommended $14,067 million in discretionary funding, $79 million more than approved by the House, and an increase of $1,319 million (10.3%) over FY2009. The FY2010 conference agreement, as enacted in P.L. 111-117 , provided discretionary appropriations of $14,076 million, an increase of $1,328 million (10.4%) over FY2009. Mandatory programs for Related Agencies included in the L-HHS-ED bill were funded at $47.3 billion for FY2010, virtually all of it for the Supplemental Security Income (SSI) program. The following are some highlights for Related Agencies of President Obama's FY2010 budget request, the House bill, the Senate Appropriations Committee's recommendations, and the conference agreement, as enacted in P.L. 111-117 . See Table 13 for details. All comparisons of funding levels with FY2009 appropriations are based on FY2009 regular appropriations only. The Administration requested $11,447 million for SSA administrative expenses for FY2010, an increase of $993 million (9.5%) over FY2009. Both the House and the Senate Appropriations Committee agreed to the President's request. The conference agreement also approved the President's request. The President requested $539 million for National and Community Service Programs (NCSP), an increase of $172 million. The request for NCSP included $373 million for AmeriCorps State and National Grants, an increase of $105 million (39.0%). The House approved an increase of $106 million for NCSP, including a $64 million increase for AmeriCorps grants. The Senate Appropriations Committee recommended a $176 million increase for NCSP, including $105 million more for AmeriCorps. The conference agreement provided $537 million for NCSP, an increase of $170 million (46.4%). The agreement approved $373 million for AmeriCorps, the same as the President's request. The President asked for $196 million for the National Service Trust, an increase of $61 million over the $135 million provided for FY2009. The House agreed to increase funding by $43 million. The Senate Committee recommended an increase of $62 million. The conference agreement followed the Senate committee recommendation of $197 million, an increase of $62 million (6.0%) over FY2009. The President requested, and both the House and the Senate committee approved, a $21 million (7.9%) increase in funding for the National Labor Relations Board (NLRB). The NLRB received $263 million for FY2009. The conference agreement approved the President's request. The ARRA provided an additional $1.2 billion in discretionary funding for Related Agencies in FY2009, a portion of which will be obligated in FY2010. Both SSA and NCSP have developed implementation plans for spending the money. The plans for SSA and NCSP are available at http://www.ssa.gov/recovery and http://www.nationalservice.gov/about/recovery/index.asp , respectively. Table 13 shows the appropriations details for offices and major programs of the L-HHS-ED Related Agencies. The following items include some of the key budget terms used in this report; they are based on CRS Report 98-720, Manual on the Federal Budget Process , by [author name scrubbed] and Allen Schick (pdf). The websites provide general information on the federal budget and appropriations. Advance appropriation is budget authority that will become available in a fiscal year beyond the fiscal year for which the appropriations act is enacted; scorekeeping counts the entire amount in the fiscal year it first becomes available for obligation. Appropriation is budget authority that permits federal agencies to incur obligations and to make payments out of the Treasury for specified purposes. Appropriations represent the amounts that agencies may obligate during the period of time specified in the law. Annual appropriations are provided in appropriations acts; most permanent appropriations are provided in substantive law. Major types of appropriations are regular, supplemental, and continuing. Budget authority is legal authority to incur financial obligations that normally result in the outlay of federal government funds. Major types of budget authority are appropriations, borrowing authority, and contract authority. Budget authority also includes the subsidy cost to the federal government of direct loans and loan guarantees, estimated on a net present value basis. Budget resolution is a concurrent resolution passed by both chambers of Congress, but not requiring the signature of the President, setting forth the congressional budget for at least five fiscal years. It includes various budget totals and functional allocations. Discretionary spending is budget authority provided in annual appropriations acts, other than appropriated entitlements. Entitlement authority is the authority to make payments to persons, businesses, or governments that meet the eligibility criteria established by law; as such, it represents a legally binding obligation on the part of the federal government. Entitlement authority may be funded by either annual or permanent appropriations acts. Forward funding is budget authority that becomes available after the beginning of the fiscal year for which the appropriation is enacted and remains available into the next fiscal year; the entire amount is counted or scored in the fiscal year in which it first becomes available. Mandatory (direct) spending is budget authority provided in laws other than annual appropriations acts, including appropriated entitlements. Rescission is the cancellation of budget authority previously enacted. Scorekeeping is a set of procedures for tracking and reporting on the status of congressional budgetary actions. Supplemental appropriation is budget authority provided in an appropriations act that provides funds that are in addition to regular appropriations. Websites General information on budget and appropriations may be found at these websites. Specific L-HHS-ED agency sites are listed in relevant sections of this report. House Committees http://appropriations.house.gov/ http://republicans.appropriations.house.gov/ http://budget.house.gov/ http://budget.house.gov/republicans/ Senate Committees http://appropriations.senate.gov/ http://budget.senate.gov/democratic/ http://budget.senate.gov/republican/ Congressional Budget Office (CBO) http://www.cbo.gov/ Congressional Research Service (CRS) http://www.crs.gov/Pages/clis.aspx?cliid=73 Government Accountability Office (GAO) http://www.gao.gov/ Government Printing Office (GPO) http://www.gpoaccess.gov/usbudget/ Office of Management and Budget (OMB) http://www.whitehouse.gov/omb/budget/Overview/ Statements of Administration Policy (SAPs): http://www.whitehouse.gov/omb/111/legislative_sap_date/ | This report tracks FY2010 appropriations for the Departments of Labor, Health and Human Services, and Education, and Related Agencies (L-HHS-ED). This legislation provides discretionary funds for three major federal departments and 13 related agencies. The report summarizes L-HHS-ED discretionary funding issues but not authorization or entitlement issues. On May 7, 2009, President Obama submitted the FY2010 budget request to Congress, including $163.8 billion in discretionary L-HHS-ED funds. The comparable FY2009 amount was $160.1 billion, enacted mainly through the Omnibus Appropriations Act, 2009 (P.L. 111-8, Division F). The request was an increase of $3.7 billion (2.3%) over FY2009. On July 22, 2009, the House Committee on Appropriations reported H.R. 3293 (H.Rept. 111-220), its proposal for FY2010 L-HHS-ED appropriations. The House passed the bill, amended, on July 24, approving $165.6 billion in discretionary funds, $1.9 billion over the request and an increase of $5.6 billion (3.5%) over FY2009. The Senate Committee on Appropriations reported its version of H.R. 3293 on August 4, 2009 (S.Rept. 111-66), recommending $165.4 billion in discretionary funds for L-HHS-ED, $1.6 billion over the request and an increase of $5.3 billion (3.3%) over FY2009. Two continuing resolutions (CRs) provided temporary FY2010 funding until enactment of P.L. 111-117, the Consolidated Appropriations Act, 2010, on December 16, 2009. Division D of the consolidated act provided $165.8 billion for discretionary L-HHS-ED programs, an increase of $5.8 billion (3.6%) over FY2009. Some L-HHS-ED agencies and programs have supplemental funding available in FY2010 from the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5). ARRA provided $124.2 billion in FY2009 emergency supplemental appropriations for discretionary L-HHS-ED programs, with funds generally available for obligation through September 30, 2010. Department of Labor (DOL). FY2009 discretionary appropriations for DOL were $12,411 million. For FY2010, the President requested $13,280 million, $869 million (7.0%) more than funding for FY2009. P.L. 111-117 provided $13,534 million for DOL, an increase of $1,123 million (9.0%) over FY2009. Workforce Investment Act (WIA) programs received $5,545 million, an increase of $232 million (4.4%) above the $5,314 million provided for FY2009. Department of Health and Human Services (HHS). FY2009 discretionary appropriations for HHS were $71,385 million. For FY2010, the President requested $71,758 million, $373 million (0.5%) more than the FY2009 amount. P.L. 111-117 provided $73,958 million in discretionary funding for HHS, an increase of $2,573 million (3.6%) over FY2009. Department of Education (ED). FY2009 discretionary appropriations for ED were $63,533 million. For FY2010, the President requested $64,692 million, $1,159 million (1.8%) more than the FY2009 amount. P.L. 111-117 provided $64,278 million in discretionary funding for ED, $744 million (1.2%) more than FY2009. Related Agencies. FY2009 discretionary appropriations for Related Agencies were $12,748 million. For FY2010, the President requested $14,028 million, $1,280 million (10.0%) more than the FY2009 amount. P.L. 111-117 provided Related Agencies with $14,076 million in discretionary funding, an increase of $1,328 million (10.4%) over FY2009. |
The Elementary and Secondary Education Act (ESEA) was last amended by the No Child Left Behind Act of 2001 (NCLB; P.L. 107-110 ). Most programs authorized by the ESEA were authorized through FY2007. As Congress has not reauthorized the ESEA, appropriations for ESEA programs are currently not explicitly authorized. However, because the programs continue to receive annual appropriations, appropriations are considered implicitly authorized. During the 112 th Congress, both the House and Senate have considered legislation to reauthorize the ESEA. On October 20, 2011, the Senate Health, Education, Labor, and Pensions (HELP) Committee considered and ordered reported the Elementary and Secondary Education Reauthorization Act of 2011 ( S. 3578 ; S.Rept. 112-221 ) by a bipartisan vote of 15-7. The House Education and Workforce Committee considered and ordered reported two bills that together would provide for a comprehensive reauthorization of the ESEA: (1) the Student Success Act ( H.R. 3989 , H.Rept. 112-458 ), and (2) the Encouraging Innovation and Effective Teachers Act ( H.R. 3990 ; H.Rept. 112-459 Part 1). Both bills were ordered reported on February 28, 2012, on strictly partisan votes (23-16 in each case). It is unclear whether S. 3578 or H.R. 3989 and H.R. 3990 will be considered on the Senate or House floors, respectively. S. 3578 and H.R. 3989 and H.R. 3990 would take different approaches to reauthorizing the ESEA, most notably in three key areas: (1) accountability for student achievement, (2) teacher quality versus teacher effectiveness, and (3) targeted support for elementary and secondary education versus the use of a block grant. In addition, both the HELP Committee and Education and Workforce Committee bills would eliminate existing programs, while creating new programs. This report examines major features of S. 3578 , H.R. 3989 , and H.R. 3990 with respect to current law. The report begins by discussing the approach that each bill takes toward reshaping the ESEA in key areas. Next, the report provides a structured orientation by ESEA title and part to how the ESEA would be reconfigured under each bill. Then it more thoroughly summarizes the major proposals in the aforementioned bills, focusing on those aspects of the bills that would fundamentally change a portion of current law. The report does not aim to provide a comprehensive summary of these bills or of technical changes that would be made by each measure. The report concludes with an appendix that examines the proposed program authorizations included in each bill. As H.R. 3989 and H.R. 3990 would collectively provide for a comprehensive reauthorization of the ESEA, beginning with the structured orientation to how the bills would change the ESEA, they are considered as if they are one bill. For the purposes of this report, a program is considered to be a new program if the program is a newly proposed program or is a substantively changed or reconfigured existing program (e.g., changes multiple aspects of a program, such as the purpose of the program, distribution of funds, uses of funds, or eligible recipients of funds). Programs included in the ESEA reauthorization bills are considered to be similar to programs in current law if they are substantively similar in purpose, recipients, and activities. The tables in this report refer to these programs as being "retained" by a particular bill. For example, the Advanced Placement program is considered to be retained under S. 3578 , as the new program (Accelerated Learning) would be substantively similar to the program included in current law, despite the inclusion of new funding to support tests administered under the International Baccalaureate program. On the other hand, the block grant program created under H.R. 3990 is considered a new program, as it differs from the current Innovative Programs block grant program in numerous ways including program purposes, funding to subgrantees, and allowable activities. Concurrently, the current law block grant program is considered to be "not retained" under H.R. 3990 . It should be noted that an indication that a particular program or activity would not be included in a particular bill does not mean that all of the activities authorized under current law for the program would be eliminated. The activities may be continued under a different program. For example, while H.R. 3989 and H.R. 3990 would no longer retain many of the current ESEA programs, H.R. 3990 would include a block grant program under which funds could potentially be used for similar activities as were permitted or required under some programs that would not be retained. The uses of funds under the proposed block grant program are discussed in this report. Similarly, if an existing program or activity is not specifically mentioned as allowable under a new program, it should not be assumed that funds could not be used to support such programs or activities. It is beyond the scope of this report to discuss proposed programs or activities in great detail. At the same time, an indication that a program would be "similar to current law" does not mean that it would be retained without changes. As previously discussed, this report focuses on major changes that would be made to current law, so there may be additional changes made to a program or activity that are not highlighted in this report. This section of the report examines the reauthorization approaches taken by S. 3578 , H.R. 3989 , and H.R. 3990 in three key areas: (1) accountability for student achievement, (2) teacher quality versus teacher effectiveness, and (3) targeted support for elementary and secondary education versus the use of a block grant. For each of the three areas, a brief discussion of the treatment of the issue under current law is included, followed by a summary of how S. 3578 , H.R. 3989 , and H.R. 3990 would address the issues. Under NCLB, a series of comprehensive standards-based accountability requirements were enacted. States, local educational agencies (LEAs), and schools must comply with these requirements in order to receive Title I-A funds. The key features of these requirements are discussed below. This is followed by a brief discussion of how S. 3578 and H.R. 3989 would treat each of these requirements. Standards. At a minimum, each state must adopt challenging academic content and challenging student academic achievement standards in mathematics and reading/language arts (hereinafter referred to as reading) for each of grades 3-8 and for one grade in grades 10-12. States must also adopt content and achievement standards for science for at least three grade levels (grades 3-5, grades 6-9, and grades 10-12). States may choose to adopt standards for other subject areas. Assessments. All states must develop and implement yearly assessments aligned with content and achievement standards in reading and mathematics for grades 3-8 and one grade in grades 10-12. In addition, the state must develop and administer science assessments aligned with content and achievement standards once in grades 3-5, grades 6-9, and grades 10-12 Annual measurable objectives (AMOs). States must develop AMOs that are established separately for reading and mathematics assessments, are the same for all schools and LEAs, identify a single minimum percentage of students who must meet or exceed the proficient level on the assessments that applies to the all students group and each subgroup for which data are disaggregated, and must ensure that all students will meet or exceed the state's proficient level of achievement on the assessments based on a timeline established by the state. The timeline must incorporate concrete movement toward meeting an "ultimate goal" of all students reaching a proficient or higher level of achievement by the end of the 2013-2014 school year. Adequate yearly progress (AYP). AYP is determined based on three components: student academic achievement on the required state reading and mathematics assessments, with a focus on the percentage of students scoring at the proficient level or higher; 95% student participation rates in assessments by all students and for any subgroup for which data are disaggregated; and performance on another academic indicator, which must be graduation rates for high schools. Schools or LEAs meet AYP standards only if they meet the required threshold levels of performance on all three indicators for the all students group and any subgroup for which data are disaggregated. AYP must be determined separately and specifically not only for all students but also for all subgroups for which data must be disaggregated within each school, LEA, and state. Consequences based on performance. States are required to identify LEAs, and LEAs are required to identify schools, for program improvement if the LEA or school failed to meet the state AYP standards for two consecutive years. LEAs or schools that fail to meet AYP standards for additional years are required to take a variety of actions. For example, schools that fail to meet AYP for two consecutive years are identified for school improvement and must offer public school choice to students, develop a school improvement plan, and use Title I-A funds for professional development. Failure to make AYP for an additional year results in a school also having to offer supplemental educational services (SES). LEAs are required to reserve 20% of their Title I-A funds for transportation for public school choice and for SES. Schools that fail to make AYP for an additional year continue to do all of the aforementioned activities and enter into corrective action. Under corrective action, they are required to take one of several statutorily specified actions, including replacing school staff, changing the curriculum, extending the school year or school day, or working with an outside expert. Subsequent failure to make AYP requires a school to plan for and, ultimately, implement restructuring. Restructuring involves the continuation of the aforementioned activities and implementation of an alternative governance structure, such as converting to a charter school. It should be noted that these consequences are applied regardless of the extent to which a school failed to make AYP in a given year but consequences need only be applied to schools receiving Title I-A funds. S. 3578 would retain similar requirements related to standards and assessments; however, all states would be required to develop college and career ready standards in reading and mathematics, and assessments would have to be aligned with these new standards. States would have the discretion to administer a single annual summative assessment or multiple assessments administered throughout the school year that result in a single summative score. They would no longer be required to establish AMOs, but they would be required to determine whether students were on-track to being college- and career-ready by the time they graduated from high school. The bill would also eliminate the concept of AYP. It would require that assessments be administered to not less than 95% of all students and not less than 95% of the members of each subgroup for which data are disaggregated. The bill would also require that high school graduation rates be reported. While no specific consequences are associated with failing to meet the participation rate requirement, schools with relatively low graduation rates may be subject to interventions. In addition, while states would be required to determine whether students are on-track to being college- and career-ready, there would be no "ultimate goal" with associated consequences toward which states, LEAs, and schools must work. With respect to "consequences," states would be required to identify "persistently low-achieving schools," which would include the lowest performing 5% of elementary and secondary schools (not including high schools) based on assessment results, the lowest 5% of high schools based on graduation rates and assessment results, and all other high schools with less than a 60% graduation rate. These schools would be required to implement a transformation, strategic staffing, turnaround, whole school reform, restart, or closure model, or other strategies approved by the Secretary. The bill would require that public school choice be offered to students attending these schools. There would be no requirement to offer SES. The bill would also require states to identify "achievement gap schools." These would be the 5% of elementary and secondary schools (not including high schools) and 5% of high schools that are not identified as persistently low achieving but have the largest achievement gap among subgroups or the lowest performance by subgroup with respect to being college and career ready or graduation rates. LEAs would be required to develop an intervention plan for these schools. Under H.R. 3989 , states would be required to adopt content and achievement standards for mathematics and reading and any other subject as determined by the state. Assessments would have to be aligned with these standards and be administered in each of grades 3-8 and once in grades 9-12. The state would no longer be required to have science standards or aligned assessments. States would have the discretion to administer a single annual summative assessment or multiple assessments administered throughout the school year that result in a single summative score. States would no longer be required to establish AMOs. The bill would also eliminate the concept of AYP. It would require that assessments be administered to not less than 95% of all students and not less than 95% of the members of each subgroup for which data are disaggregated. The bill would also require that high school graduation rates be reported. In addition, there would be no "ultimate goal" with associated consequences toward which states, LEAs, and schools must work. The bill would eliminate current outcome accountability requirements. States would be required to include a system for school improvement for public schools receiving Title I-A-1 funds that would be implemented by LEAs and includes implementing interventions that are designed to address such schools' weaknesses. While public school choice and SES would no longer be required, the bill would create a new reservation of funds, however, for direct services to students under Section 1003A. States would be required to reserve 3% of the total amount received by the state under Title I-A-1 (Grants to LEAs) to make competitive grants to LEAs to provide public school choice or high-quality academic tutoring that is designed to help increase student academic achievement. With the enactment of NCLB, new requirements were included in Title I-A to ensure an equitable distribution of highly qualified instruction across schools and establish minimum professional standards for what constitutes a highly qualified teacher. NCLB also authorized programs to support efforts to meet the teacher quality requirements as well as systems that reward teacher performance. These provisions are described below followed by a discussion of how S. 3578 , H.R. 3989 , and H.R. 3990 would amend them. Distribution. Current law requires that states ensure Title I schools provide instruction by highly qualified instructional staff and take specific steps to ensure that poor and minority children are not taught at higher rates than other children by inexperienced, unqualified, or out-of-field teachers. Newly hired teachers. Each LEA receiving Title I-A funds must ensure that all newly hired teachers teaching in a program supported by such funds be highly qualified. Highly qualified teacher (HQT). The definition of an HQT has two basic components involving professional credentials and subject-matter knowledge. First, to be deemed highly qualified, a teacher must possess a baccalaureate degree and full state teaching certification. Second, a teacher must demonstrate subject-matter knowledge in the areas that she or he teaches. The manner in which teachers satisfy the second component depends on the extent of their teaching experience and the educational level at which they teach. Deadline. Each state receiving Title I-A funds was required to have a plan to ensure that, by no later than the end of the 2005-2006 school year, all public school teachers teaching in core academic subjects within the state met the definition of an HQT. The plan was required to set annual measurable objectives to meet this deadline. Support. The Teacher and Principal Training and Recruitment Fund (Title II-A) provides formula grants to support state and local efforts to meet ESEA teacher quality requirements. Performance. The Teacher Incentive Fund (Title V-D) supports competitive grants for high-need schools to develop and implement performance-based teacher and principal compensation systems that must consider gains in student academic achievement as well as classroom evaluations conducted multiple times during each school year, among other factors. S. 3578 would retain similar requirements to those in current law regarding the equitable distribution of teachers with some adjustments in determining whether teachers are equally distributed. Most notably, states would be required to use at least two of five measures of teacher quality and performance including the percentage and distribution of teachers who (1) are HQT, (2) are inexperienced, (3) have not completed a preparation program, (4) are teaching out-of-field, or (5) are rated in the highest and lowest categories under an approved teacher evaluation system. The bill would also retain a similar definition of HQT and require each LEA receiving Title I-A funds to meet the requirement for all teachers in core academic subjects as defined in current law. The bill would provide an exception to the HQT requirement for LEAs in a state that has fully implemented an approved teacher evaluation system. Such LEAs would be required to meet the HQT requirement with respect to new core subject matter teachers only. An approved teacher evaluation system is defined in a manner that is similar to the definition currently used in the Teacher Incentive Fund. An approved evaluation system must be based "in significant part" on student academic achievement, involve classroom observations, provide meaningful feedback, establish multiple performance categories, use multiple measures, inform professional development, and include training for evaluators. The bill would retain the Title II-A formula grant program with modest amendments. H.R. 3989 would eliminate current requirements regarding the equitable distribution of instructional quality and highly qualified teachers. In addition, under H.R. 3990 , as a condition of receiving Title II-A funds, LEAs would be required to have a teacher evaluation system in place that uses student achievement as a "significant factor," is based on multiple measures, involves more than two performance categories, and is used to make personnel decisions within three years of enactment. H.R. 3990 would retain formula grant funding under Title II-A; however, the enrollment and poverty elements used for allocation would be modified. The bill would also curtail allowable activities largely to those that support the development and implementation of state and local evaluation systems for teachers. Under current law, the ESEA includes several formula grant programs that provide grants to states, LEAs, or other entities (e.g., Indian tribes). These programs provide aid to support specific student populations (e.g., disadvantaged students, limited English proficient students), provide additional aid to entities based on their location (i.e., rural LEAs), or provide funds for a specific set of activities (e.g., those related to literacy or school safety). The ESEA also contains numerous competitive grant programs, which generally receive less funding than formula grant programs. The competitive grant programs included in the ESEA address issues such as counseling, arts education, physical education, and magnet schools. As shown in Table 1 , many of the competitive grant programs and some of the formula grant programs included in the ESEA are no longer funded. The HELP Committee and the Education and Workforce Committee have proposed fundamentally different approaches with respect to how to continue to provide funding through the ESEA. In general, S. 3578 would retain several competitive grant programs and create new programs to support activities that are currently supported under either formula or competitive grant programs that would otherwise be eliminated. H.R. 3989 and H.R. 3990 would eliminate some formula grant programs and most competitive grant programs included in current law but would include a block grant program whose funding could potentially be used to support similar activities to those that are supported under programs slated for elimination. The divergent approaches taken by these bills with respect to targeted support and block grants are discussed in more detail below. S. 3578 would retain most of the current formula grant programs, while eliminating several competitive grant programs (see Table 1 ). It would add several targeted grant programs that would broadly support similar activities as those supported under programs being eliminated. For example, the bill would add a new literacy program; a new science, technology, engineering, and mathematics program; a program to support a well-rounded education which would fund subject-matter specific activities (e.g., arts, economics); and a program focused on student well-being. The bill would not include a block grant program. H.R. 3989 and H.R. 3990 would retain some, but not all, of the existing formula grant programs and would eliminate most competitive grant programs (see Table 1 ). However, H.R. 3990 includes a new block grant program (the Local Academic Flexible grant) that would be authorized at $2.7 billion and would provide formula grants to states. In contrast, the Innovative Programs grant program, the block grant included under current law, was last authorized at $600 million and last funded at $99 million in FY2007. The new block grant program would afford states considerable flexibility in how funds are used. Under the new block grant program, states would be required to use at least 75% of the funds received to award competitive grants to eligible entities which include partnerships of LEAs, community-based organizations (CBOs), business entities, and nongovernmental entities. All partnerships are required to include at least one LEA. In addition, the state would be required to use not less than 10% to award competitive grants to nongovernment entities. States could use funds for state level activities as well. For instance, SEAs could use funds to develop standards and assessments, to administer assessments, to monitor and evaluate programs and activities receiving funding, to provide training and technical assistance, for statewide academic focused programs, to share evidence-based and other effective strategies, and for administrative costs. Grants to LEAs and other eligible entities could be used for either (1) supplemental student support activities (e.g., before or after school activities, tutoring, expanded learning time) but not in-school learning activities; and (2) activities to support students (e.g., academic subject specific programs, extended learning time programs, parent engagement) but not class-size reduction, construction, or staff compensation. Nongovernmental entities must use funds for a program or project to increase the academic achievement of public school students attending a public elementary or secondary school. Thus, it is possible that funds provided under this program could be used to support activities that previously received ESEA support, but which would no longer have a targeted funding stream under H.R. 3989 or H.R. 3990 . However, there is no way to know whether a state or an LEA would receive the same amount of funding, less funding, or more funding under the proposed block grant program as it would if programs that would be eliminated under H.R. 3989 and H.R. 3990 were retained. Table 1 provides a structural orientation by ESEA title and part of how S. 3578 , H.R. 3989 , and H.R. 3990 would modify current law based primarily on line-item amounts for ESEA programs included in appropriations tables, as well as the individual programs included under the Fund for the Improvement of Education. This list of "programs" does not take into account the number of programs, projects, or activities that may be funded under a single line-item appropriation, so the actual number of ESEA programs, projects, or activities being supported through appropriations is not shown. Current ESEA programs under which the federal government provides grants to the initial grantee (as opposed to a subgrantee) by formula are noted on the table. The table provides appropriations information for FY2012. It also indicates where S. 3578 , H.R. 3989 , and H.R. 3990 would place a given program in a reauthorized ESEA if the program is retained. It should be noted that an indication that a program would not be retained does not mean that all of the activities authorized under current law for the program would be eliminated. The activities may be continued under a different program. For example, while H.R. 3989 and H.R. 3990 would no longer retain many of the current ESEA programs, H.R. 3990 would include a block grant program under which funds could potentially be used for similar activities as were permitted or required under some programs that would not be retained. In addition, if an existing ESEA program would not be retained but a new, targeted program would address similar broad purposes (e.g., literacy, dropout prevention), this has been noted in the table. At the same time, an indication that a program would be retained does not mean that it would be retained without changes. For example, while both S. 3578 and H.R. 3990 would retain a state grant program focused on teachers like Title II-A of the ESEA, both bills would modify the formula used to award grants and would change the uses of funds. In addition, an indication that a program would be retained does not mean that it would be retained under the same name. For example, the Advanced Placement program in current law would be retained as the Accelerated Learning program under S. 3578 . The program would be expanded to include International Baccalaureate programs and exams. Table 2 compares S. 3578 , H.R. 3989 , and H.R. 3990 to current law. It provides a more detailed description of specific features of each bill. It is arranged thematically, focusing on key issues that have arisen during the reauthorization process. The themes are as follows: Overall structural and funding issues Accountability Title I-A Other issues related to special populations/areas Teachers, principals, and school leadership Science, technology, engineering, and mathematics (STEM) education Flexibility and choice Other program areas addressed by current law Programs currently authorized outside of the ESEA and proposed for inclusion in the ESEA General provisions Key changes included in ESEA reauthorization bills to non-ESEA programs/acts No attempts were made to provide a comprehensive analysis of each of the bills or to compare S. 3578 with H.R. 3989 and H.R. 3990 . Table A-1 examines specific program authorizations included in current law compared with those included in S. 3578 , H.R. 3989 , and H.R. 3990 . Overall, current law included 46 specific authorizations compared with 36 in S. 3578 and 12 in H.R. 3989 and H.R. 3990 . It should be noted that a single authorization may apply to more than one program. Table A-1 was designed to show the actual number of explicit authorizations included in current law and each of the bills. In order to make this table more useful, however, if proposed statutory language indicated that certain programs receive a specific share of a given authorization, this has been indicated on the table as well. For example, H.R. 3989 includes only two authorizations, but proposed statutory language would provide a specified share of one of those authorizations to multiple, individual programs. A new program authorization under S. 3578 , H.R. 3989 , or H.R. 3990 should not be interpreted to mean that the program was not authorized under current law. For example, S. 3578 would include separate authorizations for Teacher Incentive Fund (TIF) grants and for Promise Neighborhoods. Both of these programs are currently funded and were enacted through appropriations language using general authority available to the Secretary under the Fund for the Improvement of Education (FIE; Title V-D-1). Under current law, there is only one authorization for FIE that encompasses 21 subparts, including Title V-D-1, without specifying a share of the authorization for a given subpart. Therefore, under current law, separate authorizations are not listed for the TIF or Promise Neighborhoods program. In general, all of the authorizations included in S. 3578 are for "such sums" for FY2012 and each of the four succeeding fiscal years (i.e., through FY2016). H.R. 3989 and H.R. 3990 specify authorization amounts for FY2013 only. The amounts authorized for FY2014 through FY2018 would be determined by increasing the FY2013 authorization amount by a percentage equal to the percentage of inflation as determined by the Consumer Price Index for the calendar year ending prior to the beginning of that fiscal year. Given that most of the authorizations in current law and all of the authorizations in S. 3578 are for "such sums as may be necessary," it is not possible to calculate the total amount authorized across current law and the ESEA reauthorization bills. With that said, the total authorized level in H.R. 3989 and H.R. 3990 is $24.0 billion. FY2012 appropriations for ESEA under current law are $23.3 billion. It should be noted that an authorization of an appropriation is only an authorization. Congress can and does enact appropriations at funding levels that differ from authorization levels. | The Elementary and Secondary Education Act (ESEA) was last amended by the No Child Left Behind Act of 2001 (NCLB; P.L. 107-110). During the 112th Congress, both the House and Senate have considered legislation to reauthorize the ESEA. On October 20, 2011, the Senate Health, Education, Labor, and Pensions (HELP) Committee considered and ordered reported the Elementary and Secondary Education Reauthorization Act of 2011 (S. 3578; S.Rept. 112-221) by a bipartisan vote of 15-7. The House Education and Workforce Committee considered and ordered reported two bills that together would provide for a comprehensive reauthorization of the ESEA: (1) the Student Success Act (H.R. 3989, H.Rept. 112-458), and (2) the Encouraging Innovation and Effective Teachers Act (H.R. 3990; H.Rept. 112-459 Part 1). Both bills were ordered reported on February 28, 2012, on strictly partisan votes (23-16 in each case). It is unclear whether S. 3578 or H.R. 3989 and H.R. 3990 will be considered on the Senate or House floors, respectively. S. 3578 and H.R. 3989 and H.R. 3990 would take different approaches to reauthorizing the ESEA, most notably in three key areas: 1. Accountability for student achievement: Both S. 3578 and H.R. 3989 would modify current accountability requirements related to student achievement, including eliminating the requirement to determine adequate yearly progress (AYP) and the requirement to apply a specified set of outcome accountability provisions to all schools, regardless of the extent to which they failed to make AYP. While both bills would continue to require that states have standards for, and assess students annually in, reading and mathematics, only S. 3578 would continue to require states to have standards and assessments in science. S. 3578 would require various interventions to be implemented in certain low achieving schools, while H.R. 3989 would not require specific actions to be taken in low performing schools. 2. Teacher quality versus teacher effectiveness: S. 3578 would retain requirements related to "teacher quality" unless a state met several requirements related to teacher performance evaluation, including using student achievement as part of the teacher evaluation process. H.R. 3989 and H.R. 3990 would eliminate current "teacher quality" requirements but would require local educational agencies to implement teacher performance evaluation systems based, in part, on student achievement. 3. Targeted support for elementary and secondary education versus the use of a block grant: Each bill would consolidate some existing competitive grant programs, but H.R. 3989 and H.R. 3990 would consolidate a greater number of programs than S. 3578. At the same time, S. 3578 would create several new targeted grant programs, while H.R. 3990 would greatly expand the use of block grant funding. |
NATO held a summit in Bucharest, Romania, on April 2-4, 2008. A principal issue was consideration of the candidacies for membership of Albania, Croatia, and the Former Yugoslav Republic of Macedonia (FYROM). Their candidacies initiated the third round of enlargement in the post-Cold War era. In 1997, NATO invited Poland, the Czech Republic, and Hungary to join the alliance; they were admitted in 1999. In 2002, the allies invited Bulgaria, Romania, Lithuania, Latvia, Estonia, Slovenia, and Slovakia to join the alliance; they were admitted in 2004. These last two rounds of enlargement were "strategic" in the sense that the new members' territory lay in regions that Russia once deemed critical to its own national interest, and in the sense that the region had been intensely involved in conflict for much of modern European history. In addition, several of these countries are sizeable, with considerable armed forces and significant resources. At Bucharest, the allies issued invitations to Albania and Croatia to join the alliance. Greece blocked an invitation to Macedonia due to a dispute over Macedonia's name. Today, NATO's purpose extends well beyond the mission of collective defense of the Cold War era. While collective defense remains a core function, the allies now undertake missions against terrorism and proliferation of weapons of mass destruction. A global military reach is necessary for such missions. The Bush Administration has pressed the allies to develop more deployable forces, able to go long distances and sustain themselves. Such resources are beyond the means of small member states, which are expected instead to develop "niche" capabilities, such as special forces or troops able to contain a chemical weapons attack. NATO has also developed a collective security mission, such as its stabilization and peacekeeping mission in Kosovo. Albania and Croatia are small countries, with correspondingly small militaries. Croatia was part of the former Yugoslavia, a communist state but one that kept the Soviet Union at arms' length and had reasonably friendly relations with the West. Albania, also once a communist state during the Cold War, was for many years the most isolated country in Europe. With the collapse of Yugoslavia and the end of the Cold War, the countries put themselves on the path to democracy and a commitment to join western institutions. The two countries have aspirations to join the European Union as well as NATO. Albania is a poor country with few natural resources. Albania and Croatia, in the sense of their military importance and their general resources, would not represent a "strategic" presence in the alliance, although their consistent contributions to NATO operations have been lauded. However, due to the continuing instability in the region, further stirred by Serbia's and Russia's sharply negative reaction to Kosovo's independence, the two countries are a potential factor for stabilization in southeastern Europe. This report will review the process by which candidate states are selected, including a sketch of the responsibilities of Congress and allied governments in final approval or disapproval of Albania and Croatia. The report will review general political factors for qualification, as well as external issues such as the views of Russia and regional geopolitical considerations. There will then follow an analysis of current conditions in the two states nominated to join, as well as in Macedonia. In addition, there will be a brief analysis of the debate over the qualifications of Georgia and Ukraine for NATO's Membership Action Plan (MAP), a set of guidelines laid out by the alliance for governments that wish to take the next step of becoming actual candidates. The allies were divided over the MAP for Georgia and Ukraine, and they were not extended the MAP at Bucharest. An appendix will examine key legislation on enlargement during the past fifteen years. The Washington Treaty of 1949, NATO's founding instrument, does not describe detailed qualifications for membership. It does require that member states be democracies and follow the rule of law. It also requires that they take steps to strengthen their militaries, and refrain from the use of force in settling disputes outside the treaty framework. Article X of the Treaty leaves the door open to any states able to meet the general qualifications for membership, including a contribution to the security of member states. The process by which governments interested in membership may join has been refined since the end of the Cold War. In 1994 NATO established the Partnership for Peace (PFP), a program in which non-member states might train with NATO forces, participate in peacekeeping or other allied activities, and seek avenues to draw closer to the alliance. Some PFP members, such as Austria, are not necessarily interested in membership. In 1995 NATO published a Study on NATO Enlargement . The report remains the most detailed public roadmap for governments wishing to enter NATO. It describes the need for candidate states to develop democratic structures and a market economy, respect human rights and the rights of ethnic minorities, and build a military capable of contributing to collective defense. The 1995 study NATO included other requirements, principally the need to settle all disputes, such as border demarcations, with neighboring countries. The Balkan conflicts of the 1990s gave this requirement special significance. With the collapse of the Soviet Union, NATO has also become a collective security as well as a collective defense organization. Prospective members must develop military forces trained for peacekeeping and state-building, as well as for collective defense. After the admission of Poland, the Czech Republic and Hungary in 1999, the allies, led by the United States, developed a more detailed process for prospective members. This process, called the Membership Action Plan (MAP), lays out in considerable detail specific steps that a government must follow to become a member. Such steps might include laws designating its parliament as having civilian oversight of the military, or the downsizing and professionalization of a large military, or the settlement of a border dispute with a neighbor. Each country's MAP is classified, as is its evaluation by the allies. During the 2003-2004 round of enlargement, the MAP was made available to the United States Senate for review. Some allies have criticized the MAP process. They contend that it is primarily a creation of the United States, and that the ultimate decision on whether MAP requirements are met is made principally in Washington. They say, for example, that the full range of qualifications outlined in the MAP in the 2003 round of enlargement was not adequately assessed for several states that became members of the alliance. They contend, therefore, that designation of candidate states as prospective members is above all a political process, and that actual accomplishment of requirements is secondary to the will of the alliance's leader. U.S. officials dispute this characterization. For a candidate state to have been invited to join the alliance at Bucharest, consensus among the 26 member governments was necessary to approve an invitation. Each candidate was considered separately. One or more votes against a state means would block that state's progress to the next stage in the process of becoming a member. It was Greece's opposition to Macedonia that brought Skopje's failure to obtain an invitation. In March 2008, Greek Prime Minister Karamanlis said, "No solution – no invitation." There were other issues under discussion as well. According to some officials in allied states, Albania and Macedonia continue to have problems of governance and issues detrimental to internal political comity. At the same time, the two governments have evidently made considerable progress in military reform, and their populations overwhelmingly support NATO membership. Croatia has a settled political environment. A somewhat narrow majority of its population supports NATO membership, a figure that has been rising in recent months. These issues will be more fully discussed below. The member states had hoped to make a preliminary determination about invitations at a NATO foreign ministers' meeting on March 6, 2008, but resolution of the issue surrounding Macedonia's name, and other issues, prevented a collective decision. At least two governments, France and Germany, expressed reservations about offering the MAP to Georgia and Ukraine. At Bucharest, other governments such as Spain and Italy shared the French and German view. The allies will draw up and sign a protocol for Albania and Croatia, probably by the end of July 2008. The protocol will outline NATO's expectations of the two prospective members. The protocol will then be deposited with each allied government. From that point, member governments will go through their constitutional processes to amend the Washington Treaty and admit a new state or states. In some member states, such as the United Kingdom, the government has the authority to determine whether the executive alone may decide to admit a state nominated for entry, or instead, if issues of broad significance are involved, may send the protocol to parliament for approval. At the other end of the spectrum, the Netherlands has a meticulous, time-consuming process involving a parliamentary study and debate before a final vote is taken. NATO hopes to admit prospective candidate states at its next summit, to be held on the French-German border, scheduled for late 2009. The United States Senate has the constitutional authority to give its advice and consent by a two-thirds majority to the amendment of any treaty. In the case of NATO enlargement, it must decide whether to amend the Washington Treaty to commit the United States to defend additional geographic territory. The Senate Foreign Relations Committee is the committee holding the initial authority to consider the issue. Both the Senate Foreign Relations Committee and the full Senate may decide whether to vote on each candidate state separately, or all together. During the previous two rounds of enlargement, House and Senate committees held hearings on enlargement. One purpose of the hearings is to create more widespread knowledge of possibly pending new obligations of the United States government. In the past, committees have also discussed such issues as the costs of enlargement, the qualifications of the candidate states, regional security implications of enlargement, implications for relations with Russia, and new issues in NATO's future, such as the viability of new missions. The Bush Administration reflects the general NATO view that the door to NATO must remain open to qualified states. Since the Clinton Administration, U.S. officials have supported the idea of a Europe "whole and free." While NATO remains an organization for the defense of the United States, Canada, and the European allies, it has increasingly developed a political agenda. For example, it now routinely discusses such matters as energy security, disaster relief, and a range of political issues with Russia. The United States designed the MAP process, and takes a leading role in requiring candidate states to develop a professional military, democratic structures, a transparent defense budget process, civilian control of the military, and free market structures. The Bush Administration also supports the entry of NATO governments into the European Union as a means to build stability. Some NATO governments have contended that the Bush Administration is less interested in the alliance than its post-World War II predecessors. This view, more apparent in the first five years of the Bush Administration, has brought challenges to U.S. leadership of the alliance. In the last several years, however, the Administration has dropped former Defense Secretary Donald Rumsfeld's use of what many consider the divisive terms "coalitions of the willing" and "the old and new Europe," and sought instead to engage all allied governments in decision-making about NATO's general missions and its specific operations. Some allied governments say that meetings of the North Atlantic Council (NAC), NATO's political governing body, have become more collegial and productive in recent years as a result. The Administration supported invitations to Albania, Croatia, and Macedonia at Bucharest. While U.S. officials acknowledged that all three states must continue to improve their militaries and their political institutions, they also believe that each state has made considerable progress over the last several years. These officials also contended that the three governments would contribute to the political stabilization of southeastern Europe. The Bush Administration supports the idea of a "NATO with global partners." This idea does not necessarily imply membership for countries beyond the Euro-Atlantic region. Instead, the Administration has sought, for example, to engage such countries as Australia, New Zealand, and Japan in the effort to stabilize Afghanistan, but does not actively promote their membership in the alliance. The Administration does have, however, a view of NATO's long-term membership roster that is broader than that of some allies. At Bucharest, these allies questioned whether Georgia and Ukraine should be invited to join the MAP process. In the days leading to the summit, President Bush made a highly visible tour of Georgia and Ukraine, where he touted their qualifications for the MAP. He may have expended considerable political capital with other allies, as several member states had already made clear their opposition to the MAP for the two states. The allies have extended Partnership for Peace to a number of central Asian governments, a move that the Administration strongly supports. There are several reasons for this policy, even though these governments are not democratic: these governments provide logistical support to allied operations in Afghanistan; the United States and its allies wish to encourage greater respect for human rights and nascent democratic practices in central Asia; and several of these countries are key to the development of greater energy security because of their oil and natural gas resources and the pipelines that cross their territory. As in previous rounds of enlargement, a range of political factors attends consideration of the candidate states' application for membership. Beyond the qualifications achieved by a candidate state in the MAP process, such matters as the stabilization of southeastern Europe, Russia's voice in European security, and bilateral relations between a member state and a candidate state also come into play. Stability in southeastern Europe is an issue of great importance both to NATO and the European Union, and current member governments believe that enlargement can serve this goal. NATO's decision to go to war against Serbia in 1999 to stop ethnic cleansing in Kosovo, and the alliance's subsequent creation of KFOR to contribute to Kosovo's stability are evidence of this point. Further evidence is the EU's decision to lead Kosovo's "supervised independence." Both Serbia and Russia reacted strongly against Kosovo's independence, declared on February 17, 2008. The United States and most EU governments recognized Kosovo's independence the following week. On February 21 the U.S. embassy in Belgrade was attacked, as was the Croatian embassy, and part of the Slovenian embassy was sacked and burned. Serbian police reportedly stood by while mobs carried out these attacks. Most Serbian government leaders have vowed never to accept Kosovo's independence, and some may be complicit in stirring up unrest among the Serbian minority in northern Kosovo. NATO Secretary General Jaap de Hoop Scheffer has described Serbia as having sunk into a "sullen nationalism." Of the three candidate states, Albania and Croatia have recognized Kosovo's new status, but Macedonia is expected to do so as well in the near future. Croatia has sought to serve as a channel for the United States and Europe with Serbia, and has resettled half of the 300,000 Serb refugees who fled Croatia during the Balkan conflicts of the 1990s. According to a range of European governments, there is minimal discrimination in Croatia against the Serbian minority. The ability of the three candidate states to put to rest enmity towards Serbia resulting from the conflicts of the 1990s is an argument in favor of their serving as a factor for stabilization in southeastern Europe, in the view of some member states. Their entry into NATO could also serve as a positive example for future NATO candidates, including Serbia. Others contend that Serbia is a key government in southeastern Europe, and that NATO must find accommodation with Belgrade before absorbing three states whose membership would further antagonize Serbia's leadership. In contrast, Russia's role in European security remains an important question to the United States and its allies. Russia opposes inclusion of the three candidate states in the alliance, but its claim that their membership would be detrimental to Russian interests is less plausible than its complaints during the previous two rounds of enlargement. None of the candidate governments is either contiguous to Russian territory, nor was any ever part of the Warsaw Pact. And, as already noted, neither Albania, Croatia, nor Macedonia has a formidable military or notable natural resources. Russia's opposition to the candidacies of Ukraine and Georgia for the MAP was shrill and threatening. President Putin, likely soon to be the new prime minister, has said that Russia will target nuclear weapons on Ukraine should it ever become a member of NATO. Russia has reduced natural gas supplies to Ukraine and Georgia several times in the last several years, ostensibly because the two countries would not agree to pay a market price, but also as a likely act of intimidation. More broadly, Gazprom, Russia's government-owned national energy company that was once led by the President-elect Dmitri Medvedev, has been attempting to purchase distribution networks in Europe. NATO discussed energy security at the Bucharest summit, and some European governments believe that the alliance must first come to grips with how to respond to energy cut-offs before moving closer to states such as Georgia and Ukraine that are vulnerable to Moscow's energy politics. This debate may have affected the two countries's failure to secure the MAP at the summit. Russia has also posed other obstacles to improved relations with NATO. Estonian officials contend that cyber attacks on computers in Estonian banks and governmental offices in spring 2007 originated from within the Russian government. Moscow opposes the Bush Administration's ideas for a missile defense system in Europe, and has reportedly spurned a range of proposals to include Russia in the system. Some European governments contend that NATO and the EU must maintain a fully open communication with Moscow and continue to seek to find a measure of accommodation under these circumstances. At the same time, the allies assert that Russia must not be allowed effectively to veto further NATO enlargement, or any NATO policies. Some allies that are also in the European Union believe that a NATO candidate state that becomes a member of the alliance is propelled forward in the line to become an EU member. These EU members wish to see future Union enlargement move more slowly. They believe that EU decision-making has been complicated by recent enlargements, although the recent Lisbon reform treaty is meant to ease some of these problems (a view echoed by some in the alliance about NATO decision-making). Some EU governments wish to devise a more workable plan to reach important decisions in the EU before admitting more states. Croatia and Macedonia are EU candidate states, but only Croatia is deemed to have made sufficient progress to have begun accession negotiations. Officials in some EU governments are wary that Albania and Macedonia have passed legislation, for example, to reduce corruption and fight organized crime, but that implementation of the legislation is at an early stage. The current example of Bulgaria's and Romania's record in the EU could adversely affect Albania's (and eventually Macedonia's) efforts to join NATO, and then the EU. Bulgaria and Romania joined the EU in January 2007. However, in February 2008 the EU sharply criticized the two governments for poor implementation of legislation to fight organized crime and corruption, and threatened to suspend them in six months from the Union's justice and interior policies unless rapid progress is made. Some officials in EU states believe that a clear message should be sent to Albania and Macedonia that more progress must be made in the same areas before admission to NATO, and to the EU. Several allied governments believe that the overall pace of NATO enlargement is too compressed, and wish to consider first how to resolve a complex range of issues. In their view, if Albania and Croatia succeed in joining the alliance, then the next round should go more slowly. These governments tended to oppose placing Georgia and Ukraine in the MAP at Bucharest, and contend that other issues – the calming of nationalist emotions in Serbia, an overall improvement in NATO-Russian relations, and coming to grips with the wide-ranging problems in energy security – must first be resolved before considering new countries for the MAP. Waiting further in the wings for the MAP could be Bosnia and Herzegovina, Montenegro, an eventually united Cyprus, and even Serbia. Albania was one of the first countries in central and eastern Europe to seek NATO membership after the fall of Communism in the region in 1989-1991. Albania's membership candidacy has been evaluated by the Allies using a number of criteria, such as the state of its political and economic reforms, public support for NATO membership, defense reforms and ability to contribute to allied missions, and Albania's role in its region. However, NATO's decision on Albania's candidacy was in the end a political judgment of NATO member states on whether Albania's membership will contribute to their security. Most observers believe that the main challenges to Albania's candidacy are questions about the pace of its political reforms. Albania's current government is led by the center-right Democratic Party of Albania (DPA), which formed a coalition with several smaller parties after the country's 2005 parliamentary elections. The government is led by longtime DPA leader and Prime Minister Sali Berisha. In the past, Berisha has often been criticized for having a harsh and uncompromising leadership style, although observers have noted that he has tried to moderate this image since the 2005 elections. Since its first multiparty election in 1991, Albanian politics have been marked by fierce political conflict between parties and factional struggles within them. In Berisha's previous tenure as Prime Minister, public order collapsed completely for several months in 1997 after the failure of financial pyramid schemes. Since 1991, both the DPA and the other chief Albanian party, the Socialist Party of Albania, have lost elections and refused to concede defeat, charging fraud. Indeed, the Organization for Security and Cooperation in Europe (OSCE) has often assessed the quality of Albanian elections as not fully meeting international standards, including an OSCE report after the 2005 vote. Local elections in February 2007 also fell short of international standards, according to the OSCE, although Albania's record has gradually improved. U.S. and EU leaders have often called on Albania's leaders to show greater civility in their political struggles and to work together to prepare the country for Euro-Atlantic integration. Aside from the issue of political civility, Albania has significant legal and institutional shortcomings. Two key current issues cited by NATO and Albanian leaders themselves are electoral reform and judicial reform. The Albanian parliament is in the process of drafting new legislation on these issues, but progress has been slow. Moreover, observers note that passing laws is one thing; implementing them effectively is another. Other Albanian reform efforts have focused on fighting organized crime and corruption, perhaps among the most serious challenges the country faces. Some of Europe's most powerful crime organizations are based in or have strong links to Albania. In Transparency International's 2007 Corruption Perceptions Index, Albania ranked 105 th out of 175 countries, with the worst showing in central Europe. Public support in Albania for the country's membership in NATO is very high, with public opinion polls showing as many as 96% of those polled in favor. All major Albanian political parties across the political spectrum favor NATO membership. Albania has made significant progress in military reforms. However, the country's small size and poverty will likely prevent it from making a large contribution to the alliance's military capabilities. With the assistance of the United States and other NATO countries, Albania is trying to develop a small, efficient, well-trained force that can operate effectively with NATO. The current strength of Albania's armed forces is 11,020 troops. By the time the country's restructuring effort is over in 2010, it will comprise about 10,000 men. Albania is devoting a significant share of its meager resources to defense spending. Albania's 2007 defense budget was $208 million, representing about 1.8% of the country's Gross Domestic Product (GDP). In 2008, Albania will spend 2.01% of GDP on defense, just above the 2% recommended by NATO for member states, although achieved by only 7 of the 26 allies. As in the case of the previous round of enlargement, NATO has encouraged candidate states to develop "niche" capabilities to assist NATO missions. Albania has focused on creating a Rapid Reaction Brigade, military police, special operations forces, explosive ordnance disposal teams, engineers, and medical support units. Albania says it plans to have 40% of its land forces ready for international missions. Eight percent of the total forces would be deployable at any one time, and the remaining would be available for rotations, according to Albanian officials. Independent assessments of Albania's reform progress note that the country is committed to carrying out these reforms, despite facing severe practical and financial limitations. Albanian leaders contend that their country has already acted for years as a de facto NATO ally. Albanian forces participated in SFOR, the NATO-led peacekeeping force in Bosnia, and are part of the current EU force there. Albania has deployed a company-sized force of about 140 men as part of ISAF, the NATO-led stabilization force in Afghanistan. It has deployed a military medical team to ISAF jointly with Macedonia and Croatia. There are currently 71 Albanian special forces troops serving as part of the U.S.-led coalition in Iraq. Albanian defense officials concede that Albania will continue to need bilateral assistance for some time to be able to participate in international missions. Much of its hardware comes as a result of international donations, and it lacks sufficient logistical capabilities, which requires the assistance of allied countries when Albania's forces are deployed abroad. On March 15, 2008, a massive blast at an Albanian army ammunition dump killed at least 26 persons, injured over 300 others, and destroyed more than 400 homes. The incident took place during efforts to dispose of the country's huge stockpile of communist-era artillery shells, with the help of a U.S. contractor. Albanian Defense Minister Fatmir Mediu resigned after the incident, and three persons have been charged with negligence. While the investigation into the explosion is still ongoing, some observers have said the incident may show weaknesses in the professionalism and competence in Albania's government and defense establishment. Albania has no outstanding territorial issues with its neighbors. Albania was one of the first countries to recognize Kosovo's independence after the former Serbian province declared it on February 17, 2008. This has increased tensions in its relations with Serbia. Albanian leaders have repeatedly said that they do not support merging their country with Kosovo and ethnic Albanian-majority parts of Macedonia in a "Greater Albania." Indeed, U.S. and EU officials often praise Albania for its moderate stance on the Kosovo issue. Since 2003, Albania has participated with Croatia and Macedonia in the U.S.-sponsored Adriatic Charter, which promotes cooperation among the three countries in defense reforms and other areas in order to boost their NATO membership prospects. Albania participates in other regional fora, including the Southeast Europe Defense Ministerial (SEDM) and the Southeastern Europe Brigade (SEEBRIG). Albanian officials say that their membership in NATO (as well as that of Croatia and Macedonia, the other candidates) will stabilize the region by anchoring the alliance more firmly in southeastern Europe. Membership of these three countries would also give pause to extremist forces in Serbia, they say. Moreover, they contend that it will give encouragement to pro-Western forces in Serbia, showing that if they follow the course of the Adriatic Charter countries, their country too can be part of the Euro-Atlantic community. Albania received an invitation to join NATO at the Bucharest summit. After a protocol of accession is signed, most likely by the end of July 2008, each NATO country will follow its constitutional procedures to admit Albania. The Allies will likely continue to press Albania to address key reform concerns, including those that may have been exposed by the March 2008 ammunition dump blast. NATO countries evaluated Croatia's request to join the alliance using a number of criteria, such as the state of its political and economic reforms, public support for membership, progress on defense reforms and ability to contribute to allied missions, and whether Croatia plays a positive role in its region. In the final analysis, however, NATO member states made a political judgment on whether Croatia's membership will contribute to their security. Croatia's progress on political and economic reforms is generally considered to be very good, and does not appear to be an obstacle to its NATO candidacy. Croatia has been conducting membership negotiations with the European Union since October 2005. In its November 2007 progress report on Croatia's candidacy, the European Commission found that Croatia has met the political criteria for EU membership. The report praised the progress Croatia has made in reforming its judiciary and fighting corruption. However, it said that Croatia must still make more progress on these issues. Transparency International ranked Croatia 64 th out of 179 countries in its 2007 Corruption Perceptions Index. It ranks next-to-last (just above Romania and equal with Bulgaria) when compared to EU and western European countries, but at the top when compared to eastern European and former Soviet countries not part of the EU. Croatia has also made progress in minority rights, and to a lesser extent, the return of Serb refugees to their homes. Over 300,000 Serb refugees fled or were driven from their homes during the 1991-1995 war between Croatian and local Serb forces backed by neighboring Serbia. About half that number have returned, according to the Croatian government. Other sources claim that this estimate is inflated as many persons return only briefly in order to sell their property and leave. Many of those who remain are elderly pensioners. The EU stated that further progress is needed on these issues, as well as the prosecution of war criminals. The EU report noted that Croatia is a functioning market economy, but stressed the need for further structural reforms, less state interference in the economy, and a better public administration and judicial system. Public support has been identified as perhaps the biggest weakness of Croatia's membership candidacy. Until recently, public opinion polls from early 2008 showed support for NATO membership barely exceeding 50% of the population, despite active efforts of the Croatian government to boost public awareness of the benefits of NATO membership. After an attack by a Serbian mob on the Croatian embassy in Belgrade following Kosovo's declaration of independence from Serbia in February 2008, this figure soared to more than 70%. Those opposing NATO membership believe that it would engage Croatia in international conflicts against its will and that NATO will demand bases in Croatia. The Croatian government has tried to persuade its citizens that neither outcome will occur. The largest party in the governing coalition, the Croatian Democratic Community (HDZ), strongly supports NATO membership for Croatia. Since the death of its founder in 1999, longtime Croatian strongman Franjo Tudjman, the HDZ has transformed itself from a nationalist, quasi-authoritarian party to a democratically-oriented, pro-European center-right political force. Croatia's leading opposition party, the Social Democratic Party, supports NATO membership, but called for a public referendum on the issue. In any case, Prime Minister Sanader has ruled out a referendum on NATO membership during the country's November 2007 parliamentary elections and afterward. The HDZ's coalition partner, the Croatian Peasants' Party-Croatian Social Liberal Party (HSS-HSLS) once supported a NATO referendum, but dropped its demand when it formed a coalition government with the HDZ. An effort by anti-NATO activists to collect enough signatures from Croatian voters to force a referendum failed by a large margin. Croatia has made progress on defense reforms, according to most observers. Croatia is moving from the relatively large, territorially-based conscript army that it had during its war with Serbian forces in the 1990s to a smaller, more professional, more deployable force. Croatia ended conscription at the beginning of 2008. Croatia's active duty armed forces total 17,660 men, of which 12,300 are in the Army. Croatian defense officials say that it is their goal to have 40% of their forces able to be deployed for international missions. Croatia's 2008 defense expenditures are expected to amount to 1.8% of GDP. By 2010, Croatia plans to spend 2% of its GDP on defense, the level recommended by NATO for member states, although currently reached by only 7 of the 26 allies. As in the case of the previous round of enlargement, and as mentioned in reference to Albania, NATO has encouraged candidate states to develop "niche" capabilities to assist NATO missions. To this end, Croatia is developing a special operations platoon, a demining platoon, and two helicopters for NATO-led operations. It also plans to contribute a motorized infantry company, a nuclear, chemical and biological weapons defense platoon, and an engineering platoon. However, some independent assessments question whether Croatia has committed the financial resources necessary to carry out its planned reforms. Croatia has about 190 troops in Mazar-e-Sharif and Faizabadan in northern Afghanistan, as part of the NATO-led ISAF stabilization force, and is planning to increase the size of its force by another 100 troops. Croatia heads an Operational Mentoring and Liaison Team (OMLT) that trains Afghan army units. It also participates in a military medical team with Albania and Macedonia. Croatia did not support the U.S. invasion of Iraq in 2003 and it has no troops in the U.S.-led coalition there. Croatia will likely continue to need support from its allies to be able to participate in international missions, in part due to a lack of logistical capabilities. Croatia has no major conflicts with its neighbors. Relations with Serbia improved greatly after democratic governments came to power in both countries in 2000. Since then, Croatia has also played a largely positive role in Bosnia and Herzegovina, encouraging ethnic Croats there to work within the Bosnian political system rather than seek intervention from Croatia. In mid-March 2008, Croatia resolved an issue over a coastal zone that it had had with two neighbors. Croatia had declared an "ecological and fisheries protection zone" in its Adriatic waters, over the strong objections of neighboring Slovenia and Italy. With support of the Croatian parliament, Zagreb suspended the zone on March 12, 2008. Croatia and Slovenia had also disagreed over the maritime boundary between the two countries. However, in August 2007, the two countries agreed to refer the dispute for arbitration to the International Court of Justice at The Hague. Another regional issue is Kosovo. Croatia at first delayed recognizing Kosovo's independence, which the former Serbian province declared on February 17, 2008, not wishing to alienate Serbia by being among the first countries to do so. On February 21, Serbian rioters attacked the Croatian embassy in Belgrade, in a rash of assaults that also targeted the U.S. embassy. Croatian officials condemned the violence. On March 19, Croatia extended diplomatic recognition to Kosovo. Serbia has warned that it would downgrade relations with Croatia and any other country recognizing Kosovo. Since 2003, Croatia has participated with Albania and Macedonia in the U.S.-sponsored Adriatic Charter, which promotes cooperation among the three countries in defense reforms and other areas in order to boost their NATO membership prospects. Croatia participates in other regional fora, including the Southeast Europe Defense Ministerial (SEDM) and the Southeastern Europe Brigade (SEEBRIG). Croatia received an invitation to join NATO at the Bucharest summit. After a protocol of accession is concluded, which is expected to occur by the end of July 2008, each NATO country will follow its constitutional process to admit Croatia to the Alliance. Since joining NATO's Membership Action Plan (MAP) in 1999, Macedonia has worked closely with NATO on a broad array of reforms. Macedonia's efforts have been backed by a strong domestic majority (90% by some polls) favoring membership in NATO. In addition to consultative mechanisms under the MAP process, Macedonia hosts a NATO liaison office in Skopje that provides advice on military reforms and support to NATO-led Balkan operations. At a January 2008 meeting to review NATO's progress report on Macedonia's 9 th MAP cycle, NATO representatives praised Macedonia's progress in implementing political, economic, and military reforms, but noted that "more needs to be accomplished." While details of the reports under the MAP process remain classified, media reports, summary analyses, and comments by government officials have indicated a mixed picture for Macedonia, but with notable progress achieved in the months and weeks before the Bucharest summit. Among the most important factors that has weighed on Macedonia's NATO candidacy prospects has been the state of its political reforms. NATO had identified reform priorities in Macedonia to include "efforts to meet democratic standards, support for reducing corruption and organized crime, judicial reform, improving public administration, and promoting good-neighborly relations." Throughout much of 2007, political conflict across the spectrum of political parties in Macedonia caused substantial deadlock in parliament, and even led to a physical confrontation in parliament that fall. The net result was stalled progress on passing key reform measures, including bills relating to implementation of the Ohrid Framework Agreement (the 2001 accord that ended a near-civil war in Macedonia). On numerous occasions that year, international officials expressed disappointment with the antagonistic state of political relations across the party spectrum in Macedonia, and the capacity for political leaders to engage in constructive dialogue and compromise rather than confrontation. Shortly before the Bucharest summit, the Macedonian government nearly fell after an ethnic Albanian party briefly left the coalition. Following the summit, a majority in the Assembly voted to dissolve the parliament and hold snap elections on June 1; Prime Minister Gruevski remains popular and his party is expected to do well in the coming vote. However, it is not clear to what extent the new vote may hold up further progress on domestic reforms or on resolving the name dispute (see below). NATO's political reform priorities identified for Macedonia track closely with the country's EU accession prospects as well. Macedonia is currently a named EU candidate country, but still awaits the start of actual accession negotiations with Brussels. In its latest progress reports on EU candidates released in early November 2007, the European Commission praised some of Macedonia's advancements, but also expressed concern that political tensions were delaying important political and legal reforms and undermining the functioning of political institutions. Reflecting these concerns, the EU has not yet set a start date for accession talks. This unfulfilled goal remains a priority for Macedonia in 2008. Macedonia has an extensive track record of implementing broad defense reforms, advancing security cooperation regionally, and contributing to global missions. The Army of the Republic of Macedonia (ARM) has been undergoing a major restructuring effort toward a smaller, lighter, and fully professional force under a streamlined command structure. From a 2007 strength of about 11,000, Macedonia continues to downsize its forces to reach about 8,000 active troops by the end of 2008, to increase the deployability of its forces, and to eliminate conscription. Macedonia's restructuring effort has focused on developing niche capabilities for use in allied operations such as special forces – including special purpose units for counter-insurgency and unconventional operations – and military police. Macedonia has surpassed NATO's informal defense budget benchmark of 2% of GDP. Its 2007 defense budget was increased to over $153 million by one estimate, or about 2.3% of GDP, and included a greater share for military modernization than in the past. Macedonia has sustained its contributions to numerous international missions, and has taken measures to reduce limitations, or caveats, on the use of its troops. Its current contributions include a 130-strong infantry unit providing security to the NATO ISAF headquarters in Kabul, Afghanistan; about 30 military personnel to the EU force in Bosnia; and a 40-strong special operations platoon in Baghdad as part of U.S.-led operations in Iraq. Macedonia is adding a second platoon to Iraq in 2008. As noted, Macedonia continues to host a NATO headquarters presence in Skopje for the alliance's Balkan operations, mainly in Kosovo. In 2007, it took a leading role in coordinating activities of the U.S.-Adriatic Charter. A longstanding unresolved dispute with Greece, a NATO ally, became closely intertwined with Macedonia's prospects for an invitation at the Bucharest summit. The two countries have been in disagreement over Macedonia's use of the name "Macedonia" since 1991, and have met intermittently with U.N. Special Representatives since 1995 in order to reach a mutually acceptable solution to the dispute. U.N. Envoy and U.S. diplomat Matthew Nimetz commenced a new round of talks with Greece and Macedonia in January 2008. With a greater sense of urgency to resolving the dispute, Nimetz floated several new proposals on resolving the dispute in February and March. Further talks with the parties, however, could not produce an agreement. While this dispute had long been kept on a separate track from Macedonia's Euro-Atlantic aspirations, the two issues became inextricably linked in the run-up to the Bucharest summit. Athens maintained that it could not support Macedonia's NATO candidacy if no mutually acceptable agreement on the name issue was reached. Since NATO operates by consensus, the Greek position made clear that a veto was eminently possible. In contrast, Macedonia's government insisted that it has made numerous concessions already, and that linking its accession prospects to the bilateral name dispute would be unacceptable and would violate an interim accord agreed to by both sides in 1995. In visits to the region and at the March 6, 2008 foreign ministers meeting, NATO representatives urged that a solution be found before the summit. After the summit, U.S. and other officials continued to urge both parties to engage in the Nimetz process in order to reach a compromise agreement. Despite the upcoming early elections, the Macedonian government has said it will resume talks under the Nimetz process. Macedonia has long sought to act as a stabilizing factor in the unresolved conflict between its two northern neighbors of Serbia and Kosovo. Kosovo declared independence on February 17, 2008. The United States and many European Union countries subsequently recognized Kosovo's independence; Macedonia is expected eventually to follow suit. By virtue of its long common border and strong ethnic/communal links between Kosovo's ethnic Albanian majority and Macedonia's ethnic Albanian minority, Macedonia has a major stake in Kosovo's security situation and its regional impact. Many observers are concerned that any violent unrest in Kosovo could easily spill over into Macedonia. At the same time, observers note that Kosovo has not been the cause of recent political tensions in Macedonia, or even a major focus of domestic politics. Indeed, many observers believe that some aspects of Macedonia's recent experience in inter-ethnic accommodation – for example, in decentralization – could serve as possible models for Kosovo's government. The Macedonian government has expressed support for the terms of the Ahtisaari plan for a comprehensive settlement in Kosovo. Kosovo's changed status and uncertain aftermath have elevated international concerns about stability in the Balkans. Some fear that a volatile situation in Kosovo could create further regional instability and exacerbate political tensions in Macedonia, moving Macedonia away from meeting NATO standards. Others contend that the situation in Kosovo provides further argument in favor of anchoring Macedonia and the other MAP countries in NATO, in order to promote regional stability during Kosovo's transition. Those of this view are concerned that Macedonia's failure to receive a NATO invitation at Bucharest could precipitate further political tensions in Macedonia and delay unnecessarily Macedonia's long-established accession track. Of the three MAP states, NATO invited only Albania and Croatia to begin accession talks to join the alliance. NATO noted with regret that talks to resolve the name issue had not produced a successful outcome. Alliance members agreed to extend an invitation to Macedonia "as soon as a mutually acceptable solution to the name issue has been reached" and said they expected talks on the name issue to be "concluded as soon as possible." Expressing deep disappointment, the Macedonian delegation left the summit early. At a follow-on meeting in Croatia, President Bush expressed further regret about the failure to include Macedonia and reiterated the U.S. position favoring Macedonia's entry into NATO. NATO member states contribute to the activities of the alliance in several ways, the chief of which is through the deployment of their own armed forces, funded by their national budgets. Certain commonly conducted activities, however, are paid for out of three NATO-run budgets. These three accounts—the civil budget, the military budget, and the security investment program—are funded by individual contributions from the member states. The countries' percentage shares of the common funds are negotiated among the members, and are based upon per capita GDP and several other factors. NATO staff have been tasked with recalculating cost shares for all member nations in light of the addition of invitations to two new states. The resulting changes – reductions in the contributions of existing member states – will be quite small. During the period leading up to first round of enlargement in Central and Eastern Europe in 1999, analysts estimated the cost of adding new members at between $10 billion and $125 billion, depending upon different threat scenarios and accounting techniques. Some Members of Congress expressed concern over these cost projections and were also worried that the United States might be left to shoulder a large share of the expenditures; they questioned whether existing burdensharing arrangements should continue and suggested that the European allies should be encouraged to assume a larger financial share for the security of the continent. However, a NATO study estimated that enlargement would require only $1.5 billion in common funds expenditures over 10 years, and DOD concurred. It was further forecast that the 2004 round of enlargement would cost a similar amount, "with greater benefits" to U.S. security. In addition, the inclusion of ten new contributors to the NATO common funds actually reduced the percentage shares of the established members—including the United States. In preparation for the Bucharest summit in April 2008, NATO staff are preparing estimates of the total cost and the cost-sharing implications of a new round of enlargement. U.S. officials state informally that the methodologies and assumptions used to estimate costs and cost sharing arrangements in prior rounds of enlargement are believed to be still valid, and that any addition of new members in 2008 would not entail significant costs. The only expenses likely to be charged directly to the alliance's common military budget would be for the procurement of secure communications between NATO headquarters in Brussels and Mons, and capitals of the new member countries. Any other common-funded projects in new member states would be assessed and funded in terms of their contributions to NATO capabilities or support to ongoing missions and are not directly attributable to enlargement. In recent years, the cost issue in general has received relatively little attention from policymakers and the media. The focus has instead been on 1) specialized capabilities that new – and existing – members can bring to the alliance, and 2) member states' willingness to contribute military assets to alliance operations, particularly in Afghanistan. After Georgia's "rose revolution" of late 2003 brought a new reformist government to power, Georgia placed top priority on integration with NATO. Georgia began sending troops to assist NATO forces in Kosovo in 1999 and recently pledged to send troops to assist the International Security Assistance Force (ISAF) in Afghanistan. It is also the third largest contributor (behind the United States and Britain) to coalition operations in Iraq, with a current deployment of 2,000 troops. Georgia joined NATO's Partnership for Peace (PFP) program in 1994. At the NATO Summit in Prague in November 2002, Georgia declared that it aspired to NATO membership. Although some alliance members initially appeared more confident than others that Georgia had made adequate progress, a consensus was reached in September 2006 to offer Georgia an "Intensified Dialogue" of stepped-up consultations to assist the country in furthering its aspirations for alliance membership. At a meeting with NATO Secretary General Jaap de Hoop Scheffer on February 14, 2008, the head of Georgia's mission to NATO handed him a note from President Mikheil Saakashvili formally requesting the alliance to invite Georgia to participate in a Membership Action Plan (MAP). On February 14, 2008, the Senate approved S.Res. 439 (sponsored by Senator Lugar), which urged NATO to award a MAP to Georgia and Ukraine as soon as possible. Further movement by Georgia toward alliance membership is dependent upon Georgia's drive to democratize, develop a market economy with social welfare guarantees, and create a professional military that contributes to Euro-Atlantic security. Other criteria include the resolution of internal separatist conflicts and international disputes. After a Georgian government crackdown on demonstrators in early November 2007, some allies raised concerns about Georgia's apparently faltering democratization and the suitability of inviting it to participate in a MAP at the upcoming NATO summit in Bucharest in April 2008. De Hoop Scheffer criticized the imposition of emergency rule and the closure of media outlets by the government in Georgia as "not in line with Euro-Atlantic values." Domestic and international criticism may have helped convince President Saakashvili to admit that his government appeared non-responsive to the concerns of many citizens, and to resign and seek re-election by pledging reforms. Following Saakashvili's re-election in early 2008, NATO "welcomed" the international monitors' assessments that the election reflected the free choice of the voters, and stated that "NATO will continue to deepen its intensified dialogue with Georgia." Nonetheless, some allies reportedly urged delaying a decision at the April NATO summit on a MAP for Georgia, at least until after an assessment of that country's prospective May 2008 legislative election. Georgia has made progress in creating a free market economy, resulting in GDP growth of 10% in 2007 ( CIA World Factbook ). However, the economy remains hampered by trade restrictions imposed by Russia. The high level of lingering poverty was a contributing factor in the civil unrest in late 2007. Although the Georgian government has made some progress in combating corruption, the World Bank stresses that corruption still seriously retards good governance. Saakashvili has pledged added efforts to combat poverty and corruption. The Georgian military has undertaken major efforts to re-equip its armed forces with Western-made or upgraded weapons, armor, aviation, and electronic equipment, with stated objectives that include increasing the military's interoperability with NATO forces and contributing to NATO collective security and operations. Georgia's Strategic Defense Review has suggested that the country eventually might be able to contribute to NATO by developing a niche capability in mountain combat training. To enhance democratic civil-military relations, a civilian defense minister was appointed in 2004 to head a ministry increasingly staffed by civilians. Some in Georgia have alleged that military budgeting remains non-transparent and thwarts legislative oversight. De Hoop Scheffer appeared to stress in October 2007 that Georgia should settle its separatist conflicts if it aspires to alliance membership, a viewpoint also expressed by German Chancellor Angela Merkel in March 2008. However, some observers argued that Georgia should not be excluded from the MAP and, ultimately, NATO membership due to separatist conflicts that are in large part fueled by Russia. President Saakashvili has declared that Georgia will pursue only peaceful means to regain authority over Abkhazia and South Ossetia. Georgian officials have argued that progress toward alliance membership eventually will encourage the breakaway regions to re-integrate with a stable, peaceful, democratic, and prosperous Georgia. Georgia's poor relations with Russia are a consideration in NATO's deliberations over a MAP for Georgia. However, alliance membership in principle is open to all European aspirants and all Allies have stated that Russia shall not have a "veto" over a decision to offer membership to Georgia. NATO did not offer Georgia a MAP at the Bucharest summit. Among apparent arguments used at the summit by Allies opposed to a MAP for Georgia (see also above), German Defense Minister Franz Josef Jung argued on April 2 that Georgia does not meet a requirement of NATO membership (and of MAP) to be a contributor to rather than a recipient of Alliance security, since a U.N. observer mission is stationed in Abkhazia, to which Germany and other NATO countries contribute personnel. Similarly, German Foreign Minister Frank-Walter Steinmeier raised concerns on April 2 that political instability in Georgia makes it unsuitable for a MAP. He also argued that European relations with Russia were under "strain," because of policies that included the recognition by many European governments of Kosovo's independence, and that Russia could become "unmanageable" if further strains occurred. French Prime Minister Francois Fillon stated on April 1 that Paris first wanted to join in a European "dialogue" with Russia on the balance of power before considering a MAP for Georgia. Some observers suggested that European concerns about upsetting energy ties with Russia affected views toward a MAP for Georgia. In the Summit Communique, the Allies praised Georgia's (and Ukraine's) "valuable contributions to Alliance operations," and declared that "we support these countries' applications for MAP." In unprecedented language, the Alliance also pledged that Georgia (and Ukraine) would eventually become a member of NATO. Seemingly indicative of the concerns of some Allies about democratization progress in Georgia, the Summit Declaration called for Georgia's prospective May 2008 legislative elections to be "free and fair." It stated that "intensified dialogue" with Georgia would continue until "questions still outstanding" regarding its MAP application were addressed, and directed the foreign ministers of Alliance members to examine Georgia's progress in resolving these questions at a meeting in December 2008. The Communique called for Russia to address Georgia's remaining concerns about the closure of Russian military bases on its territory (presumably referring to the fact that Russia continues to use a base in Gudauta, Abkhazia, for its "peacekeepers"), in line with Russia's commitments under the adapted CFE Treaty. The Communique also raised concerns about regional conflicts in the South Caucasus, and called for the peaceful settlement of conflicts "taking into account [the] territorial integrity, independence, and sovereignty," of Georgia (and Armenia and Azerbaijan). President Saakashvili hailed the Summit Communique language that Georgia "will become a member of NATO" and claimed that it was a "direct obligation" by the Alliance that was better than a MAP, which has no guarantee of NATO membership. Georgian Foreign Minister Davit Bakradze warned that Russia will "do everything" over the next few months to destabilize Georgia in the expectation that the foreign ministers would then balk at a MAP for Georgia. While Russian officials viewed the outcome of the NATO summit as somewhat successful because Georgia was not offered a MAP, President Putin appeared to react harshly to NATO's pledge of eventual membership for Georgia. On April 16, 2008, he directed his government to establish a broad range of cooperative ties with Abkhazia and South Ossetia. Both Georgia and NATO protested these Russian moves as undermining Georgia's sovereignty and territorial integrity. Ukraine participates in NATO's Partnership for Peace (PFP) program and has an "Intensified Dialogue" with NATO on possible future membership in NATO and related reforms. On January 15, 2008, President Viktor Yushchenko, Prime Minster Yuliya Tymoshenko, and parliament speaker Arseniy Yatsenyuk sent a letter to NATO Secretary General Jaap de Hoop Scheffer requesting a Membership Action Plan (MAP) for Ukraine at the NATO summit in Bucharest. On March 17, President Yushchenko and Prime Minister Tymoshenko sent letters to De Hoop Scheffer, German Federal Chancellor Angela Merkel, and French President Nicolas Sarkozy reiterating Ukraine's request for a MAP. Supporters of a MAP for Ukraine believe that it is important to give the pro-Western government in Kiev a strong signal of support for its Euro-Atlantic aspirations. They say that Ukraine's membership would be a way to incorporate the country more fully into the Euro-Atlantic community of democratic values, as part of the overall U.S. foreign policy goal of creating a Europe "whole and free." Those who view Russia as a potential threat to European security see Ukraine's future membership in NATO as a guarantee against possible Russian attempts to revive its "empire." However, Ukraine's MAP candidacy faces several challenges. One key challenge to Ukraine's desire for a MAP is the current lack of consensus on NATO membership in Ukrainian society. Public opinion polls have shown that less than one-quarter of the population supports NATO membership at present. Ukrainian public opinion, on this as on other issues, is split largely along regional lines. Persons living in southern and eastern Ukraine tend to oppose NATO membership. People in these regions, whether ethnic Russians or Ukrainians, tend to be Russian-speaking, are suspicious of Ukrainian nationalism, and support close ties with Russia. They are largely opposed to NATO membership because they fear that it will worsen ties with Russia. Many supporters of NATO membership are from western Ukraine, where Ukrainian-speakers dominate, suspicion of Russia is substantial, and support for a Western orientation for Ukraine is high. However, western Ukraine is considerably less populous than eastern Ukraine, where most of the country's industrial capacity is concentrated. In addition to pro-Russian sentiment, many people in these regions and elsewhere retain bad memories of the Soviet invasion of Afghanistan, in which Ukrainian draftees were forced to participate. They fear that NATO membership could embroil them in Afghanistan again, and in similar conflicts in distant parts of the world. Ukraine's participation in the U.S.-led coalition in Iraq in 2003-2004 was politically unpopular in Ukraine. President Yushchenko withdrew Ukraine's troops from Iraq shortly after taking office in 2005. The ruling government coalition, which supports a MAP for Ukraine, holds a wafer-thin majority in the Ukrainian parliament. Its fragile unity has been shaken by tensions between President Yushchenko and Prime Minister Tymoshenko over issues not related to NATO membership. President Yushchenko strongly supports NATO membership for Ukraine. Until the January 2008 letter to NATO Secretary General de Hoop Scheffer, Tymoshenko appeared to be lukewarm at best about joining the alliance. The Party of Regions, the largest opposition party, and the Communists are strongly opposed to NATO membership. After the January 2008 letter, they blocked the Ukrainian parliament from conducting business, in protest against Yatsenyuk's signature of the document. The parliament resumed operations on March 6, 2008, after it passed a resolution stating that the parliament would consider legislation to join NATO only after a public referendum approved NATO membership. Ukrainian leaders acknowledge that an effective public information campaign is needed to boost support in Ukraine for NATO membership. A lack of domestic consensus on NATO membership could make it difficult for future Ukrainian governments to consistently fulfill the terms of a MAP. In February 2008, perhaps in an effort to defuse domestic and Russian criticism over his decision to seek a MAP, President Yushchenko said that Ukraine will not allow the establishment of NATO bases on Ukrainian soil. He noted that the Ukrainian constitution does not permit the establishment of foreign military bases in Ukraine, with the temporary exception of Russia's current Black Sea naval base, the lease for which runs out in 2017. Before the January 2008 letter by Ukraine's top three leaders, U.S. officials warned that there must be support for the MAP "across the government spectrum," that Ukraine must continue defense reforms, and that Ukraine needs to conduct a serious information campaign to educate the public on NATO. They warned that Ukraine must "have its act together" on these issues and not make "premature appeals" for membership. The January 2008 letter to the NATO Secretary General may remove at least the first objection for the United States. However, both before and after a NATO foreign ministers' meeting on March 6, 2008, U.S. Secretary of State Condoleezza Rice refrained from publicly expressing support for a MAP for Ukraine at the Bucharest summit, saying only that NATO is a performance-based organization and that the decision on a MAP for Ukraine will be not be taken until the summit. During a visit to Kiev on April 1 to meet with President Yushchenko, President Bush strongly supported granting a MAP to Ukraine at the Bucharest summit. Key European NATO allies were reluctant to consider a MAP for Ukraine at Bucharest in part because they feel that Ukraine's qualifications for a MAP are weak, and in part because they are concerned about damaging relations with Russia. On March 6, German Foreign Minister Frank-Walter Steinmeier said, "I cannot hide my skepticism" about Ukraine's chances for a MAP. At the NATO foreign ministers' meeting, French Foreign Minister Bernard Kouchner and other European leaders stressed the need for maintaining good relations with Moscow. Russian leaders have been hostile to Ukraine's possible NATO membership. Russia has viewed the former Soviet republic as lying within its sphere of influence, in which Western countries and institutions should play little role. NATO, as a military alliance, is viewed with particular suspicion. On February 14, 2008, in response to a question about possible Ukrainian membership in NATO, President Putin warned that Russia might be forced to take military countermeasures, including aiming missiles against Ukraine, if Kiev hosted foreign bases or joined the U.S. missile defense project. In addition to changes in its military posture, Russia could react in several other ways to the prospect of NATO membership for Ukraine, judging by Moscow's past conduct in the region. It could try to stir up regional conflicts between eastern and western Ukraine. Russia could encourage pro-Russian groups to intensify anti-NATO campaigns and stir up conflict by pushing for use of Russian as an official language in eastern and southern Ukraine. Russia could even encourage those favoring more autonomy for these regions or even their separation from Ukraine, particularly in the case of the Crimean peninsula. It should be noted, however, that such tactics have not always worked as Moscow expected. Indeed, they have sometimes produced a backlash among the large majority of Ukrainians who favor the country's sovereignty and territorial integrity. Russia could also exploit close economic ties between the two countries. As it did in January 2006, Russia could cut off natural gas supplies to Ukraine, or sharply increase the price it charges. Russia could also cut off or hinder other trade with Ukraine, or make life difficult for the many Ukranian labor migrants in Russia. Russia has used similar tactics in disputes with Moldova and Georgia, both of which have sought closer ties with the EU or NATO or both. In any case, Russian ability and desire to "punish" Ukraine politically and economically could exceed the ability and willingness of many NATO states to respond. Another possibility is that, after complaining loudly, Russia would grudgingly accept NATO membership for Ukraine, as it did in the case of the Baltic states, Poland, and other countries in Central Europe. Many observers believe that this outcome may be less likely due to the particular sensitivity of Ukraine to Russians, many of whom believe the country should be closely tied to Russia, as much of it has been from the 17 th century until 1991. In addition, many observers note that Russia's foreign policy has been more assertive in recent years, as high revenues from energy exports have improved its internal and external finances. Moreover, the Russian government regime has used anti-NATO and anti-U.S. rhetoric to shore up its domestic support. The Allies declined to offer Ukraine a MAP at the Bucharest summit. However, they expressed support for Ukraine's MAP application, and said that Kiev could receive a MAP at the NATO Foreign Ministers' meeting in December 2008 if remaining questions over its application are resolved. In a move that surprised many observers, the summit communique also contained an unqualified statement that Ukraine (and Georgia) "will become members of NATO," without specifying when that might happen. The ambiguous result of the summit caused varying reactions within Ukraine. President Yushchenko and the Ukrainian government hailed the summit as a key stepping-stone on Kiev's path toward NATO membership, pointing in particular to the commitment made to admit Ukraine into the Alliance. In contrast, Yanukovych and the opposition applauded the denial of a MAP at the summit, viewing it as a blow to Yushchenko's pro-NATO policy. Russian leaders appeared dissatisfied with the summit outcome, despite the fact that Ukraine was not offered a MAP. According to Russian press accounts, President Putin reportedly told President Bush and NATO leaders at the NATO-Russia summit that Ukraine was not a real state, given its regional heterogeneity, and that Ukraine would cease to exist if it joined NATO. On April 8, Russian Foreign Minister Sergei Lavrov said Russia would do all that it could do to prevent NATO membership for Ukraine. On April 11, Chief of the Russian General Staff General Yuriy Baluyevsky warned that Russia would take military and "other measures" if Ukraine joined NATO. Beyond Georgia and Ukraine, other countries that currently participate in the Partnership for Peace program could well seek full membership in NATO in the future. In the western Balkan region, these include Serbia, Montenegro, and Bosnia-Herzegovina. For the time being, Serbia may not move much closer to the alliance. At the Bucharest summit, however, the alliance invited Montenegro and Bosnia-Herzegovina to begin an Intensified Dialogue with NATO, an interim step relating to membership aspirations. Both countries also agreed to develop concrete relations with the alliance through Individual Partnership Action Plans (IPAP). The newly independent country of Kosovo may also seek closer ties with NATO, perhaps first through PfP. The Bucharest summit did not make significant strategic decisions concerning enlargement or the MAP process. However, most allies seem to believe that Albania's and Croatia's road to membership in the alliance could lead to greater stability in southeastern Europe, especially given the recent independence of Kosovo and the enduring hostility to NATO of important political factions in Serbia. An ongoing strategic concern of the alliance is the stabilization of Afghanistan. Enlargement is only tangentially related to this issue. Albania's and Croatia's militaries and resources are modest. But the United States and several other leading governments in the alliance expect new member states to develop niche capabilities to contribute to NATO operations around the world; and in Afghanistan, financial assistance to the government in Kabul, whether through the EU or other organizations, is important not only to stabilize the country, but as a demonstration of solidarity in the effort to accomplish the alliance's most important mission. NATO is facing future challenges that may shape any following rounds of enlargement. Strategically, one of the most important is energy security. Gazprom, Russia's national energy company, is making strong efforts to control parts of Europe's oil and natural gas distribution network. Even without such control, much of Europe and the Caucasus depend upon Russia for portions of their energy supply. Gazprom's repeated supply disruptions to customer countries underscores a stark reality: Russia can cut off a vital lifeline if it so desires. Countermeasures – new pipelines skirting Russia and drawing supplies from a range of sources, and conservation – will require years to plan and implement, probably at great expense. Some allies believe that energy security must be enhanced before new members in succeeding rounds may be extended invitations to join, particularly if they are vulnerable to Russian pressure. Concurrent efforts to improve relations with Russia are likely to be a centerpiece of European allies' policy during this period. Another important strategic consideration will likely be the ongoing effort to improve NATO-EU coordination. One issue is the different membership of the two organizations. Governments in one of the two organizations sometimes block coordination with the other organization to promote a national agenda. The two organizations are now working closely together to stabilize Kosovo. Yet NATO and the EU have different means to arrive at key decisions. The essence of EU policymaking is in the social and economic sphere. In that environment, internal compromises and horse-trading are common when EU member states bargain for resolution of a key issue. While NATO decision-making is often complicated, the trade-offs apparent in EU processes are less common, and decisions are often more quickly made. NATO and the EU have important objectives that are the same, namely stabilization of a country or region that threatens their interests. Working together effectively, however, can prove a difficult undertaking, as in Afghanistan. The Senate has given its assent to all five rounds of NATO enlargement. However, Congress has played a particularly active role in shaping the alliance's eastward expansion since the end of the Cold War. In the NATO Participation Act of 1994 (title II of P.L. 103-447 ), Congress for the first time authorized the president both to assist designated former Soviet Bloc countries to become full NATO members, and to provide excess defense articles, international military education and training, and foreign military financing assistance to these countries. In subsequent legislation in 1996, 1998, and 2002, Congress further encouraged and endorsed NATO's eastward enlargement, while outlining the conditions under which such enlargement should take place. Before ratifying the treaty protocols enabling the alliance's 1998 and 2004 enlargements, the Senate broke with past practice, subjecting its approval of the protocols to several conditions. One such condition, as articulated in the Senate's resolutions of ratification for both enlargements, requires the president to submit to the appropriate congressional committees a detailed report on each country being actively considered for NATO membership before beginning accession talks and to submit updated reports on each country before signing any protocols of accession. Specifically, these reports are to include an evaluation of how a country being actively considered for NATO membership will further the principles of NATO and contribute to the security of the North Atlantic area; an evaluation of the country's eligibility for membership, including military readiness; an explanation of how an invitation to the country would affect the national security interests of the United States; a U.S. government analysis of common-funded military requirements and costs associated with integrating the country into NATO and an analysis of the shares of those costs to be borne by NATO members; and a preliminary analysis of the budgetary implications for the United States of integrating that country into NATO. Members of the 109 th and 110 th Congresses have expressed continued support for NATO enlargement. On September 29, 2006, towards the end of the 109 th Congress, Senator Richard Lugar introduced S. 4014 , the Freedom Consolidation Act of 2006. The bill, expressing support for NATO enlargement and designating Albania, Croatia, Georgia, and Macedonia as eligible to receive assistance under the NATO Participation Act of 2004, passed the Senate on November 16, 2006. S. 4014 was referred to the House International Relations Committee, but was not taken up before the end of the 109 th Congress. In the 110 th Congress, both the Senate and House passed successor bills to the bill that passed the Senate in the 109 th Congress. The NATO Freedom Consolidation Act of 2007, introduced by Senator Lugar on February 6, 2007, passed the Senate by unanimous consent on March 15, 2007. A companion bill, H.R. 987 , introduced by Representative John Tanner in the House on February 12, 2007 passed the House on March 6, 2007. President Bush signed the NATO Freedom Consolidation Act of 2007 into law ( P.L. 110-17 ) on April 9, 2007. The NATO Freedom Consolidation Act of 2007 reaffirms the United States "commitment to further enlargement of the North Atlantic Treaty Organization to include European democracies that are able and willing to meet the responsibilities of membership..." The act calls for the "timely admission" of Albania, Croatia, Georgia, the "Republic of Macedonia (FYROM)," and Ukraine to NATO, recognizes progress made by Albania, Croatia, and Macedonia on their Membership Action Plans (MAPs), and applauds political and military advances made by Georgia and Ukraine while signaling regret that the alliance has not entered into a MAP with either country. At the same time, Congress affirms that admission of these five countries into the alliance should be "contingent upon their continued implementation of democratic, defense, and economic reform, and their willingness and ability to meet the responsibilities of membership in [NATO] and a clear expression of national intent to do so." In addition to expressing support for the candidacies and potential candidacies of Albania, Croatia, Georgia, Macedonia, and Ukraine, the NATO Freedom Consolidation Act of 2007 authorizes FY2008 appropriations for security assistance to each of these countries. This assistance shall be consistent with the conditions set by the NATO Participation Act of 1994, which limit the types of security assistance offered by the United States to prospective NATO member states to the transfer of excess defense articles (as determined under section 516 and 519 of the Foreign Assistance Act), international military education and training (as determined under chapter 5 of part II of the Foreign Assistance Act), and foreign military financing assistance (as determined under section 23 of the Arms Export Control Act). According to the NATO Participation Act, security assistance should encourage joint planning, training, and military exercises with NATO forces, greater interoperability, and conformity of military doctrine. Both the Senate and House have expressed further support for a strengthening of Allied relations with Georgia and Ukraine passing companion resolutions expressing strong support "for [NATO] to enter into a Membership Action Plan with Georgia and Ukraine." The resolutions draw attention to contributions made by Georgia and Ukraine to the collective security of the alliance, and highlight progress made in each country towards a stronger relationship with NATO. In what could be an effort to address some European allies' concern that a MAP would be understood as a guarantee of future NATO membership, the resolutions explicitly state that a MAP does not ensure membership. As discussed earlier in the report, congressional deliberation over post-Cold War NATO enlargement has revolved largely around three issues: cost; burdensharing; and relations with Russia. In terms of cost, the Congressional Budget Office (CBO) estimates that additional costs to the United States associated with NATO expansion to the five countries designated in the NATO Freedom Consolidation Act would not exceed $30 million over the 2008-2012 period. Based on the State Department's 2008 appropriation request, CBO estimates that outlays would total $12 million of 2008, and $30 million over the period from 2008-2012. Neither the NATO Freedom Consolidation Act nor the accompanying Senate Foreign Relations Committee Report directly addresses potential concerns regarding burden-sharing within the alliance or the effect a further round of enlargement might have on relations with Russia. However, Members of the 110 th Congress have expressed such concerns in several congressional hearings, and Members on the United States congressional delegation to the NATO Parliamentary Assembly are said to have discussed these issues with their European counterparts, as well as officials in candidate countries Albania, Croatia, and Macedonia. | NATO held a summit in Bucharest on April 2-4, 2008. A principal issue was consideration of the candidacies for membership of Albania, Croatia, and the Former Yugoslav Republic of Macedonia (FYROM, or the Republic of Macedonia). These states are small, with correspondingly small militaries, and their inclusion in the alliance cannot be considered strategic in a military sense. However, it is possible that they could play a role in the stabilization of southeastern Europe. The allies issued invitations only to Albania and Croatia. At Bucharest NATO decided not to offer a Membership Action Plan (MAP) to Georgia and Ukraine. The MAP is a viewed as a way station to membership. Russia's strong objection to the two countries' eventual membership, as well as internal separatist conflicts in Georgia and public opposition to allied membership in Ukraine were among factors leading to the two governments' failure to enter the MAP. Energy security for candidate states in a future round of enlargement may also prove to be an important issue. The Bush Administration supported the MAP for Georgia and Ukraine, but a number of allies opposed the idea. Both the Senate and House passed resolutions in the second session of the 110th Congress urging NATO to enter into a MAP with Georgia and Ukraine (S.Res. 439 and H.Res. 997, respectively). An enduring dispute with Greece over Macedonia's formal name delayed Macedonia's entry. The allies expressed clear support for Macedonia's entry once the name dispute is resolved. Process is important in Albania's and Croatia's efforts to join the alliance. Each of the current 26 allies agreed at Bucharest to extend invitations. By the end of July 2008, NATO will send a protocol on each successful candidate to all allied governments, which will follow their respective constitutional processes to admit a candidate. Again, unanimity is required for a state ultimately to join the alliance. In Congress, hearings will be held in the House and Senate. For states to be admitted, the Senate must pass a resolution of ratification by a two-thirds majority to amend NATO's founding treaty and commit the United States to defend new geographic space. Costs of enlargement were a factor in the debate over NATO enlargement in the mid and late 1990s. The issue is less controversial today. Congress has passed legislation over the past 15 years, including in the 110th Congress, indicating its support for enlargement, as long as candidate states meet qualifications for allied membership. On April 9, 2007 President Bush signed into law the NATO Freedom Consolidation Act of 2007 (P.L. 110-17), expressing support for further NATO enlargement. House and Senate committees have recently held hearings to begin assessment of the qualifications of the candidate states. This report will be updated as needed. See also CRS Report RL31915, NATO Enlargement: Senate Advice and Consent, by [author name scrubbed]. |
When the House considers legislation, one of the last steps it takes is to consider a motion to recommit. The motion to recommit represents the last chance of the House to affect a measure. In practice, that means either to offer amendatory language or to send the bill back to committee. In practice, the motion to recommit, as authorized by Rule XIX, is offered after the previous question has been ordered on passage. For these motions, the Speaker affords priority in recognition to those opposed to the measure and gives preference among those opposed to a minority party Member, which has resulted in the motion being dubbed, "the minority's motion." Among minority opponents, priority to offer the motion is given first to the minority leader or his or her designee and then to Members from the reporting committee in order of their committee seniority. Only one proper motion to recommit is in order. If a motion to recommit is ruled out of order, a second, proper motion to recommit may be offered. A motion to recommit may be amended (although it is uncommon in practice) but only if the previous question has not yet been ordered on the motion. A motion to recommit offered after the previous question has been ordered on the bill may not be tabled. House rules specifically prohibit the House Committee on Rules from reporting a special rule that would prevent the motion to recommit from being offered on initial passage of a bill or joint resolution. House rules also guarantee that the motion to recommit may include instructions that include an amendment otherwise in order if offered by the minority leader or his or her designee. This guarantee does not apply to consideration of a Senate bill for which the text of a House-passed measure has been substituted, because the motion would have been protected during initial consideration of the House-passed measure. Motions to recommit are characterized as being of two types. The first type, referred to as a "simple" or "straight" motion to recommit, includes no instructions. If adopted by the House, it returns the underlying measure to committee. When a "straight" motion to recommit is offered, the clerk will report it in the following form: Mr. Obey of Wisconsin moves to recommit the bill, H.R. 3010 to the Committee on Appropriations. The other type of motion to recommit, offered much more frequently, includes instructions and must contain language directing that the legislation be reported "forthwith," meaning that if the House adopts such a motion, the measure remains on the House floor, and the committee chair (or designee) immediately rises and reports the bill back to the House with any amendment(s) contained in the instructions of the recommittal motion. The House votes on agreeing to the amendment(s) before moving to final passage of the bill as it may have been amended. Typically, if the motion to recommit has been agreed to, the amendment in the instructions is agreed to by voice vote. However, amendment(s) in the instructions are subject to division of the question if it consists of two or more separable substantive propositions. When a motion to recommit with instructions is offered, the clerk will report it in the following form: Mr. Scott of Virginia moves to recommit the bill H.R. 10 to the Committee on Oversight and Government Reform with instructions to report the same back to the House forthwith with the following amendment: Add at the end of section 6 the following new subsection:(f) Requiring Protection of Students and Applicants Under Civil Rights Laws.—Section 3008 (sec. 38-1853.08, D.C. Official Code) is amended by adding at the end the following new subsection: "(i) Requiring Protection of Students and Applicants Under Civil Rights Laws.—In addition to meeting the requirements of subsection (a), an eligible entity or a school may not participate in the opportunity scholarship program under this Act unless the eligible entity or school certifies to the Secretary that the eligible entity or school will provide each student who applies for or receives an opportunity scholarship under this Act with all of the applicable protections available under each of the following laws:" (1) Title IV of the Civil Rights Act of 1964 (42 U.S.C. 2000c et seq.). Both types of motions to recommit are debatable for 10 minutes. The majority floor manager of a bill or joint resolution may ask that debate time be extended to one hour. In either case, debate time is equally divided between the Member making the motion and a Member opposing it. Instructions in a motion to recommit generally may not propose to do that which may not be done by amendment under the rules of the House. For example, instructions that do any of the following would be out of order: Propose an amendment that is not germane to the measure. Amend or eliminate an amendment already adopted by the House, unless permitted by a special rule. Propose an amendment in violation of Rule XXI clause 2, 4, or 5. Propose an amendment in violation of Rule XXI, clause 10, "the CUTGO rule." Authorize a committee to report at any time or direct a committee to report by a date certain. A motion to recommit may have several procedural effects. First, it allows the minority to offer and obtain a vote on policy language of their design, an opportunity that might otherwise be unavailable if the measure is being considered under the terms of a special rule that restricts or prevents the offering of amendments. Further, a motion to recommit grants the minority the last opportunity to amend legislation before final passage. The motion to recommit even allows the offering of an amendment previously rejected by the House during consideration in Committee of the Whole. House approval of a "straight" motion to recommit could have the effect of sending the bill back to the committee from which it was reported for further work on the measure. If the underlying legislation was not first reported by the committee of jurisdiction before coming to the floor—either because it was never referred to committee or because the committee was discharged from further consideration of the bill—the minority might try to use the motion as a way to put the legislation before the committee for its consideration. A motion to recommit can also send a measure to a committee to which the bill had not been originally referred. This kind of action could be tied to the creation of an ad hoc committee, such as in the following example: Mr. Ryan of Wisconsin moves to commit the resolution ( H.Res. 6 ) to a select committee composed of the Majority Leader and the Minority Leader with instructions to report back the same to the House forthwith with only the following amendment. An ad hoc committee like this has no permanence and is not required to meet. Such motions to commit are frequently used in conjunction with the House rules package on the opening day of Congress, before standing committees have been established. Additionally, the motion to recommit might seek to send the bill to a committee to which it was not referred due to jurisdictional issues. For example, in 1975, a "straight" motion to recommit attempted to send a bill which had been reported by the Committee on Ways and Means, not only to that committee, but also to the Committee on Interstate and Foreign Commerce. This motion to recommit appeared to suggest that the goal of the underlying legislation might be achieved in additional ways under the jurisdiction of this second panel. "Straight" motions to recommit could also create a situation that would effectively dispose of the underlying measure, since once the measure is recommitted, a committee is not obligated to take further action. It could be argued that it would be unlikely for a committee to report back a measure that the House has voted to remove from the floor. Debate in the House on a "straight" motion to recommit may, however, provide a committee with a non-binding understanding of what should be done to improve the measure. A committee's decision whether to act on a recommitted measure might also be influenced by House and committee rules. For instance, a Speaker pro tempore observed in response to a parliamentary inquiry, "The Chair cannot say what in the rules of a committee might constrain the timing of any action it might take. Neither can the Chair render an advisory opinion whether points of order available under the rules of the House might preclude further proceedings on the floor." As described below, the motion to recommit underwent fundamental changes in 1909 with the stated purpose of giving the minority the right "to have a vote upon its position upon great public questions." This seems to imply that the motion was intended to have not only procedural effects but also political ones, allowing Members to go on record as supporting or opposing a specific policy, an opportunity that may be important for demonstrating their policy preference to constituents that might not otherwise occur in the absence of the motion. Besides providing a policy vote, the motion to recommit can have additional political effects. A motion to recommit may combine several proposed amendments, providing the opportunity to package together a set of views as a way to create a comprehensive public record to emphasize the minority party's differences from the platform of the majority. As described above, using a "straight" motion to recommit without instructions can have the effect of delaying or even "killing" a measure, since a committee to which the measure is recommitted would never be required to act. Motions to recommit may also have the effect of providing an outlet for the minority to express its discontent with restrictions related to the openness or fairness of the legislative process. For example, a minority dissatisfied with the number of amendments its Members have been allowed to offer in the Committee of the Whole may make use of their right to offer a motion to recommit with instructions as a means for expressing their opposition to the policies of the majority party. The motion to recommit has its antecedents in the British Parliament and has existed since the First Congress. Prior to 1909, however, it operated differently than it does today, and priority in recognition for the offering of the motion to recommit was not reserved for a Member opposed to the measure. Instead, as former Speaker of the House Joseph Cannon remarked: The object of this provision [for a motion to recommit] was, as the Chair has always understood, that the motion should be made by one friendly to the bill. Often, the majority floor manager of a bill would make a "straight" motion to recommit with the expectation that it would be defeated. Since only one proper motion to recommit is in order, this would preclude anyone else from trying to use the motion in order to defeat or amend the measure. For most of the history of the House, the purpose of the motion to recommit more closely resembled the current usage of the motion to reconsider. Recommittal provided Members with a final opportunity to correct errors within the measure, and in 1891, the Speaker ruled that a bill could be recommitted "forthwith," meaning the committee chair would report the amendments in the motion at once without the bill having to be sent back to committee. The use of the motion to recommit changed substantially in 1909 as a result of changes made in House procedures championed largely by a coalition of Democrats and Progressive Republicans who opposed the autocratic rule of Speaker Cannon. During debate on the adoption of the rules package for the 61 st Congress (1909-1910), the previous question was defeated, allowing Representative John Fitzgerald to propose a set of rules changes, one of which guaranteed priority in recognition to offer the motion to recommit to a Member opposed to the bill. This rules change was offered with the stated purpose of giving the minority the right "to have a vote upon its position upon great public questions." Further, the Fitzgerald amendment prohibited the Rules Committee from reporting any special rule that would prevent the offering of a motion to recommit. This amended rules package passed 211-173. It was not until 1932, however, that precedent definitively established giving priority in recognition to offer the motion to a minority party Member opposed to the bill. This solidified the motion as a "minority right." At the beginning of the 92 nd Congress (1971-1972), the language now contained in House Rule XIX, clause 2(b), was added to the standing rules, allowing 10 minutes of debate on a motion to recommit with instructions, equally divided between a proponent and an opponent. Also in the 92 nd Congress, a new rule made recorded votes in the Committee of the Whole in order for the first time, causing some to question whether the motion to recommit had become redundant or unnecessary. An earlier ruling by the Speaker pro tempore noted that in the Committee of the Whole, "there is no roll-call vote, so that the only opportunity that a minority may have to go on record is by means of a motion to recommit in the House." Because the rules now allowed for recorded votes in the Committee of the Whole, some argued that the motion's main purpose could be achieved in other ways, making the motion to recommit "much less necessary." The right of the minority to offer a motion to recommit, however, remained intact, even in light of the expanded rules on voting. Following the successful adoption of a motion to recommit in 1984 that included the Crime Bill as amendatory instructions, the House decided that 10 minutes of debate might not always be sufficient, since these motions had the potential of adding substantial portions of legislation to an underlying measure. At the start of the 99 th Congress (1985-1986), the current language in clause 2(c) of the rule was added, allowing the majority floor manager to demand that debate time on the motion be extended to one hour equally divided and controlled by the proponent and an opponent. To date, the one-hour extension has been demanded only once. During the 1980s and 1990s, the Rules Committee issued what the minority perceived to be an increased number of special rules restricting both the amending process as well as the motion to recommit. In 1995, the House added language now in Rule XII, clause 6(c), prohibiting the Rules Committee from reporting a special rule that would prevent the offering of a motion to recommit with instructions, thereby preventing the Rules Committee from restricting the scope or content of the motion to recommit. During the 110 th Congress (2007-2008), there was a significant increase in motions to recommit offered, specifically motions to recommit with instructions that did not include the term forthwith , referred to as motions to recommit with "non-forthwith" instructions (or sometimes referred to as "promptly" motions). If adopted, a motion to recommit with "non-forthwith" instructions would have returned the bill to the specified committee whose eventual report, if any, would not have been immediately or automatically before the House. Motions to recommit with "non-forthwith" instructions sometimes had the effect of creating a difficult political choice for Members who supported both the underlying measure and the amendment contained in the motion to recommit. Some Members argued that motions to recommit with "non-forthwith" instructions were designed to trap majority party Members reluctant to vote against the motion's amendment, forcing them into a "lose-lose" situation. Also, it was argued that the use of motions to recommit with "non-forthwith" instructions including specific policy amendments were not necessary because the motion could usually be offered "forthwith," which if successful would have immediately incorporated the motion's amendments. These arguments led the House to amend its rules. The rules adopted by the House at the beginning of the 111 th Congress (2009-2010) added a requirement that any instructions must be in the form of a direction to report an amendment or amendments back to the House "forthwith." The rules package of the 111 th Congress further altered the rules surrounding the motion to recommit by making "straight" motions to recommit debatable. Prior to this, only motions to recommit with instructions had been debatable. These changes are still in effect. | The motion to recommit provides a final opportunity for the House to affect a measure before passage, either by amending the measure or sending it back to committee. The motion to recommit is often referred to as "the minority's motion," because preference in recognition for offering a motion to recommit is given to a member of the minority party who is opposed to the bill. The stated purpose of giving the minority party this right was to allow them to "have a vote upon its position upon great public questions." House rules protect this minority right, as it is not in order for the House Committee on Rules to report a special rule that would preclude offering a motion to recommit a bill or joint resolution prior to its initial passage. Motions to recommit are of two types: "straight" motions and motions that include instructions. A Member offering a "straight" motion to recommit seeks to send the measure to committee with no requirement for further consideration by the House. A Member offering a motion to recommit with instructions seeks to immediately amend the underlying bill on the House floor. A motion to recommit may have various procedural effects, including amending an underlying measure, sending it to one or more committees, providing additional time for its consideration, or potentially disposing of the legislation. Due to its inclusion of policy language, the motion to recommit might also have political effects, such as allowing Members to go on record as supporting or opposing a specific policy and creating a comprehensive public record to emphasize the minority party's differences from the platform of the majority. This report provides an overview of House rules and precedents governing the motion to recommit and describes procedural and political effects of the motion. This report will be updated to reflect any changes in House rules governing the usage of the motion to recommit. |
Violence in the home is not a new phenomenon. Jeffrey L. Edleson, a researcher who hasstudied domestic violence extensively, dates it back to the Roman Empire, and reports that theincidence of family violence has not changed over the years as much as its visibility. (1) Edleson, who is the directorof the Minnesota Center Against Violence and Abuse, observes that the most recent victims offamily violence to receive attention are children who witness violence between adults in their homes. Carla Smith Stover of the Yale University Child Study Center noted in an overview of domesticviolence research that a large body of studies have indicated that exposure to domestic violence hasharmful effects on children's emotional and behavioral development. Some researchers havereported data demonstrating that childhood exposure to such violence is associated with coexistingand potential indications of child behavioral and psychiatric problems. (2) Stover reported that someresearchers believe that exposure to such violence can "affect children's cognitive functioning,initiative, personality style, self-esteem, and impulse control." (3) Furthermore, such childrenmay be at greater risk for child abuse and neglect. Stover cited research that found an estimated 60%to 75% of families in homes where such violence occurred had children who also were physicallyabused. (4) The impact on children of domestic violence was an issue of interest in the 109th Congress.The first session of the 109th Congress ended with the passage of the Violence Against Women andDepartment of Justice Reauthorization Act of 2005 ( P.L. 109-162 ), which contained new initiativesto address concerns about children and youth exposed to and victimized by domestic violence. Thisreport discusses existing federal programs and initiatives that have been established to assist suchchildren and youth, and new provisions enacted in P.L. 109-162 . Since 1999, several federal programs and initiatives have been created specifically to addressconcerns related to children who witness domestic violence. The programs include the Safe StartProgram (administered by the Department of Justice's (DOJ's) Office of Juvenile Justice andDelinquency Prevention, or OJJDP), Safe Havens for Children Program (sponsored by DOJ's Officeof Violence Against Women, or VAWO), and the Safe and Bright Futures for Children Initiative andthe Demonstration of Enhanced Services to Children and Youth Who Have Been Exposed toDomestic Violence (both administered by the Department of Health and Human Services, or HHS). The latter two programs are partially funded through proceeds from the Stop Family Violencepostage stamp that was created through the Stamp Out Domestic Violence Act of 2001, Section 653of the Treasury and General Government Appropriations Act of 2002 ( P.L. 107-67 ). The U.S. PostalService was directed to issue a semi-postal stamp in order to allow the public a direct and tangibleway to contribute to domestic violence funding. The stamp was issued for sale on October 8, 2003. To date, proceeds from the stamp have generated $3.03 million. Stamps will not be issued afterDecember 31, 2006. (5) In addition, the Greenbook Initiative is a federal multi-agency demonstration project thatimplements the suggested guidelines for policy and practice of the National Council of Juvenile andFamily Court Judges "Greenbook" designed to assist child welfare, domestic violence agencies, andfamily courts to respond more effectively when domestic violence and child maltreatment occursimultaneously. The federal assistance programs and the Greenbook Initiative are discussed below. The Safe Start Program was authorized by the Omnibus Consolidated and EmergencySupplemental Appropriations Act of 1999 ( P.L. 105-277 ), and was created because of the concernabout a high level of violence in 1998 that affected the lives of children (for example, multipleschool shootings that had occurred). President Bill Clinton initiated the Children Exposed toViolence Initiative, sponsored by DOJ and directed by Deputy Attorney General Eric Holder. (6) On June 22, 1999, throughthe leadership of the Deputy Attorney General, 150 practitioners and policymakers attended aNational Summit on Children Exposed to Violence to consider the issue and establish a nationalblueprint for action. The National Advisory Council on Violence Against Women also attended thesummit. (7) In FY1999, of the $283 million Violence Against Women Act appropriation provided toDOJ, $10 million was designated for the Office of Juvenile Justice and Delinquency Prevention toadminister the Safe Start Program. (8) The purpose of the program was to support communities inpreventing and reducing the impact of family and community violence on young children (primarilyfrom birth to age six) and their families, and to help communities expand their partnerships withservice providers (such as law enforcement agencies, mental health and health providers, earlychildhood education, and others) to establish a general service delivery system. (9) Eligible lead applicants for a Safe Start grant (that is, a cooperative agreement), had to becollaborative groups of two or more public agencies (including state agencies, units of localgovernment, tribal governments, and public colleges and universities), and/or private organizations(including nonprofit, for-profit, and faith-based groups) agreeing to waive any profit or fee, whoworked jointly to prevent and address the effects of witnessing violence on children. (10) Applicants could use cooperative agreement funds to create and extend local prevention,intervention, and treatment services for young children who had witnessed or were at risk ofwitnessing violence, to develop effective rules and procedures among agencies regarding how toassist such children, and to coordinate services in order to expand a community-wide system formeeting the needs of such children. (11) The goal of the project was to establish a far-reaching servicedelivery system to improve access, delivery, and quality of services for young children who wereexposed to or at risk of exposure to violence. This effort was to be accomplished by expandingexisting community partnerships between service providers in key fields such as law enforcement,health, mental health, early childhood education, child welfare, substance abuse prevention andtreatment, domestic violence crisis interventions, and others. (12) The Safe Start Demonstration Project was a 5½-year effort conducted in three phases --planning and assessment, initial implementation, and full implementation. (13) Initially, nine Safe Startdemonstration program sites were selected competitively in 1999 and 2000. Those sites wereBaltimore, Maryland; Bridgeport, Connecticut; Chatham County, North Carolina; Chicago, Illinois;Rochester, New York; Pinellas County, Florida; San Francisco, California; Spokane, Washington;and Washington County, Maine. In 2001, two tribal sites were selected -- the Pueblo Tribe of Zuni,New Mexico, and the Sitka Tribe of Alaska. (14) The 11 sites represented urban, rural, and tribal communitiesinvolved in addressing problems faced by young children exposed to violence in their homes,schools, and communities. (15) A national evaluation of the Safe Start Demonstration Project assessing the period fromJanuary through December 2004 that was conducted noted the accomplishments and challengesexperienced across the demonstration sites. (16) Safe Start Promising Approaches. Phase II ofSafe Start, now under way, is called the Safe Start Promising Approaches for Children Exposed toViolence Pilot Project (Safe Start Promising Approaches). OJJDP stated that the target populationfor the program was children exposed to violence, but it specified that "children" included infantsto persons 18 years of age. Emphasis would continue, however, to be placed upon young childrenfrom infants to six years of age and their families. OJJDP noted that the reason for this particularemphasis was twofold -- research indicated that younger children were at the greatest risk of harmfrom exposure to violence, and because the exposure of younger children was often unrecognized. Furthermore, the number of developmentally specific services as well as the number of resourcesand points of entry into services and support for young children were limited. (17) The local sites funded for the initial Safe Start Demonstration Project, listed above, were noteligible to apply for Safe Start Promising Approaches grants. (18) In August 2005, DOJawarded $6.2 million for the Safe Start Promising Approaches grants (a four-year pilot project) thatwould not only support children exposed to domestic violence, but also those who experienced andwitnessed violent crime, sexual and physical assault, and child abuse. The grants were awarded to15 community sites (19) that would operate through summer/fall of 2009. (20) The 15 community sites are Kalamazoo, Michigan; Chelsea,Massachusetts; Miami, Florida; New York, New York; the Bronx, New York; Erie, Pennsylvania;San Diego, California; Toledo, Ohio; San Francisco, California; Dallas, Texas; Providence, RhodeIsland; Oakland, California; Portland, Oregon; Pompano Beach, Florida; and Dayton, Ohio. (21) Those projects willattempt to provide evidence that promising practices and programs prove effective in reducing theharmful effects on children who witness intimate partner violence of one of their parents. OJJDP awarded $996,721 to the Rand Corporation for a national evaluation of the Safe StartPromising Approaches program. (22) The goals of the evaluation are to identify the best practices thateffectively reduce the negative impact on children's exposure to violence, and to distribute thoseresults so that other communities may duplicate the positive outcomes. (23) Funding for the Safe Start Program. Congressappropriated Safe Start funds at the $10 million level from FY1999 through FY2006. Table 1 presents the actual appropriation figures after required rescissions from FY2003 through FY2006. The President did not propose FY2007 funding for the Safe Start Program because it was a pilotprogram that the Administration believed had achieved its stated goals. (24) Neither the HouseAppropriations Committee on Science, State, Justice, Commerce, and Related Agencies (SSJC, H.Rept. 109-520 ) nor the full House (which passed the legislation) recommended FY2007 funding forthe Safe Start Program. The Senate Commerce, Justice, Science, and Related Agencies (CJS)Committee report ( S. Rept. 109-280 ) language does not identify the Safe Start Program. Safe Startwas funded in FY2006 as a set-aside within the Services, Training, Officers, and Prosecutors (STOP)grant program, and funding for the STOP grant continues under a continuing resolution (CR, P.L.109-383 ) that expires on February 15, 2007. Table 1. Safe Start Program, Appropriations History,FY2003-FY2007 ($ in millions) Source: U.S. Dept. of Justice, Office of Justice Programs, Office of Congressional and PublicAffairs, June 24, 2005, and P.L 109-108, Science, State, Justice, Commerce, and Related AgenciesAppropriations Act, 2006, 119 Stat. 2299. a. Figure reflects a 1% across-the-board rescission required by FY2006 discretionary budgetauthority. The Violence Against Women Act of 1994 (Title IV of the Violent Crime Control and LawEnforcement Act of 1994, P.L. 103-322 ), the primary federal legislation that provides assistance forbattered women, was amended in 2000 to create the Safe Havens for Children Pilot Program (as TitleIII, Sec. 1301, Limiting the Effects of Violence on Children, P.L. 106-386 ), to provide supervisedand safe visitation exchange of children by and between parents in situations involving domesticviolence, child abuse, sexual assault, or stalking. The Safe Havens for Children Program is alsoreferred to as the Supervised Visitation Program. On January 6, 2006, the President signed the Violence Against Women and Department ofJustice Reauthorization Act of 2005 ( P.L. 109-162 ). Title III of VAWA was amended, and the SafeHavens for Children Program was reauthorized at an annual level of $20 million for FY2007 throughFY2011. The legislation also established additional purposes for the program: (1) to protectchildren from the trauma of witnessing domestic or dating violence, or from experiencing abduction,injury, or death during parent and child visitation exchanges; (2) to protect parents or caretakers whoare victims of domestic and dating violence from experiencing further violence, abuse, and threatsduring child visitation exchanges; and (3) to protect children from the trauma of experiencing sexualassault or other forms of physical assault or abuse during parent and child visitation and visitationexchanges. Safe Havens for Children is administered by DOJ's Office on Violence Against Women. Theobjective of the program is to help communities support supervised visits and safe exchanges ofchildren in situations involving domestic and dating violence, child abuse, sexual assault, andstalking. Grants are available to states, Indian tribal governments, and local units of government thatagree to make contracts with or expand existing contracts and cooperative agreements with publicor private entities to carry out the provisions of the Safe Havens for Children program. (25) As amended most recently, the law requires the Attorney General to set aside not less than7% of funds for tribal governments or tribal organizations, to use not more than 3% of the funds forevaluation, monitoring, site visits, grantee conferences, and other administrative costs, and to setaside no more than 8% for technical assistance and training. Such training is to be provided bynationally recognized groups with expertise in designing safe and secure supervised visitationprograms, and visitation exchange of children in situations related to domestic and dating violence,sexual assault, or stalking. Grantees must collaborate and work with state or local courts and anonprofit, nongovernmental entity in the local community being served. (26) Grants will fund up to100% of the program costs, and a match is not required. Grantees are encouraged, however, tocontribute to the costs of their projects with supplemental contributions that may be cash, in-kindservices, or a combination of both. (27) Funding for Safe Havens. Congress initiallyauthorized $15 million to be appropriated for this program for FY2001 and FY2002 only, stipulatingthat 5% of the funds provided for those fiscal years would be made available for grants to Indiantribal governments. Congress began appropriating funding for the program in FY2002, and, as notedabove, the program has now been reauthorized through FY2011, with a requirement that 7% of fundsbe reserved for Indian tribes and organizations. For FY2007, the House-passed recommendation was$13.894 million for the program. The Senate CJS Appropriations Committee recommended $14.766million for FY2007, but the full Senate did not act on the legislation. The Safe Havens programoperates under a CR until February 15, 2007. Table 2 below provides a funding history for the Safe Havens Program. Table 2. Safe Havens: Supervised Visitation and Safe ExchangeGrant Program, Appropriations History, FY2002-FY2007 ($ in millions) Source: U.S. Dept. of Justice, Office of Legislative Affairs, June 2, 2006; Dept. of Justice, Officeof Violence Against Women, July 6, 2005, "Science, State, Justice, Commerce, and RelatedAgencies Appropriations Act. 2006" ( P.L. 109-108 ), and U.S. Dept. of Justice, Office on ViolenceAgainst Women, Violence Against Women Prevention and Prosecution Programs, The Budget ofthe United States Government, Fiscal Year 2007 -- Appendix , p. 712. a. This figure reflects a 1% across-the-board rescission required by P.L. 109-148 . The Safe and Bright Futures for Children Initiative (SBFC) was established in 2004 by HHSto assist children and youth who witness domestic violence by reducing the harmful impact of suchviolence on them, and to end the cycle of domestic violence. The program is administered by theHHS Office of Public Health and Science (OPHS) under the leadership of the Assistant Secretaryfor Health. HHS states that "this initiative seeks to encourage communities to plan for, develop,implement and sustain a coordinated system of prevention, intervention, treatment, andfollow-through services for children who have witnessed or been exposed to domestic violence andtheir families." (28) Although there was no specific mandate authorizing the SBFC Initiative, as previously stated,funding for the program was to be drawn from the Stop Family Violence postage stamp proceeds. According to HHS, the original SBFC initiative was intended to consist of two phases -- acompetitive phase one for planning and a tentative phase two for implementation based upon keyelements and lessons learned from the planning phase. (29) Phase I consisted of two years of strategic planning intended toresult in a realistic coordinated service system to assist children and youth who witness or areexposed to domestic violence, with enhancements to increase its effectiveness. In FY2004,competitive strategic-planning grants totaling approximately $3.2 million were awarded to 22communities across the nation for the two-year project period at about $75,000 per year. (30) HHS reported thatproceeds from the Stop Family Violence postage stamp to fund the program provided less revenuethan was expected; consequently, phase two of the program (the implementation stage) wascanceled. (31) On July 17and 18, 2006, a final meeting was held of all grantees involved in phase one. (32) The Director of the SBFC program indicated that at the end of the two-year grant period,HHS would evaluate the program. Grantees were required to evaluate their individual programs aswell. (33) To be eligible for a grant, applicants had to be a public or private nonprofit entity, whichcould include but was not limited to a local government agency that served children and/or teenagers,a community-based or faith-based group located in a state or U.S. territory, or a federally recognizedtribe or tribal group. (34) Grantees had to plan and put in place a continuous and coordinated system to identify, protect, andcare for children and youth who witnessed or were exposed to domestic violence. (35) In addition, HHSstipulated that, to the extent applicable, SBFC grantees had to prove that they were linked with aDOJ-sponsored Family Justice Center. (36) The Family Justice Center Initiative was established in 2003 tobetter assist domestic violence victims. When seeking help in many communities, such victims hadto travel to several different places and discuss their problems with many different people -- and inmany instances, did not receive the needed services. To remedy the problem, the President's FamilyJustice Center Initiative was created to provide comprehensive services for domestic violencevictims in one location, including medical care, counseling, social services, law enforcement,housing, and employment assistance. (37) In October 2003, the Attorney General announced that DOJwould lead a $20 million program to develop the Family Justice Center Initiative by supporting 12communities across the nation. In 2006, Family Justice Centers function in various cities throughoutthe nation. In FY2005, the HHS Administration for Children and Families (ACF), Family and YouthServices Bureau offered grants for the demonstration of enhanced services for children and youthwho had been exposed to domestic violence. The purpose of the demonstration is to supportchildren and youth who have been exposed to domestic violence by easing the impact of witnessingsuch violence, and increasing opportunities that could lead to healthy, nonviolent, and safe lives forthem as adults. Authorization for creating the grants came through the Family Violence Prevention andServices Act (FVPSA), which is Title III, Sections 301-313, of the Child Abuse Amendments of1984 ( P.L. 98-457 ). FVPSA was most recently reauthorized and amended by the Keeping Childrenand Families Safe Act of 2003 (KCFSA, P.L. 108-36 ). The Keeping Children and Families Safe Act stipulated that when funds appropriated forstate Family Violence Prevention (FVP) grants exceeded $130 million in a fiscal year, the HHSSecretary must use a portion of those surplus funds to assist children who have witnessed domesticviolence. Under those circumstances, the Secretary could award grants for demonstration programsthat would provide multisystem interventions and services for such children, and training foragencies, providers, and other groups that work (either directly or by referral) with those children. To date, funding levels for FVP grants have not exceeded $130 million. Congress appropriated$125,648,000 for the grants for FY2004, $125,630,000 for FY2005, and $124,731,000 million forFY2006. (38) Consequently, no funding has been available to assist children exposed to domestic violence throughFVPSA. Despite this situation, however, a funding opportunity occurred for assistance programsthrough proceeds received from the Stop Family Violence postage stamp. The demonstration is required to operate as a collaborative effort among eligible applicants,which include state governments, (39) federally recognized tribal governments, and nonprofits havingtax-exempt status with the Internal Revenue Service, but not higher education institutions. Consequently, faith-based and community-based groups are eligible to apply for a grant. At aminimum, eligible applicants are required to collaborate with the state domestic violence coalitionand state organization managing the family violence program. The collaboration may be led by thestate domestic violence coalition and also may include other helping services such as a child welfareagency, or an Indian tribal group that serves as a local child welfare organization. Other privatenonprofit groups or public agencies may participate in the collaborations if they have proof of pastwork concerning the impact of domestic violence on children, and can document their nonprofitstatus. (40) ACF indicates that there are four issues that must be addressed by demonstration granteesand all programs providing services that focus on assisting children who are exposed to domesticviolence. Those issues are (1) ensuring that no stigma will be attached to participation in theprogram and services, and that exposure to domestic violence is not defined as child abuse orneglect; (2) guaranteeing that programming and services provided will be linguistically and culturallycompetent and developmentally and age-appropriate; (3) guaranteeing that all professional workersin the program receive the necessary training to respond appropriately to children exposed todomestic violence; and (4) addressing the safety of the non-abusing parents and supporting theircontinuing caregiving abilities. (41) Initiative Funding. Initially, ACF planned to use$650,000 from the Stop Family Violence Postage Stamp proceeds to award about five grants toeligible applicants for the demonstration. (42) The Director of the Family Violence Prevention and Servicesprogram stated, however, that $1.1 million was received for the demonstration from postage stampproceeds. Consequently, in September 2005, 11 projects were awarded at about $130,000 each fora three-year grant period. The Director anticipated that $900,000 would be raised through the stampto cover the remaining grant needs. (43) To date, $2.3 million from postage stamp proceeds have beenawarded to the demonstration grant recipients. Nearly $700,000 remains to be spent for the program. ACF anticipates that the program will receive a final installment from FVPS proceeds sometime inspring of 2007, to be used in addition to the $700,000. (44) Applicants must agree to cooperate and participate in FVPS program evaluation efforts todetermine the impact and effectiveness of the collaborations, interventions, and services on childrenand youth who have witnessed violence among their parents or caregivers. (45) The Effective Intervention in Domestic Violence and Child Maltreatment Cases: Guidelinesfor Policy and Practice (commonly known as the Greenbook) is a list of recommendations (46) that attempt to assistdependency courts, child welfare, and domestic violence service agencies in more effectively servingfamilies experiencing violence. The Greenbook recommendations are intended to ensure thatbatterers are held accountable for their actions, and that non-abusing parents are not furthervictimized. (47) Therecommendations were developed over several months by a diverse, expert committee establishedby the Family Violence Department of the National Council of Juvenile and Family Court Judges(NCJFCJ) (48) andpublished in 1999. The Greenbook guidelines serve as a structure for the federal demonstration initiative entitled"Collaborations to Address Domestic Violence and Child Maltreatment." The federal demonstrationproject is referred to as the Greenbook Initiative, and is funded by four components of DOJ -- theNational Institute of Justice (NIJ), VAWO, the Office for Victims of Crime, and OJJDP; and fourcomponents of HHS -- the Children's Bureau and the Office of Community Services (both withinthe Administration for Children and Families), the Family and Intimate Violence PreventionProgram at the Centers for Disease Control and Prevention's National Center for Injury Preventionand Control, and the Assistant Secretary for Planning and Evaluation. (49) Since FY2001, six communities have been funded through the federal GreenbookDemonstration Initiative: Santa Clara County, California; San Francisco, California; Lane County,Oregon; El Paso County, Colorado; St. Louis County, Missouri; and Grafton County, NewHampshire. To help the sites reach their goals, funding is provided for the sites, for a nationalevaluation, and for technical assistance. Grants for the six communities were made by VAWO(including funds for technical assistance), the Children's Bureau, and NIJ (funds forevaluation). (50) Supportfor each community totals $1.05 million, or $210,000 annually, over a five-year period forimplementing the Greenbook's guidelines. (51) An interim report -- The Greenbook Demonstration Initiative: Interim Evaluation Report ( The Interim Evaluation Report ) -- evaluating the Greenbook Initiative focused on progress at themidpoint of the initiative. In the report, the Evaluation Team indicated that the six community siteshad moved from the planning to the implementation phase. The report indicated that the next phaseof the evaluation will furnish measurable evidence to determine whether changes actually occurredwithin several areas in the dependency courts, child welfare, and domestic violence service agenciesin the demonstration communities. (52) As noted earlier, the Violence Against Women and Department of Justice ReauthorizationAct of 2005 (VAWA 2005, P.L. 109-162 ) reauthorized the Safe Havens for Children program. Inaddition to reauthorizing the Safe Havens program, VAWA 2005 created several new programsintended to serve youth victims of domestic and dating violence, sexual assault, and stalking. Theseprograms are all included in Titles III and IV of P.L. 109-162 . (53) The Attorney General, in consultation with HHS, is authorized to award grants to eligibleentities to operate programs to assist youth who are victims of domestic and dating violence, sexualassault, and stalking. To receive such a grant, an eligible entity must be a nonprofit,nongovernmental group with the primary purpose of providing services that assist teen and youngadult victims of domestic and dating violence, sexual assault, or stalking; a community-based groupspecializing in intervention and prevention services for such youth; a tribe or tribal organization thatprovides services primarily to assist tribal youth or tribal victims of such violence; or a nonprofit,nongovernmental organization that provides services for runaway or homeless youth affected bydomestic or sexual abuse. Grantees must use funds for designing or duplicating and implementing programs andservices using intervention models for domestic and dating violence, sexual assault, and stalking toaddress the needs of youth who are victims of such violence. Programs must include directcounseling and advocacy, and linguistically, culturally, and community-relevant services forunderserved populations (or linkages to such services), and may also include mental health, legaladvocacy, work with public officials to help reduce or eliminate violence, and (subject to a 25%limit) additional services such as child care, transportation, educational assistance, and respite care. Not less than 7% of the program funds must be available for three-year grants to Indian tribesor tribal groups. The Attorney General must use no more than 2.5% of appropriated funds in anyyear for administration, monitoring, and grant evaluations; and use not less than 5% of appropriatedfunds in any year for technical assistance. VAWA 2005 authorizes $15 million to be appropriated for each of fiscal years 2007 through2011 for program grants. The Attorney General, through the Director of VAWO, is authorized to make two-year grantsto eligible entities to assist young victims of dating and domestic violence, sexual assault, andstalking who are between the ages of 12 and 24. The purpose of the grant is to encourage the courts,domestic violence and sexual assault service providers, youth groups and service providers, violenceprevention programs, and law enforcement agencies to cross-train and collaborate so thatcommunities can create and carry out procedures to protect and more generally and efficiently serveyoung victims. Also, grantees are encouraged, where necessary, to work with other entities such ascommunity-based supports that address the safety, health, mental health, social service, housing, andeconomic needs of youth who are victims of domestic and dating violence, sexual assault, andstalking. To be eligible for a grant, an applicant must collaborate with a victim service provider thathas a documented history of effective work regarding domestic and dating violence, sexual assault,or stalking, and the impact of such violence on young people; and must partner with a court or lawenforcement agency. Collaborations also may include batterer intervention or sex offender treatmentprograms with specified knowledge about and experience working with youth offenders;community-based youth groups that address specific concerns and problems youth face; schools orschool-based programs intended to furnish intervention and prevention services to young peopleexperiencing problems; faith-based groups that address problems faced by youth; health care entities(that are eligible to be reimbursed under Medicaid), including providers that focus on the specialneeds of youth; education programs targeted toward informing teens about HIV and other sexuallytransmitted diseases; Indian Health Service, tribal child protective services, the Bureau of IndianAffairs, or the Federal Bureau of Investigation; or may include law enforcement agencies connectedwith the Bureau of Indian Affairs that provide tribal law enforcement. Eligible entities must use grant funds to assess and analyze available services for teen andyoung adult victims. Entities must determine pertinent barriers to such services in a particular area,and work jointly to develop community protocols to address the problems. Furthermore, eligibleentities must use funds to create and enhance connections and collaborations between domesticviolence and sexual assault service providers and, where appropriate, law enforcement agencies,courts, federal agencies, and other groups addressing the safety, health, mental health, social service,housing, and economic needs of young victims of abuse. When awarding grants, the VAWO Director must give priority to groups submittingapplications in partnership with community organizations and service providers that primarily workwith young people, particularly teens, and have shown a commitment to working jointly with othergroups to cooperatively solve problems related to domestic and dating violence, sexual assault, andstalking in youth populations. Not less than 10% of appropriated funds in any year must be available to Indian tribalgovernments to create and sustain collaborations among pertinent tribal justice and social servicesdepartments, or domestic violence or sexual assault service providers, to provide culturallyappropriate services to Indian women or youth. The VAWO Director must not use more than 2.5%of funds in any year to monitor and evaluate grants, or more than 2.5% of funds in any year foradministration. Up to 8% of funds in any given year must be available for technical assistance toprograms. No later than one year after the grant period ends, the VAWO Director must prepare, submitto Congress, and make widely available summaries containing information about the activitiesimplemented by the grantees, and related initiatives the VAWO Director conducted to draw attentionto dating and domestic violence, sexual assault, and stalking, and how they affect young victims. VAWA 2005 authorizes $5 million in each of fiscal years 2007 through 2011 for the programgrants. This new program is intended to support efforts by providers of services for domestic ordating violence victims, courts, law enforcement, child welfare agencies, and other pertinentprofessionals and community groups to develop collaborative responses and services, and providecross-training to improve community responses to families that experience such violence. The HHSSecretary, through the Family and Youth Services Bureau and in consultation with VAWO, mustaward two-year competitive grants to eligible entities to carry out the grant purpose. VAWA 2005 authorizes $5 million for each of fiscal years 2007 through 2011 for thesegrants. For each fiscal year, the HHS Secretary must use no more than 3% of the funds forevaluation, monitoring, site visits, grantee conferences, and other administrative costs. Also, theSecretary must set aside no more than 7% for grants to Indian tribes to develop programs addressingchild maltreatment and domestic or dating violence that are operated by, or in partnership with, atribal group; and set aside up to 8% of funds for technical assistance and training to be conductedby groups that have demonstrated expertise in forming collaborations for community and systemresponses to families experiencing both child maltreatment and domestic or dating violence. TheSecretary also must consider the needs of underserved populations (54) when awarding grants. To be eligible for a grant, an entity must collaborate with a state or local child welfare agencyor Indian tribe, a provider of domestic or dating violence victim services, or a law enforcementagency or Bureau of Indian Affairs providing tribal law enforcement. Also, an entity may includea court and any other such agencies or private nonprofit groups and faith-based groups with theability to effectively assist the child and adult victims served by the collaboration. The Attorney General, through the VAWO Director, is authorized to award three-yearcompetitive grants under what is termed the "Supporting Teens Through Education and ProtectionAct of 2005," or STEP Act, to middle schools and high schools that work with domestic violenceand sexual assault experts. Such grants are intended to empower schools to train schooladministrators, faculty, counselors, coaches, health care providers, security employees and other staffregarding the needs, concerns of, and impact on students who experience domestic and datingviolence, sexual assault, or stalking; to develop and implement policies for students eitherexperiencing or who are perpetrators of such violence; to provide support services for students andschool staff for developing and enhancing effective prevention and intervention methods for studentsand personnel experiencing such violence; to provide students with developmentally appropriateeducation programs regarding such violence and the effects of experiencing those forms of violenceby adjusting the existing curricula activities to the relevant student population; to work with existingmentoring programs and develop strong mentoring programs to assist students in understandingviolence and recognizing violent behavior and how to prevent it, and how to address their feelingsappropriately; and to conduct evaluations assessing the effects of such programs and policies so thatdeveloping the programs can be enhanced. The VAWO Director must distribute to middle and high schools any existing DOJ, HHS, andEducation Department policy guidance and curricula concerning the prevention of domestic anddating violence, sexual assault, and stalking, and the effect of such violence on children and youth. To be eligible to receive a grant, entities must be in a partnership that includes a public,charter, tribal, or nationally accredited private middle or secondary school, a Department ofDefense-administered school under 10 U.S.C. 2164 or 20 U.S.C. 921, (55) a group of schools or aschool district; a domestic violence victim service provider with a history of working on domesticviolence that also understands the effects of violence on children and youth; and a sexual assaultvictim service provider (such as a rape crisis center, a program serving tribal sexual assault victims,or a coalition or other nonprofit nongovernmental group conducting a community-based sexualassault program) with a history of successful work regarding sexual assault that also understands theimpact of such violence on children and youth. Partnerships also may include a law enforcementagency; the state, tribal, territorial or local court; nonprofit nongovernmental groups and serviceproviders addressing sexual harassment, bullying, or gang-related violence in schools; and any othersuch agencies or nonprofit nongovernmental groups with the ability to effectively assist adult, youth,and minor victims. When awarding grants, the Director must give priority to entities that have submittedapplications in partnership with relevant courts and law enforcement organizations. Entities that aremembers of partnerships must jointly prepare and submit a report to the Director every 18 monthswith details about activities they have undertaken with grant funds, and any additional informationrequired. Within nine months after the first full grant cycle is completed, the Director must publiclydistribute (including through electronic means) model policies and procedures that were developedand implemented by grantees in middle and secondary schools. VAWA 2005 authorizes $5 million to be appropriated for each of fiscal years 2007 through2011 for program grants. The funds will remain available until expended. The Attorney General is authorized to make grants to higher education institutions orconsortia for developing and strengthening security and investigation methods to fight domestic anddating violence, sexual assault, and stalking on campuses, and for developing and strengtheningvictim services for women on campuses. Consortia may consist of campus personnel, studentgroups, campus administrators, security personnel, and regional crisis centers allied with theinstitutions. The Attorney General must award three-year competitive grants and contracts, through theVAWO Director, in amounts of not more than $500,000 for individual higher education institutions,and not more than $1 million for consortia of such institutions. The Attorney General must makeevery effort to guarantee equitable participation of public and private higher education institutionsin grant activities; ensure fair geographic grant distribution among the various regions of the nation;and ensure unbiased grant distribution to tribal colleges and universities and traditionally Blackcolleges and universities. VAWA 2005 authorizes $12 million for FY2007, and $15 million for each of fiscal years2008 through 2011 for this effort. Grantees may use funds for personnel, training, technical assistance, data collection, andother equipment; training of campus administrators, security personnel, and staff who serve oncampus disciplinary or judicial boards that develop and put into practice procedures and services tomore efficiently identify and respond to domestic and dating violence, sexual assault, and stalkingcrimes; implementing and operating violence education programs to prevent domestic and datingviolence, sexual assault, and stalking; developing, augmenting, and strengthening victim servicesprograms on campuses; establishing and distributing or otherwise providing assistance andinformation about options for victims to take punitive or other legal action; developing, installing,or enlarging data collection and communication systems related to domestic and dating violence,sexual assault, and stalking crimes on campus; making capital improvements on campus to addresssuch crimes; and improving coordination among campus administrators, security personnel, andlocal law enforcement. Each grantee must submit a biennial performance report to the Attorney General, or fundingwill be suspended. Furthermore, when the grant period is completed, the institution must file aperformance report with the Attorney General and the Secretary of Education about the activitiesundertaken and an assessment of the effectiveness of those activities in achieving the purposes listedabove. In addition, the Attorney General must submit a report to Congress no later than six monthsafter the end of the fiscal year for which grants were awarded. The report must summarizeinformation about the number of grants and amounts awarded, and provide an evaluation of theprogress made under the grants, a statistical summary of the people served, and an assessment of theeffectiveness of programs funded. The Attorney General is authorized, through the VAWO Director and in consultation withthe Secretary of HHS, to make two-year competitive grants to eligible entities for alleviating theimpact of domestic and dating violence, sexual assault, and stalking on children exposed to suchviolence, and for reducing the risk of becoming future victims of such violence. VAWA 2005authorizes $20 million for each of fiscal years 2007 through 2011 for this effort. When awarding grants, the VAWO Director must consider the needs of underservedpopulations, and must not award less than 10% of funds to Indian tribes for funding of tribal projects,up to 8% for technical assistance programs, and not less than 66% to programs for assisting childrenexposed to domestic and dating violence, sexual assault, or stalking; or for training, coordinating,and advocating for programs that serve such children and youth. To be eligible for a grant, an entity must be a victim service provider; tribal nonprofitorganization or community-based group with a documented history of successful work concerningchildren and youth exposed to domestic and dating violence, sexual assault, or stalking; or a state,territorial, tribal, or local government agency that is partnered with such entities. Grantees must prepare and submit an application to the Director containing whateverinformation is required, and at a minimum, describe the policies and procedures the entity has orplans to adopt to increase and guarantee the safety of children and their nonabusing parent who havebeen or are experiencing exposure to violence, and also such individuals who are alreadyexperiencing domestic and/or dating violence, sexual assault, or stalking; and guaranteelinguistically, culturally, and community-relevant services to underserved populations. The Attorney General, through the VAWO Director and in consultation with the Secretaryof HHS, must make two-year competitive grants to home visitation programs, jointly working withvictim services providers to develop and implement model policies and steps to train home visitationservice providers about addressing domestic and dating violence, sexual assault, and stalkingsituations in families experiencing such violence or that are at risk of violence, in order to reduce theeffects of that violence on children, preserve safety, improve parenting skills, and put an end tointergenerational cycles of violence. The Director must consider the needs of underserved populations, award not less than 7%of appropriated funds for tribal projects, and award up to 8% of funds for technical assistanceprograms. VAWA 2005 authorizes $7 million for each of fiscal years 2007 through 2011 for eligibleentities to conduct the programs. To receive a grant, an eligible entity must be a national, federal, state, local, territorial, ortribal home visitation program that provides services to pregnant women or young children and theirparent or primary caregiver in their permanent or temporary home or other familiar surroundings;or a victim services group or agency that works together with a national, federal, state, local,territorial, or tribal home visitation program. Grantees must prepare and submit an appropriate application to the Director in the mannerrequired, describing the policies and procedures they intend to adopt to improve upon or guaranteethe safety and security of children and their nonabusing parent in homes experiencing domestic anddating violence, sexual assault, or stalking; guarantee linguistically, culturally, andcommunity-relevant services for underserved communities; ensure adequate training by victimservice providers to home visitation program staff; and guarantee that relevant state and local victimservice providers and coalitions are aware of the activities of groups receiving grants and areincluded as training partners, where possible. The Attorney General, through the VAWO Director and in consultation with the Secretaryof HHS, must make two-year competitive grants to eligible entities for the purpose of developingand increasing programs to get men and youth to participate in preventing domestic and datingviolence, sexual assault, and stalking by helping them develop mutually respectful and nonviolentrelationships. When awarding grants, the Director must consider the needs of underserved population,award not less than 10% of funds to Indian tribes, and award up to 8% of funds for technicalassistance to grantees and non-grantees working in this area. VAWA 2005 authorizes $10 million for each of fiscal years 2007 through 2011 for the grantprograms. Eligible entities include nonprofit, nongovernmental victim service providers or coalitions;community-based child or youth services groups that have demonstrated experience and skill inaddressing the needs and concerns of youth; and state, territorial, tribal, or local government unitspartnered with either of those organizations just mentioned, or a program providing culturallyspecific services. Eligible entities must use funds to develop or improve upon community-based projects,including gender-specific programs that encourage children and youth to seek nonviolentrelationships to reduce the risk of becoming either victims or perpetrators of domestic and datingviolence, sexual assault, or stalking; or such entities with experience in conducting public educationcampaigns addressing domestic and dating violence, sexual assault, or stalking must establish publiceducation and community efforts to encourage men and boys to become allies with women and girlsto prevent violence against females. Grantees can use no more than 40% of the funds to create and disseminate media materials. The HHS Secretary, acting through the National Center for Injury Prevention and Controlat the Centers for Disease Control and Prevention, is authorized to make grants to entities forsupporting research to study prevention and intervention programs to foster the understanding ofsexual and domestic violence committed by and against adults, youth, and children. Such entitiesmust include sexual assault coalitions and programs, research groups, tribal organizations, andacademic institutions. Research must include evaluating and studying best practices for reducingand preventing violence against women and children, including through strategies focused onunderserved communities. VAWA 2005 authorizes $2 million for each of fiscal years 2007 through 2011 to carry outthis study. The Attorney General, through VAWO, is authorized to make grants to states for conductinga campaign to increase public awareness about issues related to domestic violence against pregnantwomen. VAWA 2005 authorizes such sums as necessary to carry out this effort for each of fiscalyears 2006 through 2010. | Violence between domestic partners is not a new phenomenon. Children who witness suchviolence, however, have increasingly become a concern of policymakers. Since 1999, several federalprograms and initiatives have been created to address the problems of children who witness domesticviolence, and several new initiatives were enacted in the 109th Congress. The Safe Start Initiative was authorized by legislation in 1999 ( P.L. 105-277 ) to prevent andreduce the effects of family and community violence on young children from birth to age six. In2000, Congress reauthorized the Violence Against Women Act and created the Safe Havens forChildren Pilot Program to provide supervised and safe visitation exchange of children by andbetween parents in situations involving domestic violence. In 2001, the Stop Family Violencepostage stamp was created, directing the U.S. Postal Service to issue a semi-postal stamp to allowthe public an opportunity to contribute toward domestic violence funding. Proceeds from the saleswere transferred to the Department of Health and Human Services (HHS) for domestic violenceprevention programs, specifically the Safe and Bright Futures for Children Program, and theDemonstration of Enhanced Services to Children and Youth Who Have Been Exposed to DomesticViolence. To date, proceeds from the stamp have generated $3.0 million. Furthermore, funds havebeen authorized under the Family Violence Prevention and Services Act to assist children exposedto domestic violence, if appropriations exceed $130 million in a fiscal year. To date, appropriationshave not exceeded that amount. The Greenbook Initiative is a federal multi-agency demonstration project that implementsthe suggested guidelines for policy and practice of the National Council of Juvenile and FamilyCourt Judges, and is designed to assist child welfare, domestic violence agencies, and family courtsin responding more effectively when domestic violence and child maltreatment occursimultaneously. Since FY2001, six communities have been funded through the federal GreenbookDemonstration Initiative. The impact on children of exposure to domestic violence was an issue in the 109th Congress. At the end of the first session, Congress passed the Violence Against Women and Department ofJustice Reauthorization Act of 2005 ( P.L. 109-162 ), which contained a series of new initiatives. New programs would provide services to assist youth who have been victims of domestic and datingviolence, sexual assault, and stalking; support training and collaborative efforts of service providerswho assist families in which domestic violence and child maltreatment occur simultaneously; enablemiddle and high schools to train relevant school personnel to assist student victims of such violence,holding perpetrators accountable; and combat such violence on college campuses. |
On October 5, 2009, President Obama signed Executive Order (EO) 13514, Federal Leadership in Environmental, Energy, and Economic Performance , to establish an integrated strategy towards "sustainability" in the federal government and to make reduction of "greenhouse gas" (GHG) emissions a priority for federal agencies. The order requires federal agencies to set GHG emissions reduction targets, increase energy efficiency, reduce fleet petroleum consumption, conserve water, reduce waste, support sustainable communities, and leverage federal purchasing power to promote environmentally-responsible products and technologies. The federal government represents the largest single consumer of energy in the U.S. economy, occupying nearly half a million buildings, operating more than 600,000 vehicles, and purchasing over $500 billion in goods and services annually. EO 13514 directs federal agencies to lead by example in setting sustainability performance standards "to create a clean energy economy" in order to increase the Nation's prosperity, promote energy security, protect the interests of taxpayers, and safeguard the health of the environment. Federal agencies must weigh both economic and social benefits and costs in annual evaluations of project performance, expanding projects with net benefits, and reassessing or discontinuing under-performing projects. These evaluations must be transparent, with actions taken to comply with the Order disclosed on publicly available federal websites. Military and related national security activities appear to be exempted from the requirements of EO 13514. This report discusses the more significant provision of EO 13514. However, the concept of "sustainability" is left for a separate report. EO 13514 establishes new goals and provisions, augments or expands many existing provisions, and extends some dates for compliance. It does not revoke any provision of previous Executive Orders. Previous administrations issued several executive orders addressing various energy and environmental goals and practices of federal agencies. Specifically, EO 13423─ Strengthening Federal Environmental, Energy and Transportation Management (January 24, 2007)─replaced five earlier executive orders addressing energy and environmental management by agencies of the federal government, establishing goals, practices, and reporting requirements for environmental, energy, transportation performance, and accountability. Refer to this report's Appendix for a summary of EO 13423 provisions. The following sections summarize the major energy and environmental provisions and goals in the new EO 13514. They also compare provisions and goals to previous environmental and energy efficiency goals of EO 13423, with a summary provided in Table 1 . EO 13514 now directs federal agencies to establish GHG percentage reduction targets for scope 1 (federally owned or controlled sources) and scope 2 (federally purchased or generated energy) GHG emissions by FY2020. Agencies must report their reduction targets to both the Chair of the Council of Environmental Quality (CEQ) and to the Director of the Office of Management and Budget (OMB Director). In establishing the target, the new order directs each agency to consider reductions associated with reduced energy intensity in buildings, increased use of renewable energy, implementing renewable energy projects on agency property, and reduced use of fossil fuels in vehicles. Each agency also must develop and implement a Strategic Sustainability Performance Plan (SSP) (within 240 days of the order). Thereafter, an annually updated plan is due. The SSP will establish priorities for agency actions based on a lifecycle return on investment, as detailed in Section 8 of the order. Along with the SSP, a percentage reduction target for scope 3 (federally contracted actions) GHG emissions must be established and reported to the Chair of the CEQ and the Director of OMB. Each agency head is to designate a "Senior Sustainability Officer" who will be accountable for accomplishing the new EO 13514 goals. The order includes the key requirement for integrating the SSP into the agency's strategic planning and budget process, including the agency's strategic plan under section 3 of the Government Performance and Results Act of 1993 (GPRA). Within 15 months, each agency is to report a comprehensive inventory of scope 1 , scope 2 , and scope 3 emissions to the CEQ Chair and the OMB Director. EO 13423 had no specific GHG emission reduction target. Instead, that order set a goal to improve energy efficiency, and reduce GHG emissions through a 30% reduction in "energy intensity" by 2015. At least half of the renewable energy purchased annually for agency consumption was required to come from new renewable energy sources, and these projects where feasible were to be located on agency property. General Comments : The new EO 13514 will require federal agencies to understand and measure their GHG footprint before making recommendations about reducing the size of that footprint. The requirement to weigh both economic and social benefits and costs may require further clarification as value systems may enter the solution evaluation process. Federal contractors may be required to sign up with a voluntary registry to report GHG emissions. EO 13514 increases goals for water use efficiency and management to reduce potable water consumption by 2% annually through FY2020. Federal agency industrial, landscaping, and agricultural water consumption must be reduced 2% annually through FY2020. Water reuse strategies and storm water management are part of these goals. EO 13423 had set a goal for federal agencies to reduce water consumption intensity 16% by FY2015 (relative to a FY2007 baseline) through life-cycle cost-effective measures. The requirement incorporated the "Federal Leadership in High Performance and Sustainable Buildings Memorandum of Understanding (2006)" to reduce potable water use. General Comments : EO 13514 adds five years to the deadline for meeting the water efficiency target. While estimates indicate that overall water use in the United States has been declining, water shortages in various regions show that continued improvement in water use efficiency can be of benefit. The benefits of increasing energy efficiency are also apparent with almost half of the 410 billion gallons of daily water use going to the thermoelectric production of power. EO 13514 sets goals for pollution prevention and waste elimination that rely on measures to reduce waste and pollutant generation before the effluents enter the waste stream. Agencies must divert at least 50% of their construction demolition debris and 50% of other non-hazardous solid waste from landfill disposal to recycling or recovery operations. Other pollution prevention goals include pest management programs and controls for chemical uses and processes. EO 13423 did not set any specific quantitative goals for pollution prevention or waste elimination. It did direct agencies to reduce the quantity of toxic and hazardous chemicals and materials acquired, used, and disposed of by the agency. It also called for the increased diversion of solid waste, as appropriate, and directed agencies to conduct cost-effective waste prevention and recycling programs at their facilities. EO 13514 directs that the design of all planned new federal buildings beginning in 2020 achieve zero net-energy use by 2030. Existing buildings must reduce their consumption of energy, water, and materials, and identify alternatives to renovation. It encourages cost-effective, innovative strategies to minimize water and energy consumption, for example, reflective or vegetated roofs. Rehabilitation of federally owned, historic buildings should employ "best practices" and technologies to promote long-term viability. The new order also gives priority to the developing site selection procedures to site federal buildings in sustainable locations. EO 13423 had required new construction and major renovation of agency buildings comply with the Guiding Principles for Federal Leadership in High Performance and Sustainable Buildings established in the Federal Leadership in High Performance and Sustainable Buildings Memorandum of Understanding . At least 15% of each agency's existing federal capital asset building inventory had to incorporate the sustainable practices in the Guiding Principles by the end of FY2015. General Comments : The new order takes the next step by raising the bar on energy efficiency to aim for zero net-energy buildings. To achieve this goal in new buildings, it may be necessary to incorporate solar photovoltaic (and other technologies) into windows and other aspects of building design. Life-cycle considerations may require modular design of both internal and external components to ensure that these features will continue to be productive (or enable improvements) over the useful life of such buildings. To ensure full functionality and safety for public buildings, new standards may be required which consider human comfort and productivity levels in zero net-energy building environments. EO 13514 requires sustainable acquisition practices to ensure that 95% of new contracts for products and services, including task and delivery orders (but excluding weapons systems) be energy-efficient (i.e., Energy Star or Federal Energy Management Program (FEMP) designated criteria), water-efficient, biobased, environmentally-preferable (i.e., Electronic Product Environmental Assessment Tool (EPEAT) certified), non-ozone depleting, contain recycled content, and non-toxic or less-toxic alternatives. Sustainable practices promote the procurement of Energy Star or FEMP-designated electronic equipment (ensuring a procurement preference for EPEAT-registered electronic products), and the implementation of "best management practices" for energy-efficient servers and federal data centers. Disposal of excess or surplus electronics must employ environmentally sound practices. All agency electronic products are to enable power management, duplex printing, or other energy efficient or environmentally preferable features. EO 13423 stated that agency acquisition of goods had to use sustainable environmental practices, including the acquisition of biobased, environmentally preferable, energy-efficient, water-efficient, and recycled content goods. Paper used by agencies was required to have at least 30% post-consumer fiber content. At least 95% of electronic products had to satisfy the requirements for EPEAT registered equipment, and computers and monitors had to include Energy Star features. It also directed agencies to implement policies that extended the useful life of agency electronic equipment and used environmentally sound practices to dispose of electronic equipment at the end of its useful life. EO 13514 creates an implementation team and a management structure to coordinate federal agencies activities that is similar in structure and make-up to the management and reporting structures created previously by EO 13423. While the new order continues to afford federal agencies flexibility in making recommendations to meet the goals, it should guide the agencies as to the types of actions they can consider and hold them accountable for meeting the requirements. EO 13514 establishes an interagency committee composed of the Federal Environment Executive and agency Senior Sustainability Officers to advise the CEQ Chair and the OMB Director on the implementation of the order and to facilitate implementation of each agency's SSP. The Steering Committee will also determine what federal actions are appropriate to achieve the order's policy goals. Each agency's SSP will be subject to the OMB Director's approval. The SSP is to identify the activities, policies, plans, procedures, and practices of the agency that are relevant to the implementation of the order. Specific agency goals, schedules, milestones, and quantifiable metrics are to be developed. These should consider environmental measures as well as economic and social benefits and costs in evaluating projects and activities based on a lifecycle return on investment. The SSP should also evaluate climate change risks and vulnerabilities of the agency's operations and mission in both the "short and long term." EO 13514 directs the Department of Energy (DOE) (through FEMP) in coordination with the Environmental Protection Agency (EPA), the General Services Administration (GSA), the Departments of Commerce, Defense, and the Interior, and other federal agencies to develop recommendations for reporting and procedures for accounting GHG emissions. The recommendations and procedures are due for submission to the CEQ Chair and OMB Director within 180 days of the date of the order. The order emphasizes accuracy and consistency in quantifying and accounting for GHG emissions from all scope 1 , 2, and 3 sources. If significant changes in agency missions render the initial baseline information unsuitable as a benchmark, the order permits choosing an alternative to the FY2008 baseline. Recommendation must consider past federal agency efforts to reduce GHG emissions. EO 13514 directs DOE to coordinate with the General Services Administration and issue guidance on federal fleet management within 180 days of the order. The guidance must address the acquisition of alternative fuel vehicles, the use of alternative fuels with the goal of improving fleet fuel economy, and the reduction of fleet petroleum use 30% by 2020. The guidance must consider electric vehicles for appropriate functions. EO 13514 directs GSA to coordinate with EPA and the Department of Defense to provide recommendations on working with the federal vendor and contracting community to reduce scope 3 emissions. These are emissions derived from the supply of products and services to the federal government. The recommendations should consider the potential impacts on the procurement process, and on the federal vendor and contracting community. Federal agencies may consider various market-based solutions in making sustainability improvements. Using the private sector in this way can help federal agencies meet the goals of EO 13514 while conserving financial resources to meet their primary missions. Two widely used contracts ─ Energy Savings Performance Contracts (ESPCs) and Utility Energy Savings Contracts (UESCs) ─ provide federal agencies with the means of improving energy efficiency through private sector financing. Under an ESPC, a private-sector energy services company (ESCO) develops and installs energy improvements such as energy efficient lighting or heating, ventilation and air conditioning systems (HVAC). The federal agency then repays the ESCO for the capital expenditure over a maximum of 25-year period from resultant energy savings. EPSCs, in particular, have gained widespread use throughout the federal sector. Federal agencies have invested approximately $2.3 billion through ESPCs, with more than 460 contracts awarded in 47 states. ESPCs come with an incentive that allows facility managers to apply the cash benefit of energy savings to other improvements or programs. The Congressional Budget Office's (CBO) view of ESPCs is that they impose a future financial obligation on the federal government. CBO began scoring ESPCs as mandatory spending, coinciding with the expiration of the 1990 Budget Enforcement Act pay-as-you-go (PAYGO) rules. The CBO scoring reflects how ESPCs create future commitments to appropriations. The Government Accountability Office (GAO) finds that the benefits of ESPCs could be achieved using upfront funds (that is, fully funded in advance) and with lower financing costs, but agencies generally do not receive sufficient funds upfront for doing so and see ESPCs as a necessary supplement to upfront funding in order to achieve the longer-term energy savings benefits. UESCs can accomplish the energy efficiency improvements similar to ESPCs. With a UESC, a utility finances the costs of capital improvements and recovers its investment over the contract term from the customer's utility rates. The utility benefits by reducing its customer's demand for energy, thus increasing its spare capacity for periods when energy demands peak. Unlike ESPCs, however, there are no statutory requirements that an agency realize savings from reduced energy consumption. Facility managers, however, can stipulate terms for energy cost savings. Much of EO 13514 requires federal agencies to examine the environmental and social impacts of their mission, personnel and logistical operations with regard to sustainability. The definition of sustainability carries over from EO 13423, without discussion of how the private sector views or generally implements the concept. Given that the order has elevated sustainability to a high priority, a broader discussion would help clarify the concept and possibly promote better policy solutions. Reducing greenhouse gas emissions is EO 13514's most significant requirement. Energy consumption, and thereby fossil fuels use, is arguably involved in almost every aspect and activity of all federal agencies. In establishing targets for reducing GHG emissions, agencies may need to weigh the potential impacts on their missions while also considering whether advances in technology are likely over the timeframe of compliance. The requirement for federal agencies to reduce scope 3 GHG emissions could have many implications, including the evaluation of telecommuting as an imperative for many federal employees to reduce gasoline consumption. Upgrading security for computer-based systems and adding equipment for communications could be major considerations on the cost side. This latest energy- and environment-related executive order requires federal agencies to recommend how they will achieve mandatory goals, but CEQ and OMB must approve and decide the federal actions that agencies may actually employ. CEQ and OMB may become arbiters of these recommendations, weighing the mission and criticality of agency activities, as solutions deemed appropriate in some circumstances may not be appropriate for others. Conflicts between priorities can emerge. For example, if more electricity is required to charge hybrid and electric vehicles and that electricity comes from traditional steam-electric power plants, water consumption could increase thus making water-use goals less achievable. Increased coal use to generate the electricity could exacerbate GHG emissions. Such potential conflicts and possible impacts on the priorities of other agencies are likely to be taken up by the Steering Committee. The development of a process for resolving such issues is likely be an area of considerable focus. In signing Executive Order (EO) 13423, Strengthening Federal Environmental, Energy and Transportation Management , President George W. Bush revoked five earlier executive orders affecting federal agencies' energy and environmental management. Section 11 of the order consolidated and strengthened the five executive orders and two memorandums of understanding (MOU) and established new and updated goals, practices, and reporting requirements for environmental, energy, and transportation performance and accountability. In some cases, the Bush order put in place replacement energy and environmental efficiency goals for previous goals with target dates that had passed. EO 13423 also implemented and supplemented provisions of the 2005 Energy Policy Act (EPACT; P.L. 110-140 ) dealing with energy and environmental management by federal agencies. The combination of EPACT (Title I, Part A) and EO 13423 defined the energy efficiency objectives for federal agencies under the Bush Administration. EO 13423 directed all federal agencies to improve energy efficiency and reduce greenhouse gas emissions through reductions in energy intensity (3% annually through the end of FY2015, and 30% by the end of FY2015, relative to each agency's baseline energy use in FY2003). Agencies scored progress in reaching building energy-efficiency goals in terms of reductions in energy consumption versus gross building area. For the energy reduction goals of EPACT, EO 13423 excluded some inherently inefficient industrial types of buildings were from this scoring. EO 13423 (Section 2f) mandated specific energy reduction targets for new construction and renovations. Further, it directed federal agencies to meet objectives set in the Federal Leadership in High Performance and Sustainable Buildings Memorandum of Understanding ("Sustainable Buildings MOU"). The Sustainable Buildings MOU called for new buildings to be 30% more cost efficient than industry standards, and for buildings undergoing major renovations to be 20% more cost efficient than a pre-renovation, 2003 baseline. The order also encouraged federal agencies to incorporate sustainable practices into projects underway, and sell or dispose of unneeded assets. The revoked EO 13123 had directed improvements in building energy efficiency, promoted the use of renewable energy, and set goals for reduction of greenhouse gas (GHG) emissions associated with energy use in buildings, among other energy-related requirements. In contrast, Bush's EO 13423 had no specific GHG reduction target. However, Section 2.a of EO 13423 did include the goal of cutting GHG emissions by federal agencies through reductions in the energy intensity of agency operations, but does not specify a GHG reduction target. EPACT only credited electricity from renewable energy sources in meeting federal purchase requirements. EO 13423 required that at least half of the EPACT renewable energy requirement comes from new (put in service after January 1, 1999) renewable energy sources. Agencies could also use new non-electric renewable energy sources to meet the requirement for new renewable energy. (Examples of non-electric renewable energy include thermal energy from solar ventilation pre-heat systems, solar heating and cooling systems, solar water heating, ground source heat pumps, biomass heating and cooling, thermal uses of geothermal and ocean resources.) However, these non-electric renewable energy sources could not apply toward meeting the EPACT renewable electricity requirement. In meeting EPACT's energy-intensity reduction goals (Btu/gsf), agency credits for renewable energy purchases started to phase out in FY2008 and reduce to zero by FY2011. Finally, EO 13423 required each federal agency to annually report to the President. The Office of Management and Budget (OMB) provided general reporting guidance in Circular No. A-11 (Section 55, Information on Energy Use, Costs, and Efficiency ). A 2008 DOE memorandum provided detailed reporting guidance in to federal agency energy coordinators. | On October 5, 2009, President Obama signed Executive Order 13514, Federal Leadership in Environmental, Energy, and Economic Performance, to establish an integrated strategy towards sustainability in the federal government and to make reduction of greenhouse gas (GHG) emissions a priority for federal agencies. Executive Order 13514 (EO 13514) requires federal agencies to set GHG emissions reduction targets, increase energy efficiency, reduce fleet petroleum consumption 30% by 2020, conserve water, reduce waste, support sustainable communities, and leverage federal purchasing power to promote environmentally-responsible products and technologies. Under the previous administration, EO 13423, Strengthening Federal Environmental, Energy and Transportation Management, replaced five earlier executive orders addressing energy and environmental management by federal agencies, established goals, practices, and reporting requirements for environmental, energy, transportation performance, and accountability. The terms "sustainability and sustainable" carried over from EO 13423 without a discussion of the concepts or how the concepts apply outside of the federal government. Given that EO 13423 elevated "sustainable" to a high priority, discussion of the concept may promote better solutions. The new EO 13514 does not revoke any provision of the previous EO 13423. It does establish new goals and provisions, augments or expands many existing provisions, and extends some dates for compliance. Much of Executive Order 13514 requires the agencies to examine the environmental and social impacts of their mission, personnel, and logistical operations with regard to sustainability. EO 13514 requires federal agencies to assess and measure their GHG footprint and submit emissions targets (within 90 days of the order). A requirement to weigh both "economic and social benefits and costs" of these targets may require further clarification as value systems may enter the solution evaluation process. Environmentally sustainable products and services are required immediately for 95% of all new procurements. The new order adds a requirement to reduce water use in federal industrial, landscaping, and agricultural applications by at least 20% from 2010 levels. The new order also increases the energy efficiency levels required of new building designs, and sets a target of zero net-energy consumption for new buildings by 2030. EO 13514's most significant new goal is reducing greenhouse gas emissions. Fossil fuel use constitutes the federal government's major source of GHG emissions. GHG emission-reduction targets may require federal agency managers to weigh the potential impacts on their agency missions, considering available technology and the timeframe needed for complying. Conflicting priorities may emerge in implementing the goals of the new executive order. Consideration of unintended consequences and their potential impacts on the priorities of other agencies is likely to be an area of considerable focus. |
U.S. laws provide a variety of avenues for U.S. industries, including agricultural producers, to seek relief when they believe they have been injured by the effects of trade. Trade remedies, the primary means of such relief, are designed to counter the economic effects on U.S. producers of imports sold in the United States at unfairly low prices or of exports that benefit from a foreign government's domestic or export subsidies. They might also be sought to reduce the impacts of surges in fairly-traded imports. The use of trade remedies has grown along with increased U.S. involvement in trade agreements. Trade relief is viewed as a cushion against the potentially negative impacts of trade liberalization on import-sensitive products – a number of them agricultural – thus helping to build broader political support for trade agreements. U.S. trade remedy laws generally reflect and are subject to international trade rules, notably those under the World Trade Organization (WTO) multilateral agreements and the North American Free Trade Agreement (NAFTA). On the one hand, other countries, utilizing various WTO and NAFTA rules and procedures, can and do challenge the legality of some U.S. actions taken under its trade remedy laws. On the other hand, when such U.S. laws are applied in conformity with the international trade rules, WTO and NAFTA dispute settlement procedures can serve to validate and strengthen any U.S. actions taken. In addition, U.S. producers, working through U.S. trade officials, might also tap WTO and NAFTA to resolve trade issues on a consultative or other lower-profile basis before they escalate into more costly, contentious cases involving hearing panels, appeals, sanctions, and the like. ( Appendix A describes provisions and procedures on dispute settlement under the WTO and NAFTA.) Some prominent examples where segments of U.S. agriculture have formally sought import relief in recent years include cattle imports from Canada and Mexico; wheat imports from Canada; lamb meat imports primarily from Australia and New Zealand; wheat gluten from Europe; and apple juice and honey from China, among others. As U.S. producers of these items have found, the procedures for pursuing trade remedies are somewhat complex, resource-intensive, and time consuming. Winning a case is even more difficult. Currently, federal law provides for four primary trade remedies. Three address import concerns: safeguards (or escape clause), antidumping duties (AD), and countervailing duties (CVD). The fourth, commonly called Section 301, is the principal tool to challenge unfair foreign trade practices that affect U.S. commerce generally, including exports to other countries. The Trade Act of 1974 provides for the imposition of temporary duties, quotas, or other restrictions on imports that are traded fairly but which cause or threaten to cause injury to a domestic industry. The U.S. International Trade Commission (ITC) makes the determination of injury. This provision is intended to provide relief from injurious competition when temporary protection will enable the domestic industry to make adjustments to meet the competition from imports. Also, unlike antidumping and countervailing duty cases (see below), safeguard cases encompass imports from throughout the world, not specific countries. Safeguard procedures can be invoked by petition from affected parties (an association, industry group, or other organization), Presidential request, request of House Ways and Means or Senate Finance Committees, or the ITC's own initiative. Industry petitioners are encouraged to submit, along with their petition, a plan to promote positive adjustment to the competition from imports. During the course of its investigation of the petition or request, the ITC must take into account all relevant economic factors, including certain specific factors enumerated in the statute and must consider the condition of the industry over the relevant business cycle. If the ITC determines that imports have been a "substantial cause" of "serious injury" or the threat thereof to the industry, it recommends remedial measures which must include an increase in tariffs on the imported product, a tariff-rate quota (TRQ), a quantitative restriction, adjustment measures, or a combination of those measures. The ITC submits its recommendations to the President, who decides whether or not to impose the import restrictions. In making a decision about what action is appropriate, the President must consider such factors as the industry's adjustment plan, the plan's probable effectiveness to promote positive adjustment, other factors related to the national economic interest, and the national security interest. The President can impose safeguards for an initial period of up to 4 years and may extend the action one or more years, but the total period or import relief may not exceed 8 years. The President must report to Congress the actions he plans to take. Should the President decide to take actions other than those recommended by the ITC or to take no action, Congress may direct him to implement the recommendations of the ITC by enacting a joint resolution of disapproval of his proposed action. Safeguards must be applied in conformity with the Agreement on Safeguards agreed to during the Uruguay Round of multilateral trade negotiations. This WTO agreement provides rules for the application of Article XIX of the General Agreement on Tariffs and Trade (GATT, 1947). Rules negotiated in the Agreement provide for greater transparency in procedures and limitations on the duration of relief measures. Expanding on Article XIX, the Agreement provides that a WTO member country may not exercise its right to take retaliatory action during the first 3 years that a safeguard is in effect, provided that the safeguard measure resulted from an absolute increase in imports and otherwise conforms to the Agreement. U.S. obligations under NAFTA also affect the use of safeguards vis-a-vis Canada and Mexico. Chapter 8 of NAFTA provides, among other things, that escape clause measures against NAFTA members generally last no more than three years. Section 311 of the NAFTA Implementation Act ( P.L. 103-182 , 19 U.S.C. 3371) provides that a relief action is not to apply to imports from Canada or Mexico unless they account for a substantial share of total imports of a good. Trade law provides also for the imposition of countervailing duties on goods imported into the United States if the Department of Commerce (DOC) determines that a countervailable subsidy is being provided by a foreign government and if the ITC determines that the imports are causing or threatening to cause material injury to a U.S. industry. The purpose of CVD law is to offset any unfair competitive advantage that foreign manufacturers or exporters might have over U.S. producers because of foreign countervailable subsidies. Countervailable subsidies could include a wide range of practices such as export subsidies, import substitution subsidies, and domestic subsidies provided to a specific industry or to inputs used by an industry. Trade law also authorizes antidumping duties on imported goods if the DOC determines that an imported product is being sold at less than its fair value, and if the ITC determines that a U.S. producer is thereby being injured. Dumping is a form of price discrimination whereby goods are sold in one export market at prices lower than the prices of comparable goods in the home market or in other export markets. Although CVD and AD laws are aimed at different forms of unfair trade, they are similar procedurally and substantively. CVD and AD investigations may be initiated by the DOC or by an interested party. Interested parties may be a manufacturer or producer; a union or group or workers representative of the affected industry; a trade or business association; a coalition of firms, unions, or trade associations; or a coalition or trade association, representative of processors or, in the case of processed agricultural products, processors and growers. Petitions are filed simultaneously with the DOC and the ITC. If the DOC decides the petition is legally sufficient to commence an investigation, one is initiated with respect to imports of a particular product from a particular country. The ITC makes a preliminary determination as to whether there is a "reasonable indication" that imports in question are causing or threaten to cause material injury to the industry. An affirmative decision allows the investigation to proceed; a negative decision terminates the investigation. The DOC then must make a preliminary determination whether dumping or subsidies have taken place and, if so, make a preliminary calculation of what the dumping or subsidy margin would be. Regardless of whether the DOC's preliminary determination is positive or negative, the DOC continues the investigation and makes a final determination of dumping or subsidies and a final calculation of duty margins. The investigation is terminated if DOC makes a negative final determination. In the event of an affirmative final determination, then the ITC continues its investigation and renders a final determination of material injury or threat thereof. A negative ITC determination terminates the investigation. If the two final determinations are affirmative, then extra duties are placed on imports to be paid by the importer. The determinations are subject to judicial review and also may be challenged in the WTO dispute settlement mechanism. Both the DOC and the ITC must take into account a number of criteria in making their respective determinations. In CVD cases, the DOC must consider evidence of direct subsidies or upstream subsidies (subsidies provided to inputs the benefits of which are passed on to the final producer); if found, the DOC must determine what would be the net countervailable subsidy. In AD cases the DOC must first determine the "normal value" of the import (based on the price in the exporting country's home market, on the price of the export of the product to a third country market, or on a "constructed" price, depending on the availability of data). The DOC must compare the "normal value" with the actual price of the import in question to determine whether dumping is taking place and, if so, what the dumping margin is. In either procedure, the ITC must make two determinations: (1) Is the domestic industry being materially injured or facing a threat of material injury? (2) Are the imports in question a cause of the material injury? U.S. law establishes time frames within which the respective agencies must make their determinations. As in the case of safeguards, AD and CVD actions must be applied in conformity with trade agreements entered into by the United States, in particular, the Tokyo Round Subsidies Code, the Uruguay Round Agreement on Subsidies and Countervailing Measures, and the NAFTA. The "peace clause" (see below) in the Uruguay Round Agreement on Agriculture (URAA) has particular relevance for the use of countervailing measures for agricultural products. In the Tokyo Round of multilateral trade negotiations (1973-1979), a subsidies code governing the use of subsidies and countervailing measures was negotiated and signed by the United States. The code provided for improved procedures for notification, consultation, and dispute settlement and application of remedial measures or countermeasures through the dispute settlement process. Under the code, countries could take traditional countervailing duty actions to offset subsidies upon showing material injury to a domestic industry because of subsidized imports. The code also sets out criteria for determining material injury. During the Uruguay Round, an Agreement on Subsidies and Countervailing measures was concluded that goes beyond the Tokyo Round Subsidies Code and applies to all WTO member countries. (Only GATT member countries that had signed on to the Tokyo Round subsidies code were bound by it.) This Agreement provides, among other things, definitions of such terms as subsidies and serious prejudice for the first time in a GATT agreement; prohibits export subsidies based on the use of domestic instead of imported goods; requires most developing countries to phase out export subsidies and import substitution subsidies; and applies the WTO dispute settlement mechanism (which prevents subsidizing governments from blocking the adoption of unfavorable panel reports) to countervailing and antidumping cases. In NAFTA, Chapter 19 permits final determinations in CVD and AD cases involving another member's goods to be reviewed by binational panels rather than domestic courts, if requested by a NAFTA partner. Article 13 of the URAA, commonly referred to as the peace clause, is an agreement among WTO countries to refrain from challenging certain of each other's agricultural subsidy programs in domestic countervailing duty proceedings during a 9-year period, 1995 through 2003. (The peace clause applies also to other WTO dispute settlement proceedings in situations where countries might allege "adverse effects," "serious prejudice," or "non-violation nullification and impairment of benefits" actions.) Under Article 13, governments must refrain for the first 9 years that the URAA is in effect from taking action under domestic countervailing duty proceedings so long as the subsidies in question are so-called "green box" – that is, not considered to be trade-distorting subsidies. Article 13 also deals with possible challenges to domestic support measures that fall outside the "green box" (e.g., so-called "amber box" or more likely trade-distorting subsidies) in circumstances in which the WTO country providing the subsidy is meeting its subsidy reduction commitments agreed to in the URAA. In such cases, countries are to exercise "due restraint" in initiating investigations. Similarly, with export subsidies, member countries are to exercise due restraint in initiating investigations. Title III of the Trade Act of 1974, as amended, provides the authority and procedures to enforce U.S. rights under international trade agreements and to respond to certain unfair foreign trade practices. These provisions, which together are commonly referred to as "Section 301," provide that if the U.S. Trade Representative (USTR) determines that a foreign act, policy, or practice violates or is inconsistent with a trade agreement or is unjustifiable and burdens or restricts U.S. commerce, then USTR must act to enforce U.S. rights under the trade agreement or to obtain the elimination of the act, policy, or practice, subject to the specific direction, if any, of the President. Section 301 empowers the USTR to take several forms of action to deal with unfair practices. USTR can: 1) suspend, withdraw, or prevent the application in the foreign country involved of benefits from concessions made in a trade agreement; (2) impose duties or other import restrictions on the goods and services of the foreign country for such time as the USTR deems appropriate; (3) withdraw or suspend preferential duty treatment under various trade preference schemes; or (4) enter into binding agreements that commit the foreign country to eliminate or phase out the act, policy or practice; eliminate any burden or restriction on U.S. commerce resulting from those acts, policies, or practices; or provide the United States with compensatory trade benefits that are satisfactory to the USTR. Under Section 301, USTR can take all appropriate action, including retaliation, to obtain the removal of any act, policy, or practice of a foreign government that violates an international agreement or is unjustified, unreasonable, or discriminatory, and which burdens or restricts U.S. commerce. Any interested person may file a petition with the USTR requesting that action be taken under Section 301. Investigations also may be initiated by a petition filed with the USTR by an affected party or parties, or on USTR's own motion. If USTR makes a determination to initiate an investigation, it must at the same time request consultations with the foreign country concerned regarding the issues. If consultations with the foreign country in question do not resolve the issues and the investigation involves a trade agreement, then USTR is obliged to resort to dispute settlement procedures provided for under that agreement. Sections 301-309 are the U.S. domestic counterparts to the WTO consultation and dispute settlement procedures set forth generally in Articles XII and XIII of the GATT (1947), as elaborated on by agreements reached during the Tokyo Round and in the Uruguay Round Understanding on Rules and Procedures Governing the Settlement of Disputes. These sections contain the authority in U.S. domestic law to take retaliatory action, including import restrictions if deemed necessary, to enforce U.S. rights against violations of trade agreements by foreign countries and unjustifiable, unreasonable, or discriminatory foreign trade practices which burden or restrict U.S. commerce. Formerly, certain U.S. agricultural producers also might potentially benefit from import relief under another measure commonly called "Section 22," which refers to a provision of permanent agricultural law (the Agricultural Adjustment Act Amendment of 1935) allowing the President to impose import fees or import quotas to prevent imports from non-WTO member countries from undermining the price support and supply control objectives of domestic farm programs. Legislation implementing NAFTA and the WTO URAA exempts NAFTA and WTO member countries from Section 22 quotas and fees. Under both trade agreements, the United States converted then-in-effect Section 22 restrictions (e.g., affecting cotton, peanuts, dairy, and sugar) into tariff-rate quotas (TRQs). Another import relief mechanism was the Meat Import Act of 1979, which required the President to impose quotas on beef, veal, mutton, and goat imports when aggregate quantities of imports of such products were expected to exceed a prescribed trigger level (although voluntary restraint agreements negotiated with affected countries were used to avert such quotas). With the URAA, a TRQ replaced the previous meat import restrictions. Agricultural industries have some latitude in determining which remedy for import relief to pursue. Factors involved in the choice of remedy include the causation and injury standards to be met, the procedures involved, and the manner by which the remedy is treated in trade agreements. The causation and injury standards applied in safeguard determinations are higher than those applied in CVD or AD cases. Section 201 requires that imports be a "substantial" cause of or threat of "serious injury." "Substantial cause" is defined in the statute as "a cause which is important and not less than any other cause." "Serious injury" is injury that is a significant, overall impairment to the position of the domestic industry. In contrast, CVD and AD statutes require the determination of "material injury," defined as injury which is "not inconsequential, immaterial or unimportant." CVD and AD statutes require that the injury occur "by reason of" the subsidized or dumped imports, a less precise and lower causation standard than under the safeguard statute. In addition to stricter causation and injury standards, procedures for safeguard relief entail decisions with respect to import relief that are made at a higher policy level – the President and possibly Congress – than in AD and CVD procedures. The President has wide discretion, including taking no action at all, in deciding what, if any, safeguard relief to implement. Congress also may have a role in the process if the President does not follow the recommendation of the ITC. In contrast, no such discretion exists in CVD and AD cases. Relief as determined by the DOC is implemented by a DOC antidumping or countervailing duty order without presidential or congressional involvement. The higher injury standards and more demanding procedures for safeguard relief reflect the fact that the statute involves fairly traded imports from all sources. In addition, the President, in deciding on the actions to be taken, must take into account factors related to national economic and security interests. Foreign countries whose trade will be affected by safeguard actions will seek to encourage the President to refrain from imposing, or otherwise to moderate, the safeguards. The stricter standards and procedures are probably a significant reason why U.S. industries, including agriculture, have sought and received relief much more often from AD and CVD procedures than from safeguards (see below). Also, recent experience with WTO dispute settlement involving U.S. imposition of safeguard actions, particularly in regard to wheat gluten and lamb imports (discussed below), may discourage parties who claim import-related injury from using Section 201. In both cases, the WTO questioned the methodology used by U.S. ITC in determining injury caused by imports and overturned the remedy invoked by the President. U.S. agricultural CVD and AD decisions have faced much less scrutiny in WTO dispute settlement. A total of 73 ITC safeguard investigations have been conducted since passage of the Trade Act of 1974. Twenty of them covered food and agriculture product imports, six completed since 1995 (the list in Table 1 is chronological, beginning with the earliest). Of the 20 food and agriculture cases, seven have received some form of relief. The most recent high-profile agricultural investigations have involved wheat gluten and lamb meat imports. In both instances, the ITC found in favor of the domestic industry, and the President imposed import restrictions. WTO dispute settlement panels sided with foreign countries in their challenges of both the wheat gluten and lamb meat restrictions. Although the restrictions have been removed as a result of the adverse WTO rulings, adjustment assistance to the affected U.S. producers has continued. Wheat gluten is used by the baking industry to raise the protein level of flour. The domestic industry contends that European Union (EU) wheat gluten unfairly benefits from subsidies and trade barriers, and that EU exports to the United States have caused serious economic injury to domestic producers. An initial effort by the Wheat Gluten Industry Council to seek relief through a Section 301 action in 1997 made no progress. However, the Council, on January 15, 1998, petitioned the ITC under Section 201 for the imposition of safeguard measures against the EU imports. After the ITC found that such imports were a substantial cause of serious injury to the U.S. industry, the President, on May 30, 1998, proclaimed an annual import quota for wheat gluten, for a 3-year period ending June 1, 2001, starting at about 126 million pounds in the first year and rising to 142 million pounds in the third year. The EU in mid-1999 challenged the wheat gluten safeguards, and a WTO dispute panel in December 2000 concluded that the ITC had not ensured that injury caused by other factors was attributed to imports. Once the WTO had ruled that the U.S. safeguard was in violation of the Safeguard Agreement, the EU subsequently retaliated by imposing a special duty on imports of U.S. corn gluten feed. On June 1, 2001, the Bush Administration announced that it would not extend the wheat gluten quota. Following the lifting of the U.S. quota, the EU announced it would discontinue the tariffs on corn gluten feed. The Administration said it instead would provide the U.S. industry with $40 million over 2 years so that the industry could continue its efforts to become more competitive. Two U.S. wheat gluten companies – Midwest Grains, and Manildra, a subsidiary of an Australian firm – were expected to benefit from the subsidies. Acting on a Section 201 petition filed by the American Sheep Industry Association (ASI) and others, the ITC on February 9, 1999, found that increased lamb meat imports were a substantial cause of the threat of serious injury to the U.S. lamb meat industry. Subsequently, President Clinton announced, on July 7, 1999, an import relief package for the U.S. industry that included both a 3-year, $100 million initiative to help the industry improve productivity, and tariff-rate quotas on lamb meat imports from Australia and New Zealand (which account for 99% of such imports). Following complaints filed by the two countries, a WTO dispute panel ruled on December 6, 2000, that the United States had violated the WTO's safeguard provision by improperly attributing, to the imports, the economic injury that was caused by other factors. On May 1, 2001, a WTO appellate body turned aside a U.S. appeal. The Bush Administration on August 31, 2001, then announced that it would end the tariff-rate quota safeguard on November 15, 2001. As part of an agreement with New Zealand and Australia, the United States is to provide the U.S. lamb industry with up to $42.7 million in assistance (in addition to the $100 million) through FY2003 to help the U.S. industry continue to adjust to import competition. More than 1,200 individual AD and CVD cases have been initiated since 1980, of which 76 were for food and agricultural product imports (see Appendix B table). Since 1994, more than 300 AD and CVD cases of all types were initiated; of these, 30 were food and agricultural. However, numerous cases are related to each other. Petitioners for import relief frequently are unsuccessful in AD and CVD cases. However, a substantial number do gain relief. As of December 2001, approximately 260 AD and nearly 50 CVD orders were in effect for all types of products. Of these, 35 were food and agricultural cases (again, some of them are related to each other). Some were initiated as far back as the late 1970s (see Table 2 ). Such orders, issued when investigations find in favor of the domestic industry seeking relief, entail higher duties on imports of these products from targeted countries. A recent example of a successful U.S. petition was a recent apple industry case. Apple industry groups from Michigan, California, Pennsylvania, and Washington, in 1999 petitioned for relief from what, they argued, were unfairly-priced imports of non-frozen concentrated apple juice from China that were causing them economic injury. An anti-dumping investigation was instituted on June 7, 1999, and, ultimately, DOC and ITC determinations upheld the U.S. industry's assertions. DOC imposed anti-dumping duties of up to 52%, effective June 5, 2000. Importers can be subject to provisional duties if, in the course of an investigation, a preliminary determination is made that dumping is occurring. For example, in the cases filed September 29, 2000, against honey imports from Argentina and China (see Table 2 ), DOC made a preliminary determination (on May 7, 2001) that dumping was occurring. DOC imposed provisional duties on imports from the two countries ranging as high as 184% ad valorem (varying rates apply, depending upon the specific importing entity). The determination means that importers were required to post bonds or make cash deposits in the appropriate amounts to cover the duties until the end of the process – when either final orders, with countervailing and/or anti-dumping duties, are issued, or else the cases are terminated by DOC or ITC. U.S. honey producers subsequently prevailed when the DOC issued a final ruling that dumping and/or countervailable subsidies were occurring; and the ITC determined that the U.S. industry is being, or threatened with being, materially injured. On December 10, 2001, DOC issued a final AD order imposing import duties on Argentine and Chinese honey ranging from about 26% to 184% ad valorem (depending upon the importing entity), as well as a final CVD order for import duties of nearly 6% on Argentine honey. An example of an unsuccessful petition was a challenge against live cattle imports from Mexico and Canada under both the AD and CVD laws. In November 1998, Ranchers-Cattlemen Action Legal Foundation (R-CALF) filed a complaint that such imports were being sold in the United States at less than fair value. The ITC first voted to terminate the case against Mexico but did find reasonable indication that U.S. cattlemen were threatened or injured economically by low-cost Canadian cattle imports. DOC next concluded that Canadian cattle feeders were dumping cattle, at margins ranging from 3.86% to 15.69%. However, on November 9, 1999, the ITC ruled finally that despite such margins, the imports were not materially injuring or threatening to injure U.S. producers – therefore, no anti-dumping order (with duties) was issued. As noted, Section 301 primarily has addressed complaints not about imports, but rather that U.S. exports have been impaired by unreasonable foreign policies or actions. More than a dozen 301 cases involving food and agricultural products (a number of them related to each other) were initiated between 1994 and 2001. These have involved the EU and bananas, dairy products, meat, and wheat gluten (the latter eventually was pursued under safeguard authority; see above); Korea and meat products; Australia and leather; Japan and certain agricultural products; Canada and dairy products and wheat; and Mexico and high fructose corn syrup (HFCS). Details on some of the more prominent cases follow. In 1993, the EU established a banana import regime that favored imports from EU countries' former colonies, especially in the Caribbean, and that restricted access to bananas produced in Latin America. At the request of U.S. banana interests operating in Latin America, section 301 investigations were undertaken into whether the EU policies and practices were discriminatory. Following a series of bilateral and multilateral consultations, USTR took the issue into the WTO dispute settlement process, where, in 1997, the WTO found that the EU banana import regime was inconsistent with EU trade obligations. By 1999, the EU (with a $5 billion banana market) had not implemented the WTO reforms, so the United States imposed WTO-approved retaliation (in the form of 100% tariffs) on nearly $200 million of EU exports to the United States. In April 2001, the United States and the EU reached an agreement that resolved the banana dispute. In response to the EU's agreement to increase market access for U.S. banana distributors, the United States lifted its retaliatory duties on July 1, 2001. The agreement provides for a transition to a tariff-only system of imports in 2006. In the period until 2006, the EU is establishing quotas and a licensing system based on historical trade shares that should increase the prospects for Latin American banana imports in the EU market, especially bananas marketed by U.S. firms like Chiquita Brands International. Under the agreement, banana imports from developing countries that are former EU member country colonies (the so-called ACP countries in Africa, the Caribbean, and Pacific) will continue to enjoy preferential entry. Trade ministers in the Fourth Ministerial Conference of the WTO held in Doha, Qatar, from November 9-11, 2001, agreed to grant the EU waivers from its non-discrimination obligations in order to enable it to give preferential tariff concessions to the ACP countries and to augment the quota for Latin American bananas. As a result, full implementation of the agreement can now proceed. Section 301 actions were instituted to challenge an EU ban, which took effect in 1989, on imports of meat derived from animals treated with growth hormones. The United States contended that the ban lacks a scientific justification and therefore is inconsistent with the Uruguay Round Sanitary and Phytosanitary (SPS) Agreement. WTO panels eventually agreed with the U.S. argument, left open the option for the EU to conduct a risk assessment of hormone-treated meat; and gave the EU until May 13, 1999, to bring its hormone measure into compliance with SPS rules. The EU, citing studies that, it contends, raise human health questions about the use of such hormones, did not meet the deadline and said it intended to maintain the ban. Effective July 29, 1999, the United States imposed 100% retaliatory tariffs on $116 million worth of imports from the EU (the level approved by the WTO). The tariffs are a punitive measure that will not reopen the European market to most U.S. meat products, at least in the near term. Both sides still express a desire to reach an amicable settlement, but none was at hand as of early 2002. A Section 301 investigation was initiated in early 1998 after the U.S. Corn Refiners Association alleged that the Mexican government had denied fair and equitable marketing opportunities for U.S. high fructose corn syrup (HFCS), by fostering collusion between the Mexican sugar and soft drink industries. NAFTA and WTO dispute proceedings already were underway to address the U.S. contention that Mexico had failed to abide by its own laws when it imposed, in January 1998, anti-dumping duties ranging from $55 to $175 per ton on U.S. HFCS imports. NAFTA and WTO panels both have since sided with the United States, essentially agreeing that Mexico had not proven that the imports injure or threaten to injure a domestic industry. That could lead to retaliation in the form of 100% tariffs on some as-yet undetermined value of Mexican imports. However, the HFCS dispute is closely tied to ongoing negotiations on market access to the U.S. market for Mexican sugar. Starting October 1, 2000, Mexico under NAFTA became eligible to ship much more sugar duty free to the U.S. market than the 25,000 metric tons allowed to enter in earlier years. U.S. and Mexican negotiators continue to disagree, however, over just how much sugar Mexico actually can export to the United States. An agreement was reached in December 2001 between Mexico and the United States to attempt to find a negotiated settlement in the dispute, while leaving the HFCS duties in place. However, the sweetener issue became more contentious when Mexico imposed, on January 1, 2002, a new tax of up to 20% on soft drinks containing HFCS. This tax, too, could be challenged under NAFTA or WTO provisions. USTR initiated, on October 23, 2000, a Section 301 investigation after the North Dakota Wheat Commission filed a petition alleging that the Canadian government and the Canadian Wheat Board were engaging in anti-competitive practices in third-country markets, i.e., offering to undersell U.S. wheat with lower prices in some markets, and charging higher prices in others to make up the difference. Earlier this year, USTR asked the ITC to investigate these practices and the ITC published its report on December 18, 2001. The ITC's analysis does not support the charge that the Canadian Wheat Board is systematically underpricing exports in U.S. or third country markets. However, on February 15, 2002, USTR released an "affirmative finding" that the Government of Canada grants the Canadian Wheat Board special monopoly status that gives it a competitive advantage that harm U.S. producers. USTR said it would "aggressively pursue" several avenues to address the finding: (1) examine whether to take a dispute settlement case to the WTO; (2) work with the North Dakota Wheat Commission and the U.S. industry to examine whether to file U.S. CVD and AD petitions with Commerce and the ITC; (3) with industry, identify specific impediments to U.S. wheat exports to Canada, and to negotiate with Canada to ensure fair two-way trade; and (4) complement the first three actions with "the Administration's ongoing commitment to vigorously pursue comprehensive and meaningful reform of state trading enterprises in the WTO agriculture negotiations." USTR said it would not impose a tariff-rate quota at this time, contending that it would violate NAFTA and WTO commitments, could attract Canadian retaliation against U.S. agriculture, and would not achieve a "durable solution" to the market distortions caused by the Canadian Wheat Board monopoly. A variety of measures have been passed or proposed in recent years aimed at improving U.S. producers' ability to obtain relief from what they view as unfair import pricing and/or barriers to their own exports. In some cases, these measures have been offered primarily in response to concerns raised by U.S. agriculture. Often, they have been fueled by the trade problems experienced by other U.S. industries, but nonetheless are or would be applicable across the economy, including agriculture. Some argue that agriculture deserves special treatment under U.S. trade policy in general and trade remedy legislation in particular due to its unique characteristics. Characteristics often cited as in support of special agricultural treatment include the highly perishable and cyclical nature of agricultural products and the importance of a financially healthy farm sector in ensuring adequate food at reasonable prices. However, a counter-argument could be made that modern U.S. agriculture has become far more integrated into, and similar to, much of the rest of the U.S. economy, making special treatment unnecessary. Besides, it could be argued, the sector already is supported – far more than other industries – through an array of extensive and costly price and income supports, export programs, and other government spending that helps to cushion and insulate farmers from trade problems. This section surveys a number of legislative and trade policy developments with potential implications for agricultural producers. Senator Byrd successfully sponsored an amendment to the FY2001 agricultural appropriation ( P.L. 106-387 ; section 1003) that requires that anti-dumping and countervailing duties be redistributed to the domestic industries found to be injured by the imports and subject to the AD and CVD orders. The provision, entitled the Continued Dumping and Subsidy Offset Act of 2000, applies to all industries and not just agriculture. It requires the U.S. Customs Service to deposit the duties into a special account rather than into the general treasury, as previously. Customs then must distribute the funds to eligible firms, farmers, or other producers that were petitioners in the original AD or CVD cases to offset certain expenses they incurred as a result of the dumped or subsidized imports. Customs published on August 3, 2001, a list of AD and CVD orders, and the names of affected domestic producers potentially eligible under the "Byrd Amendment" for a redistribution of FY2001 duty collections. Customs on January 30, 2002, released details on the first disbursements under the Byrd Amendment, which totaled approximately $200 million. Much of the $200 million went to U.S. manufacturers of ball bearings and other steel products. About $22 million of the $200 million was for agricultural AD and CVD cases (generally, those in Table 2 on page 11). Most of the agricultural disbursements were for petitioners in the Italian pasta cases (see Table 2 ), notably to Hershey Foods at approximately $8 million and to American Italian Pasta at more than $7 million. Customs reported that another nearly $2 billion was being held (as of October 1, 2001) in clearing accounts awaiting final liquidation (some but not necessarily all of it ultimately will be paid to AD/CVD petitioners); about $121 million was for agriculture-related cases. The Byrd amendment has been controversial, initially because of criticism that it was inserted into the legislation during conference without committee consideration in either chamber, and more recently because of budgetary and international trade concerns. In late 2000 and early 2001, the EU, Japan, and 10 other countries lodged complaints with the WTO charging that the amendment violates WTO obligations (see below, " Concluding Observations "). Section 407 of the Trade and Development Act of 2000, ( P.L. 106-200 ) directs the USTR periodically to revise the list of products subject to trade retaliation; revision is not required if the USTR determines that implementation of WTO obligations is imminent, or the USTR and the petitioner agree that revision is unnecessary. Impetus for the provision grew largely from the difficulties the United States had in forcing the EU to change its banana import regime and its beef hormone ban (see page 13), even though WTO panels had ruled for the United States and permitted it to impose retaliatory duties against various imports from the EU. Proponents of the carousel provision contend that rotating the list of products subject to retaliation would bring more pressure to bear on the offending party by exposing a broader swath of its economy to economic pain. The USTR began implementing the provision in late May 2000, but product lists have not been changed. The EC has challenged the carousel provision in the WTO as violating the Dispute Settlement Understanding; the proceeding is still in consultations. The United States also reportedly is reluctant to employ "carousel" because of other sensitive U.S.-EU trade matters, particularly in light of a WTO panel decision that a U.S. tax benefit provided to U.S. foreign sales corporations violates trade rules, which could potentially subject the United States to as much as $4 billion in retaliatory tariffs. The amount of retaliation is currently in WTO arbitration. Several bills have been introduced in the 107 th Congress that would make potentially significant changes in existing trade remedy statutes. For example, H.R. 518 , S. 979 , and H.R. 1988 contain various provisions aimed at easing the requirements for determining that imports have caused, or threatened to cause, material injury to a U.S. industry, including but not limited to agriculture. Proposed provisions would, among other things, specify that imports could be one of the causes of injury; they no longer would have to be the primary cause for gaining import relief. Other examples include S. 1869 and H.R. 3571 , both of which would provide for expedited antidumping investigations when imports increase materially from new suppliers after an antidumping order has been issued. S. 979 and H.R. 1988 , which are companion bills, also contain language related directly to agriculture. In determining whether injury has occurred, the ITC effectively would be required, if it determines that a product is a perishable agricultural product with a short shelf life, to measure the economic effects during the course of the product's defined production period or season (i.e., not over a longer period, when the effects of an import might be diluted statistically). Several provisions also specify several factors that should or should not be weighed in determining economic injury. The Administration and congressional supporters are seeking to renew authority for the President to negotiate trade agreements with expedited procedures for legislation to implement those agreements. This authority is commonly called "trade promotion authority" (TPA) or "fast-track authority." As in the past, many (although not all) agricultural groups are among the export-oriented interests that support such authority. It is expected that a final TPA law will include language that recognizes the industry's "special status" and/or makes other special concessions to it. On December 6, 2001, the House narrowly passed, largely along party lines, a TPA bill ( H.R. 3005 ) that would authorize the President to negotiate trade agreements reached by June 30, 2005 (with a 2-year extension possible). The Senate Finance Committee cleared its version of H.R. 3005 on December 18, 2001; full Senate consideration is expected shortly. In part to shore up support for TPA among agricultural groups and also to address their specific trade concerns, proponents of H.R. 3005 have included extensive provisions regarding negotiating objectives and consultation requirements for agriculture. H.R. 3005 includes, among numerous agricultural negotiating objectives: eliminating practices that adversely affect trade in perishable or cyclical products and addressing their trade problems; and ensuring that import relief mechanisms for such products are as accessible and useful to U.S. growers as they are to producers in other countries. Also to garner more support from agricultural members, the bill's House sponsors added language expanding the consultation requirements that U.S. officials must follow before undertaking tariff reduction negotiations on agricultural products considered "import-sensitive" (defined in the House version as those subject to the minimum 2.5% annual reduction required under the URAA). The USTR would have to identify such products – likely more than 200 specific items ranging from cheese and many other dairy products to various fresh fruits and vegetables, sugar and other sweeteners, beef and lamb, oilseeds, wine, tobaccos, cotton, wool, and chocolate – and consult with Congress on how domestic producers would be affected by tariff cuts, among other requirements. The Senate version contains somewhat different language but with the same intent. Some analysts note that while H.R. 3005 and the Senate bill give the President the authority he has sought to proceed with negotiations, provisions in those bills will make it difficult for the President to achieve stated negotiating objectives for agriculture. In particular, analysts say both bills' requirement to consult in advance with Congress before negotiating cuts in tariffs on import-sensitive products, make negotiating tariff reductions more difficult and prevent negotiation of trade-offs between sectors. The Administration, however, has expressed the view that while the fast track bills pose additional hurdles for lowering tariffs on import-sensitive products, in the long-run they provide a "better basis" for negotiations. Several proposals have been offered to extend trade adjustment assistance (TAA) to farmers. TAA programs are available for workers (through the Department of Labor) and for firms (through the Department of Commerce). They provide funds for training and other adjustment measures to those who can demonstrate an adverse impact from imports. Many economists prefer this option over trade restrictive remedies because it directs assistance to those most affected and does so without distorting prices. But TAA programs as currently designed and administered have been criticized by labor advocacy groups as ineffective in responding to workers' needs in a globalizing economy. They also may be of limited value for agriculture. Current legislative authority for TAA for workers and firms expired at the end of FY2001, and the 107 th Congress has been considering legislation to extend it. Proposals to include farmers have been offered, and are included in the major vehicles now under consideration. Senator Conrad introduced, on June 26, 2001, the Trade Adjustment Assistance for Farmers Act ( S. 1100 ), which would add a new chapter to Title II of the Trade Act of 1974 (the TAA authorizing law, at 19 U.S.C. 2251 et seq. ) creating such a program for FY2002-FY2006. The bill's language was incorporated into a broader bill to extend and amend the TAA programs, the Trade Adjustment Assistance for Workers, Farmers, Communities, and Firms Act of 2001 ( S. 1209 ), introduced July 19, 2001, by Senator Bingaman, which was substantially amended and approved by the Senate Finance Committee on December 4, 2001. Under S. 1209 , a group of agricultural producers could petition the Secretary of Agriculture to be certified as eligible for TAA. The Secretary would have 60 days to determine that the national average price for the affected commodity or class of goods from that commodity (for the most recent marketing year) was less than 80% of the average price for the prior 5 years, and imports of like items "contributed importantly" to the price decline. Once such a determination was made, each member of the eligible group could apply to the Secretary for a cash payment equal to: one-half of the difference between the most recent year's national average price and 80% of the preceding 5 marketing years, times his or her production for the year. An individual's benefits would be limited to $10,000 per year, and all claims could be decreased proportionately, if necessary, to maintain the total national cost of the program at a proposed authorized funding cap of $90 million annually. Several bills with similar farmer language have been introduced into the House, including H.R. 3359 and H.R. 3670 . Current TAA eligibility for workers is based on loss of a job. The language in S. 1209 ties payments to the price effects of an imported commodity. Tying subsidies to price and production already is a key feature of a number of existing and proposed farm support programs administered by USDA. The Labor report on TAA for agricultural producers observed that the existing programs for workers emphasize retraining those who have lost their jobs so that they can find other occupations. "Any modifications to these DOL programs such as to provide financial assistance to workers to remain in their current occupations runs counter to the emphasis of these important readjustment programs." The Commerce TAA program for firms "provides opportunities for agriculture commodity producers who have been injured by lost sales and reduced the number of their employees due to increased imports to receive limited technical assistance, on a cost shared basis, that will help them regain their economic competitiveness." However, the program has funding limitations and "no authority to provide any direct financial assistance in the form of loans, loan guarantees, or income supplements, to trade injured firms." USDA officials noted in the report that low commodity prices and reduced farm income are not due primarily to increased imports. "Thus, TAA-type programs with their linkage to increased imports would not help address low prices faced by agricultural commodity producers." The Labor report concluded: Should the [Senate Finance and House Ways and Means] Committees consider legislation designed to assist agricultural commodity producers and workers adversely affected by low prices as a result of imports who desire to remain in their current occupations, we recommend that it be enacted separately and apart from the current trade adjustment assistance for workers or firms programs. As agricultural trade grows, U.S. producers are exposed not only to new sales opportunities overseas, but also to stronger price competition at home as food and farm imports from other countries increase. Often, certain groups of commodity producers perceive such imports as a threat to their livelihoods, and seek relief from the government, either under existing statutes as described above, or through new legislative proposals, some of which have attracted congressional interest. Generally, trade remedy legislation receives the most support from industries – whether agricultural or non-agricultural (e.g., steel, textiles, etc.) – that appear to be the most sensitive to foreign competition. However, opposition to such legislation often is found among other domestic interests, notably U.S. businesses that rely on imports, and consumers who face potentially higher prices due to import restrictions. Other possible costs of trade remedies are the extent, if any, to which they might sustain economically inefficient U.S. producers, heighten international trade tensions, and/or increase government outlays. Trade remedy laws already have come under scrutiny and challenge by the United States' major trading partners, and by the WTO itself. Noting that the United States has continued to make use of AD and CVD measures, the WTO recently stated: "Initiations of investigations may have a chilling effect on trade, with preliminary duties applied in most cases." Turning to the Continued Dumping and Subsidy Offset Act (the Byrd Amendment), the WTO quoted President Clinton as saying it would "provide select U.S. industries with a subsidy above and beyond the protection level needed to counteract foreign subsidies, while providing no comparable subsidy to other U.S. industries or to U.S. consumers, who are forced to pay higher prices on industrial inputs or consumer goods as a result of the anti-dumping and countervailing duties." However, the WTO also has pointed out that the United States is not alone in its use of various import protections for agriculture and other products. Regarding "special" agricultural safeguards in particular, the WTO reported that 38 of its member countries currently have reserved the right to use a combined total of 6,072 of them, which it defines as "contingency restrictions on imports taken temporarily to deal with special circumstances such as a sudden surge in imports." These are permitted generally under the UR Safeguards Agreement. With the United States in mind, the European Union and Japan, for example, have called for a review of the antidumping practices of WTO countries in the new round of multilateral trade negotiations, which are now getting under way. The United States had opposed such a review. However, U.S. negotiators subsequently agreed to language – in the November 2001 Doha declaration that began a new round of multilateral trade negotiations – that calls for "simplification and clarification" of countries' laws on antidumping and safeguard laws. USTR Zoellick recently told the Senate Finance Committee that the language is intended to encourage developing countries to bring their own trade relief measures up to U.S. standards (and to replace language that potentially would have been more unfavorable to the United States). However, several committee members sharply criticized the USTR for exposing the U.S. trade relief laws to potential weakening in the multilateral negotiations. Meanwhile, the U.S. position continues to be for further reductions in agricultural trade barriers. Some foreign governments might suggest that this position is inconsistent with the U.S. opposition to examining anti-dumping practices. Still, U.S. producers are likely to resist changes in U.S. law, and possibly to push for stronger protections, so long as they perceive foreign competitors engaging in unfair subsidization of their own agricultural producers. Appendix A. Dispute Settlement in Trade Agreements WTO Uruguay Round Agreements Understanding on Rules and Procedures Governing the Settlement of Disputes The Uruguay Round Agreements include a Dispute Settlement Understanding that sets out rules and timetables for resolving disputes. Disputes arise when one country adopts a trade policy measure or takes some action that one or more WTO members considers a violation of a WTO agreement or to be a failure to live up to obligations. A third group of countries can declare their interest in the case and enjoy some rights as well. Settling disputes is the responsibility of the Dispute Settlement Body (DSB). The first stage in dispute settlement is consultation between the governments concerned. (Consultation is always a possibility even in later stages of dispute settlement.) Consultation can take up to 60 days. If consultations fail, the complaining country can ask for the appointment of a panel (up to 45 days). The other country can block the creation of a panel once, but when the DSB meets a second time, the panel can no longer be blocked. The panel reports to the parties within 6 months and makes a final report to all WTO members within 3 weeks. The DSB adopts the report within 60 days. If there is no appeal, the process should take about 1 year. Either side, however, can appeal the panel's ruling on points of law. Appeals are heard by three members of a permanent seven-member Appellate Body. Appeals should not last more than 60 days, with a maximum of 90 days. The DSB has to accept or reject (by consensus) the appeals report within 30 days. With appeal, the process should take about 1 year and 3 months. The losing country must follow the recommendations of the panel or appeals report and state its intention to do so within 30 days of the report's adoption. Countries can be given a reasonable period of time to comply. If a country fails to act within this period, it has to enter into negotiations to determine mutually acceptable compensation. If after 20 days, no satisfactory compensation is agreed, the complaining country may ask the DSB for permission to impose trade sanctions which the DSB should grant within 30 days or the expiration of the "reasonable period of time." North American Free Trade Agreement Chapter 20 Dispute Settlement Disputes arise when one NAFTA country complains that another NAFTA country has taken, or is proposing to take, action inconsistent with the Agreement or that nullifies or impairs benefits that the complaining country thinks would accrue under the Agreement. Complaints arising under both NAFTA and the WTO may be settled in either forum at the discretion of the complaining party (with some exceptions). Consultation which can take from 15 to 45 days is the first stage of dispute settlement. If disputing parties cannot resolve the complaint, normally within 30 days, after consultations have begun, a country may refer the issue to the NAFTA Commission for resolution. The Commission must convene within 10 days to consider the issue. If the Commission is unable to resolve the dispute within 30 days, any country that participated in the dispute may convene an arbitral panel. Panel members normally are selected from rosters maintained by each NAFTA country. Roster members must be experts in law, international trade, or matters covered by NAFTA or in dispute resolution. (Selection procedures are intended to ensure that NAFTA members can select experts in particular subject matters of a dispute to serve on panels.) A five-member panel is chosen by "reverse selection." A chairman is chosen by agreement or by lot. Then each "side" in the dispute selects two panelists from among citizens of the other "side." Experts or scientific review boards may be used where disputes require their advice, as for example, in matters concerning sanitary and phytosanitary or other scientific or technical matters. Panels must make their initial report, including findings and recommendations for resolution of the dispute, within 90 days of the selection of the last panelist. Disputing parties have 14 days to provide written comments on the panel's report. The panel has 30 days then to make its final report to the disputing parties. When the disputing parties receive the final report, they must attempt to resolve the dispute according to the panel's recommendations. If no agreement is reached, the parties must agree on trade compensation for the complaining party. If a panel has found that a measure is inconsistent with NAFTA and no settlement has been reached within 30 days or an agreed period, the complaining party may suspend the application to the other party of NAFTA benefits. Suspension of benefits may remain in effect until the parties have resolved the dispute. Settlement in Anti-dumping and Countervailing Duty Cases Each NAFTA country retains its national antidumping (AD) and countervailing duty (CVD) laws and can amend them. In the case of amendments, NAFTA parties should notify and consult with the affected party in advance and also specify application to the goods of the other party where this is intended. NAFTA governments may invoke a procedure whereby independent panels of experts (preferably judges or attorneys) review antidumping and countervailing duty determinations by the relevant administrative agencies in the NAFTA countries when those determinations concern products of a NAFTA country. Governments have agreed to seek review when interested persons wish to challenge an agency AD/CVD determination and who otherwise would have standing to challenge such a determination in court. The panels apply exclusively the national law and standards of judicial review of the country whose AD or CVD determinations are under review. Panels are chosen from rosters maintained by each country in a manner similar to Chapter 20 dispute settlement procedures. NAFTA Governments may appeal a panel decision to a three-member extraordinary challenge committee (ECC) whose members are selected from rosters of judges maintained by NAFTA countries. If the ECC finds serious ethical violation, or serious legal or procedural error, and if it finds that such actions threaten the integrity of the binational panel process, then the ECC could vacate or remand the panel decision. Appendix B. Antidumping and Countervailing Duty Cases for Food and Agricultural Products Initiated Since January 1, 1980 | U.S. laws provide a variety of avenues for U.S. industries, including agricultural producers, to seek relief when they believe they have been by injured by imports or unfair trade practices. Currently, federal law provides for four primary trade remedies. Three of these – safeguards, countervailing duties, and anti-dumping duties – address concerns about the impacts of competing imports. The fourth remedy, commonly called Section 301, is the principal tool to challenge (under dispute settlement procedures in international trade agreements where applicable) unfair foreign trade practices that affect U.S. commerce generally, including exports to other countries. Recent examples of prominent agricultural import cases concern cattle from Mexico and Canada; wheat from Canada; lamb meat from Australia and New Zealand; wheat gluten from the European Union; and apple juice and honey from China. The use of trade remedies has grown along with increased U.S. involvement in bilateral and multilateral trade agreements. The availability of trade remedies is viewed as a cushion against the potentially negative impacts of trade liberalization on import-sensitive products – a number of them agricultural – thus helping to build broader political support for trade agreements. On the other hand, trade remedies also can have costs, to the extent that they raise import prices for U.S. consumers and processors, sustain economically inefficient U.S. producers, heighten international trade tensions, and/or increase government outlays. A range of bills have been introduced in recent Congresses, including the 107th, to change various trade remedy laws, mostly with the objective of increasing the likelihood that domestic industries will prevail when they seek such assistance. Other bills propose tools for helping U.S. industries cope with import competition – such as extending trade adjustment assistance to farmers. Current U.S. trade remedy laws already have come under scrutiny and challenge by the United States' major trading partners. Over the next few years, the World Trade Organization will be involved in negotiations aimed at clarifying the antidumping and subsidies agreements. U.S. officials point out that these negotiations are premised on preserving the "basic concepts, principles and effectiveness of these Agreements and the instruments and objectives." Some U.S. trading partners suggest that this position is inconsistent with past U.S. opposition to discussions that examine anti-dumping practices with a possible view toward revision. Still, U.S. agricultural producers are likely to resist changes in U.S. law, and possibly to push for stronger protections, so long as they perceive foreign competitors are engaging in unfair subsidization of their own agricultural producers. |
In the 110 th Congress, Members have introduced numerous bills that would directly or indirectly address climate change. This report describes and compares bills that directly address climate change, as opposed to those that primarily address other issues (e.g., energy efficiency and conservation) but could have ancillary impacts on climate. In some cases, it is difficult to draw a line 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 or sections—that explicitly address climate change issues. These bills fall into six major categories: (1) research on the causes and effects of climate change and on methods to measure and predict climate change; (2) deployment of emission-reducing technologies in the United States or other countries; (3) requirements for U.S. participation in international climate agreements; (4) investments in systems to adapt to changes in climate; (5) establishment of greenhouse gas (GHG) monitoring systems as a basis for research or for any potential reduction program; and (6) implementation of mandatory GHG emission reduction programs. These categories are not mutually exclusive, and several bills address more than one of the above categories. There has been considerable interest in climate change issues in the 110 th Congress. As of the date of this report, Members have introduced more than 100 bills that would directly address climate change issues. Congress has enacted six legislation proposals that address climate change to some degree: P.L. 110-140 : The President signed the Energy Independence and Security Act of 2007 December 19, 2007. Among other provisions, some of which indirectly address GHG emissions, this act amends the Energy Policy Act of 2005 to expand the carbon capture research and development program. It also directs the Department of the Interior to conduct a national assessment of geologic storage capacity for carbon dioxide (CO 2 ), and instructs the Department of Energy to implement a program to demonstrate technologies for the large-scale capture of CO 2 from industrial sources of CO 2 . In addition, the act establishes within the Department of Transportation an Office of Climate Change and the Environment to coordinate research and implement strategies to address transportation issues associated with climate change. P.L. 110-161 : The President signed the Consolidated Appropriations Act of 2008 into law December 26, 2007. Among other provisions, this statute directs EPA to promulgate regulations that require mandatory reporting of GHG emissions "above appropriate thresholds in all sectors of the economy." The act directs EPA to develop the proposed rule by September 2008 and the final rule by June 2009. In addition, the act instructs NOAA to work with the National Academy of Sciences to establish a Climate Change Study Committee that will study climate change issues and make recommendations regarding climate change mitigation strategies. P.L. 110-181 : On January 28, 2008, the President signed the National Defense Authorization Act for Fiscal Year 2008. In addition to many non-climate related provisions, the act directs the Department of Defense to assess the risks of projected climate change to the department's facilities, capabilities, and missions. P.L. 110-229 : On May 8, 2008, the President signed the Consolidated Natural Resources Act of 2008. Among other provisions, the act requires the Secretary of Energy, when reviewing research and development activities for possible inclusion in the steel research and development initiative, to expand the plan in order to consider among steel project priorities the development of technologies that reduce GHG emissions. P.L. 110-246 : On June 18, 2008, Congress enacted (overriding the President's veto) the Food, Conservation, and Energy Act. Among many other provisions, the act (Section 2709) directs the Department of Agriculture (USDA) to establish technical guidelines to "measure the environmental services benefits from conservation and land management activities in order to facilitate the participation of farmers, ranchers, and forest landowners in emerging environmental services markets." USDA is to give priority to carbon markets. P.L. 110-343 : On October 3, 2008, the President signed the Emergency Economic Stabilization Act of 2008. Among many other provisions, the legislation provides a tax credit for select (geologic) carbon sequestration activities. In addition, the act directs the Department of Treasury to enter into an agreement with the National Academy of Sciences (NAS) to "undertake a comprehensive review of the Internal Revenue Code of 1986 to identify the types of and specific tax provisions that have the largest effects on carbon and other greenhouse gas emissions and to estimate the magnitude of those effects." NAS is to report its findings to Congress by October 3, 2010. In addition to enacted legislation, the House and Senate have passed several bills. Numerous bills have been reported out of committees. These bills address a range of climate change topics. These topics are discussed briefly below. Appendix A categorizes the bills and enacted legislation by the topics discussed below. Appendix B provides a brief summary of each bill's provisions and status in the legislative process. Global climate change is a complex issue. While most scientists agree that the climate is changing in response to GHG emissions, uncertainties concerning the causes and effects of climate change remain and are a continuing subject of extensive scientific research. These uncertainties include the potential effects on natural systems, as well as effects on social and political systems. Further, research is ongoing regarding technologies that improve efficiency, reduce fossil fuel consumption, and capture and store carbon dioxide (CO 2 ) emissions. One approach to addressing climate change is to promote the deployment and diffusion of technologies to reduce GHG emissions, such as carbon capture and storage (or sequestration). Within the legislative proposals, there are different methods of promoting technology deployment. One deployment strategy may involve tax incentives for investment in technologies to improve efficiency and/or lower emissions. Other deployment strategies would provide grants, loans, and other incentives for technology transfer to developing countries. In the 110 th Congress, some bills deal solely with technology deployment through tax incentives for lower-carbon technology or grants to develop and deploy carbon capture and sequestration, or through requirements that the federal government use technology with lower emissions. Other bills that create mandatory GHG reduction programs also include technology deployment as one component. The United States ratified the United Nations Framework Convention on Climate Change (UNFCCC) in 1992. Five years later, the United States signed the convention's Kyoto Protocol, but it was never submitted to the Senate for ratification. In 2001, President George W. Bush rejected the Kyoto Protocol and withdrew the United States from subsequent negotiations. Since that time, the United States has entered into other cooperative agreements, including the Asia-Pacific Partnership on Clean Development and Climate. This partnership focuses on voluntary action by member states to promote cleaner technology and related goals. However, U.S. participation in discussions over binding agreements has been limited. Some critics of GHG regulation argue that the effects on global GHG concentrations—and consequently the effects on climate—from any reduction scheme will be limited. Some therefore contend that investment should focus on preparing communities and systems to adapt to the effects of a changing climate. This notion is shared by some proponents of GHG regulation, who argue that because of earlier greenhouse gas emissions, some level of warming will occur regardless of mitigation activity. Those stakeholders support adaptation initiatives in concert with mitigation efforts. Pursuant to the UNFCCC, the United States publishes annual reports on its GHG emissions. The U.S. Environmental Protection Agency (EPA) reports this information using various techniques (e.g., fuel analysis for CO 2 ). The 2005 emissions estimates indicate that the three dominant sources of GHG emissions are electricity generation (33%), transportation (28%), and industry (19%). At the national level, the 1990 Clean Air Act requires most electric utilities to report their GHG emissions, but there is no overall national GHG reporting requirement. However, some states also gather data through voluntary registries or mandatory GHG emissions reporting mechanisms. The United States has no federal GHG reduction requirements, although there have been proposals to require such reductions. These proposals include "command and control" regulations and market-based techniques to limit emissions. Market-based programs typically take as their model the Clean Air Act's acid rain program, which employs a cap-and-trade design to control several air pollutants. Cap-and-trade systems set strict limits on specific emissions from a particular group of sources. Sources may reduce their own emissions or purchase credits (i.e., trade) from other sources that have reduced emissions below their individual allotment. This flexibility in who makes reductions can lead to lower costs. In an efficient market, entities that face relatively low emission-reduction costs would have an incentive to achieve extra emission reductions, because these additional reductions could be sold to entities that face higher emission-reduction costs. An entity facing higher costs could purchase allowances that would allow it to emit more than its initial emissions allotment. Total U.S. emissions may decrease or increase, depending on the entities covered, the GHGs controlled, and the emissions trading schemes. In the 110 th Congress, some bills cover just the electric utility sector, while others cover most or all emissions throughout the economy. Another market-based option is to establish a "carbon tax"—a direct tax on GHG emissions or on the fuels that generate emissions when combusted. To the extent that emissions reductions can be achieved at costs lower than the tax rate, those reductions will be undertaken; if emissions reductions are more expensive, covered entities would opt to pay the tax. In this way, there is an upper limit to the cost of the control program. Members have introduced several bills in the 110 th Congress that would control emissions from only the electric utility sector. The rationale for such a policy is that electricity generation emits the highest percentage of GHGs by sector, and the number of covered sources would be relatively small compared to other sectors (e.g., transportation). Moreover, power plants have experience with reporting (if not reducing) their CO 2 emissions under the Clean Air Act. Sector-specific bills generally fall into two categories: (1) bills that would control only GHGs and (2) bills that would control both GHGs and other pollutants such as mercury, sulfur dioxide, and nitrogen oxides. This latter category of bills is generally referred to as "multi-pollutant" legislation. A broader approach is to require emission reductions from multiple economic sectors. Several bills in the 110 th Congress would apply to most or all U.S. GHG emissions. These bills are often described as an "economy-wide" GHG reduction approach. These bills vary in their coverage: some bills cover the most high-emitting sectors (e.g., electricity generation, industry, and transportation) while excluding other sectors (e.g., residential and commercial); other bills grant EPA broad authority to establish regulations to reduce the most emissions at the lowest cost. Appendix A. Major Focus Areas of Climate Change Bills and Enacted Legislation in the 110 th Congress Appendix B. Key Provisions of Climate Change Legislation in the 110 th Congress | Congressional interest in climate change legislation has grown in recent years. In the 110th Congress, Members have introduced numerous bills that directly address various aspects of climate change. These bills cover a wide spectrum, ranging from climate change research to comprehensive greenhouse gas (GHG) emissions cap-and-trade programs. As of the date of this report, Congress has enacted six broader pieces of legislation that—among many other non-climate-related provisions—address climate change in some fashion: P.L. 110-140 expands the carbon capture research and development program, requires a national assessment of geologic storage capacity for CO2, and supports technologies for the large-scale capture of CO2 from industrial sources. The act also establishes an Office of Climate Change and the Environment to coordinate research and implement strategies to address climate change-related transportation issues. P.L. 110-161 directs the Environmental Protection Agency (EPA) to develop regulations that establish a mandatory GHG reporting program that applies "above appropriate thresholds in all sectors of the economy." P.L. 110-181 directs the Department of Defense (DOD) to assess the risks of projected climate change to the department's facilities, capabilities, and missions. P.L. 110-229 requires the Secretary of Energy, when reviewing research and development activities for possible inclusion in the steel research and development initiative, to expand the plan in order to consider among steel project priorities the development of technologies that reduce GHG emissions. P.L. 110-246 directs the Department of Agriculture (USDA) to establish technical guidelines to "measure the environmental services benefits from conservation and land management activities in order to facilitate the participation of farmers, ranchers, and forest landowners in emerging environmental services markets." USDA is to give priority to carbon markets. P.L. 110-343 provides a tax credit for select (geologic) carbon sequestration activities. In addition, the National Academy of Sciences (NAS) is "to identify the types of and specific tax provisions that have the largest effects on carbon and other greenhouse gas emissions and to estimate the magnitude of those effects." NAS is to report its findings to Congress by October 3, 2010. This report briefly discusses the basic concepts on which climate change bills are based, and compares major provisions of the bills in each of the following categories: climate change research; emissions reduction technologies; U.S. actions pursuant to international emission reduction agreements; adaptation to the effects of climate change; GHG reporting and registration; and GHG emissions reduction programs. |
A major policy concern for Congress has been when and whether to address the "fiscal cliff," tax increases and spending cuts that would have substantially reduced the deficit in 2013 relative to 2012. According to projections in March 2012 by the Congressional Budget Office (CBO), this fiscal restraint constituted 5.1% of output in 2013 and was projected to reduce growth to 0.5% from 4.4%. Unemployment would have increased by 2 million. CBO's August 2012 midyear update of economic and budget projections projected growth for 2013 at an even lower level, a negative 0.5%, with a contraction of 2.9% in the first half of the year, which would likely be considered a recession. The unemployment rate would have risen to 9.1% by the fourth quarter of 2013. The American Taxpayer Relief Act, H.R. 8 , eliminated a number of provisions of the fiscal cliff, primarily by extending most expiring tax cuts. Policy choices with respect to the fiscal cliff are difficult because of the conflict between short-run and long-run economic and budgetary objectives. In the short run, the reduction in demand from the reduced budget deficit could damage an already fragile recovery. In the longer run, however, deficit reduction is needed to address a projected unsustainable debt level. Aside from these issues of short-run stimulus and long-run deficit reductions, a variety of other issues arise, such as effects of marginal tax rates on behavior and distributional considerations. These issues are acknowledged at the conclusion of the report but are not addressed in detail. Some legislation had already been introduced in 2012, primarily associated with a temporary extension of some or all of the 2001 and 2003 (so-called Bush) tax cuts (last extended in 2010) and with the increased taxes under the alternative minimum tax (AMT). The latter provision has been the subject of a continual temporary "patch," largely to keep the exemption current with inflation, with the last patch having expired at the end of 2011. Republican proposals, H.R. 8 and S. 3413 , would have extended the Bush tax cuts for another year and extended the AMT patch for two years. An amendment drafted by Senator Orrin Hatch would have extended the Bush tax cuts for another year with a one-year AMT patch for 2012 ( S.Amdt. 2491 proposed but not offered to S. 2237 ). A Democratic proposal, S. 3412 , would have extended the Bush tax cuts, except for the estate tax and the tax cuts for high-income individuals, while also extending some provisions originally enacted in the 2009 stimulus legislation (the American Recovery and Reinvestment Act of 2009 [ARRA]; P.L. 111-5 ). S. 3412 has a one-year AMT patch for 2012. Legislation has also been proposed to address other expiring tax cuts. The final legislation, H.R. 8 , contained most of the elements of these proposals, although it made most of the 2001 and 2003 tax cuts and the AMT patch permanent, rather than extending it temporarily. It allowed some of the 2001 and 2003 tax cuts to expire for higher-income individuals but at a higher level than S. 3412 . Other expiring tax provisions were extended through either 2017 (the 2009 stimulus provisions) or through 2013 (depreciation provisions and the other "extenders" that have been enacted on a temporary basis). It also addressed some of the spending reductions. The first section of this report summarizes the size and composition of the original fiscal cliff. The next section provides details of recent legislation. The following sections review aggregate economic effects, the differential effects of components of the cliff, and the magnitude of the remaining contractionary effects. Earlier legislative proposals are summarized in an appendix. The Congressional Budget Office defined the fiscal restraint as being composed of the following: The expiration of tax cuts originally enacted in 2001 and 2003 (popularly referred to as the Bush tax cuts), and extended in December 2010, which were to expire at the end of 2012. The 2001 tax cuts include the 10% rate bracket (lowered from 15%) and the lower rates for higher-income individuals (25%, 28%, 33%, and 35%, compared with 28%, 31%, 36%, and 39.6%); the elimination of the phase-out of itemized deductions and personal exemptions (PEP and Pease); the increase in the child credit; the provisions reducing the marriage penalty (increasing the standard deduction and width of lower rate brackets for joint returns); the reduction in the estate tax; and some other smaller provisions. The 2003 tax cuts are the lower rates for dividends (15% rather than ordinary income tax rates) and capital gains (15% rather than 20%). The expiration after 2012 of some smaller tax provisions enacted in the 2009 stimulus legislation—generally more beneficial provisions for education (American Opportunity Credit) and greater refundability of the child credit. The AMT "patch," a temporary increase in the exemption for the alternative minimum tax to reflect inflation, along with some smaller changes to continue allowing certain credits against the tax. The AMT patch had already expired at the end of 2011. The temporary two-percentage-point reduction in the employee's share of the Social Security payroll tax that was to expire at the end of 2012. Other tax provisions that expired at the end of 2011, or were scheduled to expire at the end of 2012, the largest of which is the expiration of bonus depreciation (end of 2012). Also included are expensing provisions for small business (Section 179 expensing) and the "extenders," a series of temporary provisions that are normally reinstated whenever they expire. Taxes imposed beginning in 2013 by the Affordable Care Act (health reform), including the additional "Medicare" tax and other taxes, such as those on medical devices. The automatic spending reductions in the Budget Control Act (BCA) adopted in 2011. The lapse of extended unemployment benefits at the end of 2012. Reductions in payments to physicians under the Medicare Sustainable Growth Rates that have been overridden only on a temporary basis and would have taken effect automatically. Increasing these payments is referred to as the "doc fix." Table 1 lists the effects on the deficit of those provisions for FY2013 compared with FY2012, with the first three bulleted items listed above combined. Because most provisions change on a calendar year basis, the effect on FY2013, which ends at the end of September, reflects the effects for the first three quarters of the calendar year and not the full year's effect. The share of the calendar year effect reflected in the fiscal year varies, however, from one provision to another. For example, the rate changes in the 2001 tax cuts would be reflected in withholding at the beginning of 2013, so that the FY2013 changes would generally capture less than a year's effect. The effects of the lapse of the AMT patch in 2011 would largely be reflected in FY2013, because it is not generally captured in withholding, but would be collected when tax returns are filed by mid-April of 2013. Effects of the estate tax would generally be small because of the lag in filing estate tax returns. As Table 1 shows, the fiscal cliff was largely composed of tax increases, which accounted for 80% of the total associated with legislative changes, and two-thirds of the total when including changes arising from non-policy sources. CBO also analyzed a subset of these provisions that are part of its alternative baseline. While CBO's baseline reflects current laws (and hence assumed the Bush tax cuts would expire at the end of 2012), the alternative baseline assumed that all tax cuts except the payroll tax reduction would be extended, the AMT patch would occur, the doc fix is made each year, and the Budget Control Act automatic spending cuts do not occur, although the discretionary spending caps remain. This scenario, therefore, assumed that the payroll tax cuts would not be extended, that the health taxes would occur as scheduled, and that the extended emergency unemployment benefits would not be continued. The provisions that are retained as part of the alternative baseline account for $362 billion of the $607 billion total in Table 1 , or 60% of the total, and 72% of policy-related changes. Within the $362 billion, 79% of this amount covers extensions of expiring tax cuts, 3% the doc fix, and the remaining 18% spending effects. In Table 1 , many of the estimates are in broad categories. Expirations of individual income tax cuts are largely combined into one major category that accounts for 44% of the policy-related fiscal cliff of $502 billion. Extension of these tax cuts had been the major focus of legislative efforts to substantially reduce the fiscal cliff. Note also that, by combining these provisions, there are no separate estimates of the three expiring provisions listed in the second line in Table 1 . In particular, the AMT patch, which were the most likely of the provisions to be adopted and might have been altered earlier than other provisions (because it related to tax returns being filed as early as January 2013), did not have a separate estimate. However, CBO has elsewhere reported separate estimates that indicate that the estimate for the AMT patch is $89 billion, making it 40% of the total for the sum of the AMT plus the 2001, 2003, and 2009 tax cuts. Note, however, that interactions between provisions means that it would make a difference whether the AMT is patched by assuming the Bush tax cuts expire or are made permanent. The patch costs more when the tax rates are lower because more taxpayers fall under the AMT. The cost of the AMT patch would be larger if it was estimated by assuming the tax cuts are made permanent. While not an official "score," Table 2 provides detailed estimates for FY2013 and FY2014 of the deficit effects of the provisions in the original fiscal cliff by the Committee for a Responsible Federal Budget (CRFB). This table estimates the increase in the deficit compared with current law due to a permanent extension of expiring tax cuts, AMT patch, and extenders, and a permanent elimination of most spending cuts, including the doc fix. It also assumes that the Affordable Care Act taxes will not take effect. However, it assumes that the payroll tax and additional unemployment benefits are extended for one year. These estimates have more detail on the components of the cliff as compared with Table 1 . They can also be calculated for both FY2013 and FY2014. The estimates for two fiscal years provide some insight into timing effects. These effects are important because, the earlier the effects occur, the greater the contraction in short-run demand. The estimates in Table 2 differ from Table 1 , which reports the projected decreases in the deficit, including changes outside of policy choices. Hence, the total CRFB estimates are about $500 billion, the rough total of policy-related provisions in Table 1 , and do not include the additional $105 billion from economic factors not related to policy. If all taxes were reflected only in withholding, the FY2014 costs would be slightly more than a third the size of the FY2013 cost because FY2013 is only three-fourths of calendar year 2013. This pattern is seen in the rate reductions at higher-income levels. For many of the tax changes, outside of rate reductions, effects are less likely to be fully captured in withholding, and they occur when tax returns are filed. Thus a smaller effect occurs in FY2013, and effects for calendar year 2013 would in part appear with the filing of tax returns in 2014. Capital gains revenue patterns appear to measure the effect of not extending the lower rate and presumably include the expectation that gains would be realized in the last quarter of 2012 in advance of the tax rate increase (and thus reflected in 2013 with the filing of FY2012 tax returns). Very little of the estate tax revenues would be reflected in FY2013 because estate tax returns do not need to be filed until nine months after death (so that no estate tax returns would be required in FY2013 for calendar year 2013 decedents); these returns are also sometimes allowed extensions. Because the AMT patch had already expired for 2012 and is in part reflected when returns are filed, more tax increase occurs in FY2013 than in subsequent years. Note also that the AMT patch costs more if the lower tax rates are extended, and there is also then a different distribution across fiscal years. If the tax cuts expired, the higher regular tax rates mean that fewer individuals would be on the AMT. Thus the $90 billion figure for FY2013 is the cost if current law remains in place (and higher tax rates come into play), whereas $125 billion is the cost if tax cuts are extended. In revenue estimates presented for legislative proposals, the AMT is scored last and so reflects the rate changes included in the bills. Note that some proposals would have provided a two-year AMT patch, and the second year would largely appear in FY2014. Because the Social Security payroll tax and unemployment benefits are assumed to be extended for only a year, the costs of those policies are concentrated in FY2013. As compared with the original policy-related fiscal cliff, H.R. 8 's offsets are smaller, and the changes are more concentrated in tax cuts. These calculations compare effects from H.R. 8 (reported in detail in Table 3 ) to the measures in Table 1 . However, there is some indication from subsequent tax estimates that the original fiscal cliff was about $10 billion larger for FY2013 and this higher number is used which makes a slight difference. Table 3 also reports the total costs over the budget horizon, which are more relevant for long-term effects on the debt. Note that the cost estimates are compared with the current law baseline, a baseline that presumes the fiscal cliff provisions occur. Thus, they indicate a revenue loss from tax changes and an increase in spending. However, compared with current policies that have been in practice (lower taxes and higher spending) they indicate a tax increase and a spending cut. The reduction in revenues and increases in spending for FY2013 are 64% of the policy-related fiscal cliff. The decrease in the deficit is 54% of the total fiscal restraint including non-policy-related effects. The share in tax cuts is slightly higher in H.R. 8 , 85%, than in the original policy-related fiscal cliff, which was 80%. The share of tax increases in the fiscal cliff offset for FY2013 is 68%. The tax increases that were not addressed were the payroll tax (23%), the tax increases in the Affordable Care Act (4%), and the tax increases from the 2001-2003 tax cuts for high-income individuals (4%). Rate increases (including a marginal rate increase to 39.6% and increases in capital gains and dividend rates to20% for joint returns with taxable incomes over $450,000 and single returns with taxable incomes over $400,000), plus the retention of PEP and Pease for joint returns with adjusted gross incomes over $300,000 and single returns over $250,000). The rate for the estate tax was increased from 35% to 40% although the $5 million exemption was retained and indexed. Less than half (47%) of the spending decreases were offset. Most of the spending cuts in the Budget Control Act (78%) are still in place. More than 98% of the long-run cost is in tax cuts. As these observations suggest, there continues to be a significant fiscal restraint that will exert a contractionary effect on the economy, with the largest effects from increased payroll taxes and across-the-board budget cuts. The contraction in aggregate demand resulting from the original fiscal cliff, according to standard economic analysis, would have reduced output and employment in the economy. A number of estimates and comments suggested that the fiscal cliff, which CBO expected to reduce the deficit by 5.1% of output in calendar year 2013, would also reduce aggregate demand and have a large negative effect on the economy in the short run. Chairman of the Federal Reserve Ben Bernanke indicated in testimony before Congress that, while there is a need for long-run debt sustainability, the tax increases and spending cuts occurring in 2013 could endanger the recovery. The International Monetary Fund, an organization that often stresses the need for reducing debt levels, expressed concern that the fiscal cliff would damage the U.S. and worldwide economy and recommended that the deficit decrease by only 1% of GDP (output), about a fifth of the fiscal cliff. The IMF also identified the fiscal cliff as the most important risk to global recovery: In the short term, the main risk relates to the possibility of excessive fiscal tightening in the United States, given recent political gridlock. In the extreme, if policymakers fail to reach consensus on extending some temporary tax cuts and reversing deep automatic spending cuts, the U.S. structural fiscal deficit could decline by more than 4 percentage points of GDP in 2013. U.S. growth would then stall next year, with significant spillovers to the rest of the world. In its May 2012 report, CBO considered a range of estimates. The midpoint of those estimates indicated that, if the fiscal cliff occurred, GDP would actually contract by 1.3% in the first half of calendar year 2013, with growth of 2.3% in the second half, for an overall growth over the year of 0.5%. With elimination of the fiscal cliff, their midpoint estimate indicated that growth would be 4.4% (5.3% in the first half and 3.4% in the second half). Thus, the fiscal cliff would be projected to lead to a reduction in output of 3.9%. CBO projected that not eliminating the fiscal cliff would have increased unemployment by 2 million. CBO's analysis noted some uncertainty about these effects. Although the midpoint estimate was a reduction of 3.9% of output, the range of potential effects of the fiscal cliff in the CBO analysis was set at 0.9% to 6.8% of output. Thus, the effects might have been considerably smaller, but they also could have been much larger. CBO did not explicitly analyze the fiscal cliff in its August 2012 budget update, but it did project a larger initial contraction of 2.9% in the first half of 2013 under current law, followed by a 1.9% increase, with unemployment reaching 9.1% by the last quarter. This contraction would qualify as a recession. The overall difference in output was about 5%. Other forecasters projected similar effects, although they varied somewhat in what they included in the fiscal cliff. Mark Zandi of Moody's Analytics estimated a fiscal cliff deficit reduction at 4.6% of output, producing a contraction of 3.6% of output. Morgan Stanley reported a deficit effect of 5% of output, for a contraction of 5% of output, and Goldman Sachs reported a deficit effect of 4% of output, for a contraction of 4% of output. IHS Global Insight assumed that the fiscal cliff would be avoided in its forecasts but indicated that going over the fiscal cliff would lead to recession. The principal reason the fiscal cliff had such a potential to slow and even contract the economy in the short run was its size. At a deficit reduction of 5% of GDP, the changes in policies constituted a large contractionary effect. However, the effect of the fiscal cliff on the economy also depends on the mix of policies. The differential contractionary effects of different elements of the fiscal cliff could have played a role in balancing short-term and long-run objectives. The contractionary effect of spending cuts and tax increases occurs because these changes reduce spending and contract demand. Reductions in direct spending directly reduce demand, and increases in taxes or decreases in transfers may partly cause a reduction in savings and partly a reduction in private spending. This decreased demand causes fewer workers to be hired and less output to be produced; some of the resulting reduced income also reduces spending, with another round of contraction. The outcome of these successive rounds of reduced spending are called multipliers. There are forces in the economy that limit the effects. For example, with a relatively small contraction for an economy at full employment, the multiplier could be close to zero because the contraction may lower interest rates or prices or both without any real output effects. Even with an underemployed economy, there are aspects that dampen the effects on the economy. For example, part of each round of decreased income reduces savings rather than spending, or some part of the contraction in demand decreases imports rather than domestic production, or some of the contraction drives down interest rates and increases private investment. (During this recession and recovery, there has been little evidence of fiscal policies altering interest rates.) The CBO projections initially indicated an aggregate multiplier for the fiscal cliff of 0.76 (a 3.9% contraction in output divided by a 5.1% decrease in the deficit relative to output). Zandi's multiplier is about the same at 0.78 (3.6% divided 4.6%), whereas the other two forecasters indicate multipliers of one. CBO's later projections indicated a multiplier closer to one. A crucial feature that causes different policies to have different effects is the size and speed of the first round of spending cuts. If the federal government decreases direct purchases of goods and services, spending is reduced by 100% of that amount. However, if the government increases taxes, individuals would reduce spending by only a fraction of that tax increase (with savings falling as well). If only half of a tax increase decreases spending, a tax multiplier is half as large as a spending multiplier. Reduced transfers and tax increases for low-income individuals are likely to reduce spending because these individuals are usually liquidity constrained (unable to borrow to meet their spending objectives). Higher-income individuals are more likely to reduce spending by a smaller share of a tax increase, and businesses are also unlikely to change their spending very much. Reductions in transfers to state and local governments may also partially reduce savings, although these governments are now generally financially constrained and may be more likely to reduce spending. There are also issues of timing. If spending increases are authorized but cannot take place quickly, their effect would be delayed. This concern was a significant one in considering spending increases in 2009, particularly with respect to infrastructure, where a planning period might have been needed. Of course, that timing issue would be different because the policy in this case involves not a spending increase, which could take some time but avoiding a spending cut. Presumably, cuts could be made more quickly than increases. (Note that in measuring the fiscal cliff, CBO projects spending changes under the BCA, not changes in budget authority.) The general patterns of differentials can be seen in CBO's analysis of the effects of the 2009 stimulus (tax cuts and spending increases to expand the economy) as shown in Table 4 . Considering the midpoint of multipliers in the last column, changes in federal spending have a higher multiplier than a low-to-middle-income tax change. Tax changes for higher-income individuals and businesses have the smallest multipliers. Transfers to individuals (such as unemployment benefits) have a somewhat smaller multiplier effect than spending changes but considerably higher effects than tax cuts. Similar patterns are found in some of the alternatives reported in earlier testimony shown in Table 5 . The smaller effect of infrastructure may reflect expectations that the spending will occur slowly (whereas in Table 4 that spending is already in place). Both of these tables show multipliers from stimulus (which produces output increases) but the concept is the same as a contraction, just reversed. CBO's report on the fiscal cliff also contained additional estimates that allow separate multipliers for different components of the fiscal cliff. CBO indicates that the fiscal cliff with a deficit decrease at 5.1% of GDP comparing calendar 2012 and 2013 will result in a decrease in output of 3.9%. CBO also estimates that the decreases in the deficit under the alternative baseline compared with current law, which accounts for 3% of GDP, would lead to an offsetting gain of 1.6% of output, with the remainder of the fiscal cliff (including non-policy-related amounts) leading to a 2.3% reduction. These estimates imply that these largely tax changes have a multiplier of 0.5 (1.6% divided by 3%) and the other provisions a multiplier of 1.1 (2.3% divided by 2.1%). In its August report, CBO estimates a similar reduction comparing the current law baseline and the alternative scenario (-0.5% versus 1.7% for a net increase of 2.2%). Apparently, CBO's August update compared with the May analysis indicates a gloomier outlook in general. Table 6 shows the estimates of the individual components of the fiscal cliff by private forecaster Mark Zandi. Multipliers are calculated by dividing the contractionary effect by the deficit decrease. The data in Table 6 indicate that the largest multiplier is for cutting unemployment insurance, followed by the automatic spending cuts, both with multipliers above one. The components of the tax extenders plus the doc fix have a weighted multiplier of about 0.6, whereas the remaining components of the fiscal cliff have a multiplier averaging about one. These results are similar to the CBO calculations for the extenders. A final set of multipliers derived from models is shown in Table 7 . As with Table 4 and Table 5 , these are the result of a stimulus, which is the reverse of a contraction but yields a multiplier that could be applied to a contractionary policy. These estimates are averages from several different structural models that would roughly be considered "New Keynesian." These models are also referred to as dynamic stochastic general equilibrium (DSGE) models, which involve optimization over time. These models embed the standard macroeconomic models (which might be loosely referred to as IS-LM models) in a dynamic intertemporal model. The ranking of multipliers in those estimates are similar to those in the tables above, with the largest multipliers for spending, followed by transfers to lower income individuals. All of the tax cut multipliers (and general transfers) are smaller than those in earlier tables although, as indicated in Table 7 , spending multipliers and multipliers for transfers to lower-income individuals are similar to those in earlier tables. To some extent, the larger discrepancy between tax cuts and spending is because only a fraction of consumers change their spending when income increases temporarily, a result of the optimization element of DSGE models. Most consumption is by individuals who optimize over an infinite time period (or a very long one) and a single year or two of reduced income has no effect. Some fraction of consumers are liquidity constrained (varying from 0% to 27%) and respond. Targeted transfers are directed at these lower-income individuals and thus have a larger stimulus effect than other transfers. The numbers in Table 7 assume that the monetary authorities accommodate the fiscal stimulus by keeping nominal interest rates fixed; without this monetary accommodation, the multipliers (except for labor income taxes) drop significantly. In general, these models are more popular with academics and tend to not be as influential among policymakers and private forecasters. Some researchers raise questions about whether the spending behavior in these models is consistent with direct evidence. Multipliers are also directly estimated using multiple time series regressions (statistical studies that examine changes in deficits and output over time), but often these studies focus on government spending (where the policies are more uniform and the first round can be presumed to be spent) or do not distinguish among the types of policies (although theory suggests that tax cut multipliers should be smaller). An important issue that has been raised about these studies (and about estimates of multipliers in general) is that multipliers should be estimated in a way that allows different multipliers in booms and recessions. One recent study indicated that the government spending multiplier was between 0 and 0.5 during expansions and between 1 and 1.5 in recessions. As the analysis above suggests, a significant portion of the total fiscal constraint, about 46% , remains after the enactment of H.R. 8 . If the omitted elements have the same multipliers as the included elements, and the contraction is 4% to 5%, a contraction of 1.8% to 2.3% would remain. Based on the multipliers for individual elements in Table 6 they would appear to have similar multipliers. Ignoring the non-policy-related segment, the contraction due to the policy-related cliff that remains would be about 1%. A JP Morgan expert has indicated a similar level, about 1%, looking only at the policy-related cliff. Brad Delong has estimated a 1.7% reduction although it is not clear what he is including. The policies that have received significant legislative attention during 2012 that would change the size of the fiscal cliff—extending the expiring tax cuts—are a majority of the fiscal cliff but a minority of the economic effects, although the economic effects are still notable. According to the implications of the CBO estimates of the effects of the alternative fiscal scenario (which largely extends the expiring tax cuts), the provisions in the alternative scenario are responsible for 60% of the fiscal cliff but 40% of the contraction. Hence extending the expiring tax cuts eliminates less than half of the projected contraction in the economy due to the fiscal cliff. The final package appeared to leave more than a third of the policy-related fiscal contraction in place, and almost half of the total fiscal cliff. As shown in Table 8 , presenting Zandi's estimates of provisions in the original fiscal cliff and a percentage of spending and a percentage of the contraction, many of the items omitted from the legislation had a more powerful than average effect on the economy per dollar of deficit, especially the payroll tax cut and the budget cuts. Even though much of the contractionary effect has been eliminated, the economy will still slow due to fiscal restraint. The trade-off between short-run and long-run issues remain, but these contractionary effects might be considered during future discussions about budget cuts or other provisions that might offset (if spending increases) or magnify (if spending decreases) the present fiscal contraction. If the only issue were the trade-off between effects on the debt and the short-term contractionary effects, one option would have been to allow the less robust tax provisions to expire and concentrate on (and perhaps even replace them with) more robust spending and transfer programs. However, there are many other issues involved in these choices that complicate decisions. For example, had the AMT not been patched, millions of taxpayers would have to deal with a provision originally designed to affect only a few. Other issues involve the general size of the government which affects choices, with respect to debt reductions, between taxes and spending. The focus of legislative change that would have affected the fiscal cliff during 2012 was largely on the expiring tax cuts. Although spending cuts have been the subject of legislative proposals, these proposals were largely about reordering spending rather than affecting the magnitude of the cuts. Proposals in both the House and Senate addressed the expiring tax cuts from 2001, 2003, and 2009, which had been extended in 2010, along with the AMT patch, which together contributed $221 billion (44%) of the policy-related fiscal cliff. A separate bill to address the AMT patch and the "extenders" had also been approved by the Senate Finance Committee. Democrats and Republicans had offered alternative plans to address the 2001, 2003, 2009 rate cuts and the AMT, as shown in Table A-1 and Table A-2 ( S. 3412 ; H.R. 8 , and S. 3413 ). The main difference between the plans was that the Republican proposal contained $49 billion of income tax cuts for higher-income individuals (generally married couples and single individuals with $250,000 and $200,000, respectively, or more in income) and $31 billion of estate tax cuts that also benefit higher-income deceased taxpayers, that were not in the Democrats' plan (a total of $80 billion). The Democrats' plan extended $27 billion of tax cuts (primarily the expanded education, child, and earned income credits) in the 2009 legislation that are not in the Republicans' plan. These latter provisions are phased out as incomes rise and tend to benefit lower- and moderate-income taxpayers. The Republican plan also proposed a two-year AMT patch, whereas the Democratic plan has a one-year patch. The Democratic proposal would have eliminated about a third of the policy-related fiscal cliff for FY2013, and the Republican proposal would have eliminated about 40% with the one-year AMT patch, and 45% with the two-year AMT patch. Because more of the tax cuts in H.R. 8 and S. 3413 were directed at higher-income taxpayers, where effects were more likely to be captured when returns are filed, the revenue losses in the Republican plan were 37% larger than the Democratic plan in FY2013, but 61% higher during the budget window of FY2013-FY2022. The Senate passed a bill ( S. 3521 ) that would have combined a two-year AMT patch, extension of Section 179 expensing (which allows equipment investments to be deducted immediately with a higher cap), and the "extenders." Provisions would have expired at the end of 2013. Table A-3 shows the revenue effects of these provisions. There are 50 extenders but most of them—40—are for businesses and energy rather than for individuals. Two business provisions (the research credit and deferral of foreign-source financing income) accounted for two-thirds of the business total, and the renewable energy production tax credit accounted for two-thirds of the energy extenders. Continuing the extenders, which is not included in the other bills discussed above, would have eliminated about 7% of the policy-related fiscal cliff. In his latest budget, President Obama proposed extending some but not all of the tax cuts (as in S. 3412 ) and reducing spending cuts, along with other proposals. | A major policy concern for Congress has been when and whether to address the "fiscal cliff," a set of tax increases and spending cuts that would have substantially reduced the deficit in 2013. In projections made in March 2012 by the Congressional Budget Office (CBO), this fiscal restraint, constituting 5.1% of output in 2013, would have reduced growth to 0.5% from 4.4%. Unemployment would increase by 2 million. In August, updated estimates projected growth at a negative 0.5%. The American Taxpayer Relief Act (H.R. 8) eliminated part of the fiscal cliff. Policy choices with respect to the fiscal cliff are difficult because of the conflict between short-run and long-run economic and budgetary objectives. In the short run, the reduction in demand from the reduced budget deficits could damage an already fragile recovery. In the longer run, however, deficit reduction is needed to address a projected unsustainable debt level. For FY2013, compared with FY2012, the original policy-related fiscal cliff was projected at $502 billion, 80% reflecting tax increases, with an additional $105 billion from other changes. The expiration of the 2001, 2003, and 2009 tax cuts (extended in 2010) and the expiration of the alternative minimum tax (AMT) "patch," which indexes the AMT exemption for inflation, accounted for 44% of the policy-related fiscal cliff. Other tax provisions included expiration of the temporary two percentage-point reduction in the employee's Social Security payroll tax (19%); the expiration of other tax cuts, including depreciation and the "extenders" (13%); and taxes scheduled to come into effect as a part of health reform (4%). Spending reductions included the automatic spending cuts under the Budget Control Act (13%); the expiration of extended unemployment insurance benefits (5%); and the "doc fix" that would have lowered Medicare payments (2%). Most changes would have taken effect after 2012, although the AMT and many of the extenders expired after 2011. CBO estimates were similar to those of other forecasters. Estimates are uncertain; CBO suggested a range of potential reductions in growth from 0.9% to 6.8% if the fiscal cliff occurred. Thus, the effects could have been much smaller, but they could also have been significantly larger, than CBO's mid-point estimate. Different parts of the cliff were projected to have different effects per dollar of budgetary effects, with larger effects from the automatic budget cuts and ending extended unemployment benefits than from ending tax cuts for higher-income individuals. H.R. 8 passed by the House on January 1, 2013 (after previous Senate approval) eliminated two-thirds of the policy-related fiscal cliff, and slightly over half of the total (including non-policy-related provisions). Thus about half of the contractionary effect remains, which would appear to reduce output by about 2%. H.R. 8 permanently extended the 2001 and 2003 income tax cuts, except for high-income taxpayers and the $5 million exemption for the estate taxes (but with a higher rate). It extended the 2009 cuts through 2017. It extended unemployment insurance benefits, the doc fix, and bonus depreciation and the "extenders" through 2013. It delayed the automatic spending cuts for two months. Elements of the fiscal cliff that will continue to reduce the deficit in 2013 compared with 2012, and potentially exert a contractionary effect, are the payroll tax reduction, which expired; some individual income tax cuts for high-income individuals; tax increases enacted in health reform; the remaining budget cuts; and non-policy-related effects. |
S hort-time compensation (STC), sometimes called work sharing, is a program within the federal-state unemployment compensation (UC) system. It provides pro-rated unemployment benefits to workers whose hours have been reduced in lieu of a layoff. STC may be helpful to a firm and its workers during an economic downturn or other periods when employers determine that a temporary reduction in work hours is necessary. The STC program has never reached many workers. As will be discussed below, approximately half of states have enacted STC legislation and, within these states, few firms and workers have participated. The reasons for this seem to be a combination of difficulty the U.S. Department of Labor (U.S. DOL) has had in implementing the 1992 authorizing legislation, lack of awareness on the part of employers, unsuitability of work sharing arrangements for some firms or workers, and costs of the program. Congress passed legislation in February 2012, P.L. 112-96 , which provided clarification to the definition of STC and also provided incentives to states to adopt and modify STC programs. Despite these changes, the proportion of UC claimants participating in STC remains low. The terms short-time compensation and work sharing are sometimes used interchangeably, however the term work sharing also refers more broadly to any arrangement under which a firm chooses to reduce work hours across the board for many or all workers instead of permanently laying off a smaller number of workers. In a typical example of work sharing, a firm that must temporarily reduce its 100-person workforce by 20% would accomplish this by reducing the work hours of the entire workforce by 20%—from five to four days a week—in lieu of laying off 20 workers. Workers whose hours are reduced are sometimes compensated with STC, which is equivalent to regular unemployment benefits that have been pro-rated for the partial work reduction. In this example, workers' STC benefits would be 20% of the unemployment benefit they would have been entitled to had they been laid off. As unemployment benefits generally replace almost half of an average worker's wages (with considerable variation among states), STC benefits for a worker who has experienced a 20% reduction in hours would amount to about 10% of the worker's wages before the reduction in hours. Employees would therefore receive a combined income of about 90% of their full-time wages as compensation for four days of work: 80% as wages plus 10% as STC. Working reduced hours because of economic conditions is currently quite common. In September 2016, an estimated 61% (3.5 million) of all part-time workers were employed part-time because of slack work or business conditions. Work sharing has a decades-long history in the United States. For example, in the early 1930s, President Hoover encouraged employers to reduce employees' hours instead of laying them off. In 1932, the President's Organization on Unemployment Relief issued a report that concluded, "Reduction in the working time is the principal method of spreading employment" through such means as reduced days per week, reduced hours per day, or rotating time off. The federal government introduced a temporary, national STC program in 1982 with the Tax Equity and Fiscal Responsibility Act (TEFRA; P.L. 97-248 ), which expired in 1985. The U.S. DOL did not curtail the program's operation in existing states, nor did it stop new states from adopting the program. The recession of 1990-1991 brought renewed attention to STC, leading Congress to enact permanent STC legislation, the Unemployment Compensation Amendments of 1992 (UCA; P.L. 102-318 ). However, at the time, government officials argued that the 1992 law was restrictive in application and would have put many existing state STC programs out of compliance and required clarification. In February 2012, Congress passed P.L. 112-96 , which, among other provisions, clarifies requirements related to STC programs. Under P.L. 112-96 , the term short-time compensation program means a program under which employers participate on a voluntary basis and submit a written plan to the appropriate state agency; an employer reduces the number of hours worked by employees in lieu of layoffs; employees' workweeks have been reduced by at least 10% and by no more than the percentage determined by the state (if any, but in no case by more than 60%); STC is paid as a pro rata portion of the unemployment compensation that would otherwise be payable to the employee if such employee were employed; eligible employees are not required to meet the "able, available and actively seeking work" requirement of regular unemployment compensation, but they must be available for their normal workweeks; eligible employees may participate in a state-approved, employer-sponsored, or Workforce Investment Act training program; and employers who provide health or retirement benefits (defined benefit or defined contribution pension plans) must certify to the appropriate state agency that such benefits will continue to be provided to STC participants under the same terms and conditions as though the workweek of such employee had not been reduced or to the same extent as other employees not participating in the STC program. As described below, P.L. 112-96 provided temporary, federal financing for 100% of STC benefits in states that meet the new definition of an STC program. A transition period of up to two years and six months from enactment of this law was provided for states with existing STC programs that did not meet the new definition. Currently, over half of the states and the District of Columbia have enacted STC programs. A description of STC programs in the states that currently operate them can be found in the Appendix . The federal-state unemployment insurance system also permits payment of "partial unemployment benefits" to a worker whose hours have been reduced significantly or to an unemployed worker who has accepted a part-time job while searching for a permanent, full-time job. To qualify for partial unemployment benefits, however, a worker must generally experience a significant reduction in work hours and pay. States provide partial unemployment benefits to part-time workers who are earning less than their weekly benefit amount (which is based on previous earnings). States reduce a worker's unemployment benefit by the amount of earnings from work, usually less a small disregard (for example, $50 or 25% of the weekly UC benefit amount), with the result that a person may receive almost no benefit if he or she has part-time earnings greater than the benefit amount. Unemployment benefits generally replace almost 50% of average wages, up to a cap, although there is considerable variation by state. As a result, to qualify for partial unemployment benefits, an average worker generally must have a reduction of 50% or more in his or her normal hours. For higher-income employees this may translate into even deeper cuts in work hours. Partial unemployment benefits may help employees whose hours are reduced by 50% or more, but they offer little incentive for employees to accept voluntarily a smaller reduction in work hours. By comparison, most state STC programs cap work hour reductions under a qualified work sharing plan to no more than 60%. STC benefits are available to employees whose work hours have been cut by as little as 10% and are not offset by work earnings. Although just over half of states now have STC programs, there continues to be only limited use of the option. From 1982 through 2008, the ratio of STC beneficiaries to regular unemployment compensation beneficiaries among all states attained 1% only twice, in 1992 and in 2001. In 2009, however, the ratio of STC beneficiaries to regular unemployment compensation beneficiaries rose to 2%, and this ratio reached nearly 3% in 2010, as shown in Table 1 . Use of STC is highly countercyclical to business conditions because employers are more likely to be interested in work sharing when they need to manage labor costs in the face of relatively low demand for their products. The local peaks in 1992, 2001, and 2009-2011 correspond with the recessions of July 1990 to March 1991, March 2001 to November 2001, and again with the December 2007-June 2009 recession. Almost 98,000 workers received STC in 1992, about 111,000 received STC in 2001, about 314,000 received STC benefits in 2010, and about 236,000 workers received STC in 2011. In 2013, STC use fell significantly to under 74,000 beneficiaries. By 2015, the number of new STC beneficiaries had fallen to just over 60,000; however, it remains higher than numbers reported in the pre-recessionary years of 2004-2007. Table 2 shows first payments of STC benefits during 2015 in states with STC programs. STC usage varies significantly among the states with STC programs. For example, the ratio of STC beneficiaries to beneficiaries of regular unemployment compensation ranged from negligible usage in many states to over 9% in Missouri. A 2002 study (hereinafter, MaCurdy et al.) in California, the largest (numerically) user of STC, found that manufacturing firms were more likely than other firms to use STC. Manufacturing firms accounted for only 11% of firms generating unemployment benefits of all kinds but they accounted for 62% of STC firms. Wholesale trade was the other sector more likely than average to use STC. Firms that used STC were generally older and larger than non-STC users. The average employment in STC firms was 239, compared to average employment of only 40 workers in firms that generated UI charges through layoffs in 2002. Older and larger firms were also more likely to have human resources departments to assist with implementing STC. In Connecticut in 2009, manufacturing firms were more likely than other firms to use STC. An interesting finding in the California study is that STC firms often have jobs that require lengthy apprenticeships or on-the-job training programs in which workers learn skills not taught in school. Within the manufacturing sector, the industries that used STC the most were manufacturers of electronics, industrial machinery, fabricated metals, instruments, furniture, primary metals, leather, rubber and plastics, and paper products. Within the construction sector, STC firms were more likely than other construction firms to be "specialty trades contractors" such as plumbers and electricians. A firm's decision to seek STC as part of a work sharing arrangement hinges on a number of factors, for example whether work sharing is appropriate for both a firm and its employees. The low usage rate of STC, even in some states that offer the program, may be due in part to the fact that work sharing itself is not appropriate for all firms or all employees. Work sharing programs in combination with STC can provide macroeconomic benefits to a state by preserving jobs during cyclical downturns, maintaining consumption through continued wages and STC, and ensuring the continuation of employer-sponsored health insurance and pensions, thereby reducing reliance on state-provided services and supports. As is well known, widespread unemployment leads to lower consumer spending and sales tax revenues. In addition, state employment services realize savings through work sharing because they are not called on to provide job search and other assistance. In 2010, the National Governors Association promoted STC as one of a number of recommended policies for assisting workers in an economic downturn. The administrative costs of STC programs have been a concern for state labor agencies. In many states, STC is still paper-based and states approve employers' work sharing plans on a case-by-case basis. In addition, STC may increase processing costs for the state agency relative to layoffs because, for a given firm, work sharing affects a larger number of workers than if the firm were to lay off workers. Some suggest that states would experience at least partially offsetting savings as a result of not having to administer certain components of the regular unemployment system, such as the requirements that a worker be actively seeking work and that he or she not refuse suitable work. No studies have attempted to quantify STC's net administrative cost to states, however. Some states have responded to high administrative costs by reducing the layers of approval for plan submissions, by automating the claims process, and by switching from employee-filed claims to employer-filed claims. States that have developed strategies to automate STC filing, approval, and ongoing claims have been able to reduce administrative costs, according to a study by Berkeley Planning Associates and Mathematica Policy Research, Inc. (hereinafter, Berkeley Planning Associates and Mathematica). Massachusetts has gone the furthest by fully automating its STC program in 2001 and 2002. The system is Internet-based, and employers use it to submit their work sharing plans and their weekly STC transactions. Massachusetts has offered to make its software available at no cost to other states. The impact of STC benefits on the solvency of state unemployment programs, as reflected in the balance of state unemployment trust fund (UTF) accounts, is likely small. The immediate impact is negative as STC benefit payments increase with the onset of a recession. Increased state unemployment tax receipts respond with a lag. STC benefits are experience-rated in approximately the same manner as regular unemployment benefits. As a result, the study by Berkeley Planning Associates and Mathematica concluded that the long-run effect on a state's UTF account, relative to layoffs, is probably minimal, although the impact could potentially be more serious if STC participation rates were very high and tax schedules were constrained. When STC was first implemented in some states in the late 1970s and 1980s, proponents argued that it would help protect the gains made by affirmative action. Because women and minorities were newer to the workforce, they were considered more vulnerable to layoffs than workers with seniority. However, the 1997 study by Berkeley Planning Associates and Mathematica found no evidence that STC disproportionately benefits ethnic or racial minorities, or women, although it is still possible that the program could help entry-level and newer workers in general. Under P.L. 112-96 , the Labor Secretary was authorized to award grants to eligible states for STC programs, with one-third of each state's grant available for implementation and improved administration purposes and two-thirds of each state's grant available for program promotion and enrollment of employers. The maximum amount of all grants to states authorized under P.L. 112-96 was $100 million; in the end, states received almost half ($46 million) of those funds. For employers, the decision between layoffs and an arrangement combining work sharing with STC may rest on both financial and non-quantifiable factors such as employee morale. Some firms may find that the combination of work sharing and STC helps reduce total costs during a downturn; however, other firms may find that layoffs are more cost-effective. Immediate cost savings to employers under a work sharing/STC arrangement come largely from reduced expenditures on wages and salaries. If a work sharing arrangement that involves all employees is the alternative to laying off low-seniority (and generally lower paid) employees, then STC would presumably save the employer in wage costs. Work sharing and STC arrangements can also reduce recruitment and training costs for employers. When business improves, employers can increase the hours of existing employees rather than recruit and train new ones. Some employers find work sharing and STC programs attractive because they prevent the firm from losing skilled employees during an economic downturn and reduce the risk that skilled employees may leave for other companies. According to the MaCurdy et al. study of STC in California, employees of STC firms tended to be older and better paid than workers collecting regular unemployment benefits, suggesting that employers were using STC to retain highly skilled workers. Some employers use work sharing and STC to protect specific groups of highly skilled workers within a larger organization that is undergoing layoffs. For example, New York State's STC program allows employers to apply different percentage reductions to hours and wages in different departments, and STC may be implemented at the level of one or more departments, shifts, or units. Berkeley Planning Associates and Mathematica, as part of their 1997 study of STC, surveyed 500 employers who used work sharing in combination with STC and found that the ability to retain valued employees was a major attraction. Most employers who used the STC program reported that they were satisfied and would use it again, according to the same 1997 survey. In fact, many firms used STC repeatedly, with some firms using it in every quarter over a three-year period. Work sharing and STC arrangements may help sustain employee morale and productivity compared to layoffs. Even employees who survive a layoff may be vulnerable to "survivor's guilt" and emotional contagion (picking up on the despair of laid-off employees) that can reduce productivity. The most frequent complaint found in the survey conducted by Berkeley Planning Associates and Mathematica was that firms' state unemployment taxes increased following use of the STC program. In the survey, firms using STC experienced higher unemployment insurance (UI) charges compared to firms that had not used STC. The STC firms, however, also continued to lay off workers. One interpretation offered by the survey's authors is that STC firms were experiencing greater economic distress than similar non-participating firms. In states where STC is charged to the firm according to the experience rating rules of the regular unemployment program, the firm incurs no more in UI tax costs by using STC than it would through layoffs. For example, MaCurdy et al. wrote about California's STC system that "it does not matter for UI tax calculations whether a firm generates $1,000 in UI benefits through work sharing or layoffs." Seven states also impose additional tax provisions on work sharing employers, in order to ensure that employers who already pay the maximum state unemployment tax rate share in the burden. According to the Berkeley Planning Associates and Mathematica study of STC, states appear to experience-rate STC claims at least as well as regular unemployment compensation claims. Certain nonprofit organizations, state and local governments, and federally recognized Indian tribes are permitted to reimburse their state unemployment funds for unemployment benefit payments attributable to service in their employ, instead of contributing taxes to the state's trust fund. Most state laws provide that reimbursing employers will be billed at the end of each calendar quarter, or another period, for benefits paid during that period. For these "reimbursing" employers, STC is not a cost-effective option. There likely are several reasons why most reductions in hours take the form of layoffs rather than shorter work schedules. Employers' lack of awareness of STC has been cited as one reason for low employer participation. In addition, production technologies may make it expensive or impossible to shorten the work week. This is the case in some manufacturing industries, for example, where the costs of shutting down and starting up equipment are high. Moreover, a work sharing arrangement may not reduce total costs to employers in exact proportion to the reduction in work hours. Some non-wage employment costs—referred to as "quasi-fixed" costs—are largely independent of the number of hours worked. Health and pension benefits are among those that fall into this category. P.L. 112-96 required employers to certify that health insurance and pension benefits during the period of the work sharing arrangement will not be reduced. Thus, STC firms continue to bear the full (rather than the pro-rated) costs of the two benefits. Work sharing helps workers who would have faced layoffs avoid significant hardship, while spreading more moderate earnings reductions across more working individuals and families. When work sharing is combined with STC, the income loss to work sharing employees is reduced. Many state STC programs also require that employers continue to provide health insurance and retirement benefits to work sharing employees as if they were working a full schedule. Some employees are simply happy to have any job in a tough labor market. One worker who received STC in 2009 in conjunction with a work sharing arrangement told a Rhode Island newspaper, "Versus being totally unemployed, it's a big plus. There aren't any jobs out there." Analysts have suggested that work sharing could shift the impact of an economic downturn from younger workers to older workers because it spreads the pain of a workforce reduction among workers of all ages. Younger employees, who are often the first to be fired in a downturn, presumably have the most to gain by work sharing combined with STC. More experienced and more highly paid workers would presumably have the most to lose, particularly in firms where jobs are protected by seniority. Consequently, employees with seniority may oppose a program that shares reductions across the labor force. Some research suggests that reduced work hours may have different implications for professional employees compared to hourly workers. Professional employees sometimes welcome a better work-life balance, while in some cases hourly workers rely not just on a full work schedule but also on overtime in order to make ends meet. When STC was introduced in the 1970s and 1980s, labor groups warned that safeguards were necessary to avoid reducing workers' health insurance and pensions. One concern had been that reduced work hours and pay could result in smaller contributions to pension plans. Traditional defined benefit pension plans generally calculate benefits based in part on a worker's high three or high five earnings years, so that workers close to retirement could be directly affected by a reduction in work hours and pay. As will be discussed below, Congress included protections for health and pension benefits when it authorized a temporary STC program from 1982 to 1985. These concerns seem to have died down during the 1980s, however, and Congress did not include health or pension safeguards when it passed a permanent law authorizing STC in 1992. By 2012, these concerns had resurfaced and as a result P.L. 112-96 requires employers to certify that health insurance and pension benefits during the period of the work sharing arrangement will not be reduced. An argument can be made that, in declining industries, work sharing and STC arrangements may cause some workers to delay serious job searches or retraining efforts. The relative advantages and disadvantages for an individual will depend in part on his or her particular skill set. STC cannot forestall what may be an inevitable layoff, however. It is sometimes said that states are laboratories for policy, and the history of STC appears to bear this out. Following the recession of 1973-1975, state governments, businesses, and labor groups began to promote work sharing arrangements that included government-provided income support. Table 3 provides the enactment year for all states with an STC program. New York was the first state to consider STC legislation, in 1975, as part of a broader employment policy bill. The legislation died in committee. In 1978, California became the first state to enact an STC law. California's action was in response to anticipated large-scale public sector layoffs arising from Proposition 13 tax reductions that limited state spending. Although the public sector layoffs never occurred, the private sector used the program. California was followed by Arizona in 1981. Oregon enacted STC legislation in 1982, with strong support from the Motorola Corporation. During this period of state innovation, U.S. DOL did not challenge states' STC programs, although federal unemployment compensation law did not explicitly allow states to use their unemployment trust funds to pay STC. The federal government introduced a temporary, national STC program in 1982 with the Tax Equity and Fiscal Responsibility Act (TEFRA; P.L. 97-248 ). Motorola and the Committee for Economic Development both lobbied in Washington for the legislation. The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), after some initial opposition, came to support STC provided that safeguards were incorporated to protect pension and health insurance benefits and to secure union certification for employers' work sharing plans. TEFRA, which expired in 1985 after three years, authorized states to use monies in their state accounts in the Unemployment Trust Fund to pay STC benefits to eligible employees whose work hours had been reduced by at least 10% under a qualified employer work sharing plan. The law required the employer to draw up a formal work sharing plan and to seek the relevant state agency's approval of the plan as well as certification by the relevant union(s) if applicable. TEFRA also provided that employees who received STC benefits would not be required to meet a state's work search and refusal of suitable work requirements for unemployment benefits. Employees would, however, be required to be available to work a normal work week. TEFRA required employers to continue to provide health and pension benefits to employees whose workweek was reduced as if the employees worked their normal hours. The act required that employers who used STC be charged in the same manner as other UI taxes, in order to ensure that STC costs were paid by participating employers instead of being passed on to other employers. TEFRA directed the Secretary of Labor to develop model STC legislation for use by the states and also to provide technical assistance to states. Finally, P.L. 97-248 directed the Secretary of Labor to submit a final report evaluating the program and making recommendations. U.S. DOL published model state legislative language and guidelines in July 1983. During TEFRA's three-year experimental period, eight additional states enacted STC programs. Following the expiration of the three-year temporary program in 1985, the existing state programs continued. U.S. DOL stopped promoting STC when its mandate to act expired with the end of the temporary federal law. However, U.S. DOL did not curtail the program's operation in existing states, nor did it stop new states from adopting the program. U.S. DOL allowed states to use the expired 1983 federal guidance and continued to collect reporting data on STC programs in the states. The recession of 1990-1991 renewed attention to STC, leading Congress to enact permanent STC legislation, the Unemployment Compensation Amendments of 1992 (UCA; P.L. 102-318 ). The 1992 law amended the Internal Revenue Code to authorize states to pay STC benefits from their accounts in the Unemployment Trust Fund. UCA essentially consisted of a five-point definition of STC as a program under which (1) individuals' workweeks were reduced by at least 10%; (2) STC was paid as a pro rata portion of the full unemployment benefit that an individual would have received if totally unemployed; (3) STC beneficiaries were not required to meet availability for work and work search requirements, unlike beneficiaries of regular unemployment compensation, but they were required to be available for their normal work week; (4) STC beneficiaries could participate in employer-sponsored training programs; and (5) the reduction in work hours was in lieu of layoffs. UCA also directed the Secretary of Labor to assist states in establishing and implementing STC programs by developing model legislative language and providing technical assistance and guidance to the states. Finally, UCA directed U.S. DOL to report on implementation of the STC program. UCA did not contain the employee and employer safeguards that had been present in TEFRA. In particular, UCA did not require employers to do the following: submit work sharing plans to the state for approval; certify to the relevant state agency that the reduction in work hours was in lieu of temporary layoffs; win consent from the relevant union(s); or contribute to health insurance or pension plans as if the employee continued to be fully employed. UCA also did not contain the TEFRA provision that STC be charged to employers "in a manner consistent with the State law" for the purposes of determining state unemployment taxes on employers ( P.L. 97-248 §194(e)). Finally, UCA did not give the U.S. Secretary of Labor the ability to determine what program elements would be appropriate beyond the 1992 law's five definitional items. These provisions were removed by committee staff in order to give states more flexibility. From 1992 until 2012 (when Congress passed P.L. 112-96 ), U.S. DOL largely sidestepped implementation of STC, neither developing new model state legislative language nor providing new guidance to the states. U.S. DOL did, however, support a study of the program (the 1997 study by Berkeley Planning Associates and Mathematica). Shortly after enactment of the 1992 law, U.S. DOL and Clinton Administration officials claimed the permanent federal law was "unworkable," according to an article by David E. Balducchi and Steven Wandner (hereinafter, Balducchi and Wandner). At the time, government officials argued that the 1992 law was restrictive in application and would have put many existing state STC programs out of compliance. For example, Clinton Administration and U.S. DOL officials were concerned that existing state provisions requiring employers to continue to provide health and pension benefits were out of compliance with UCA's definition of STC, and U.S. DOL would need to require states to roll back these provisions. On February 22, 2012, the President signed into law P.L. 112-96 , the Middle Class Tax Relief and Job Creation Act of 2012, which was a comprehensive package of measures that includes STC provisions based largely on stand-alone bills S. 1333 (Senator Jack Reed) and H.R. 2421 (Representative Rosa DeLauro). P.L. 112-96 clarified the definition of STC and offered incentives to states to adopt and modify STC programs. Under the new legislation, employers voluntarily submitted written STC plans for approval by the relevant state agency; eligible workers would receive unemployment compensation on a pro rata basis and would be able to participate in state-approved training; employees would meet the availability for work and work search requirements while collecting STC by being available for their work week as required by the state agency; and employers who provide health and retirement benefits would be required to certify that these benefits would continue to be provided under the same terms and conditions as though employees' work weeks had not been reduced or to the same extent as other employees not participating in the STC program. A state was able to ask U.S. DOL to approve other appropriate provisions in the state's STC law. For states that were administering STC programs that did not meet the new definition in P.L. 112-96 , a transition period equal to the earlier of 2½ years or the date the state changes its STC law was provided. P.L. 112-96 provided temporary (up to three years) federal financing for 100% of STC benefits in states that met the new definition of an STC program. States with existing STC programs that did not meet the new definition were eligible for 100% federal financing during a transition period of two years. The 100% federal financing ended on August 22, 2015. States without existing STC programs were allowed to enter into an agreement with U.S. DOL to receive federal reimbursement for temporary (up to two years) federal financing of 50% of STC payments to individuals, as well as federal reimbursement for additional administrative expenses, with employers paying the other 50% of STC benefit costs. If a state entered into an agreement with the U.S. Secretary of Labor and subsequently enacted a state law meeting the criteria in P.L. 112-96 , that state was eligible to receive 100% federal financing for STC programs for a total period exceeding no longer than three years. Under P.L. 112-96 , U.S. DOL awarded grants to eligible states, with one-third of each state's grant available for implementation and improved administration purposes and two-thirds of each state's grant available for program promotion and enrollment of employers. The maximum amount of all grants was limited to $100 million, less a small amount to be used by U.S. DOL for outreach. U.S. DOL was required to develop model legislative language and to provide technical assistance and guidance to states, in consultation with employers, labor organizations and state workforce agencies. U.S. DOL was directed to establish reporting requirements concerning the number of averted layoffs and participating employers. States had to apply for the STC grant(s) on or before December 31, 2014. Finally, P.L. 112-96 provided $1.5 million for U.S. DOL to report to Congress and the President, within four years of enactment, on the implementation of the legislation, including a description of states' best practices, analysis of significant challenges, and a survey of employers in all states to determine the level of interest in STC. STC is currently legislated in just over half of the states and the District of Columbia. In these states, it has never reached a large number of workers, although there is evidence of increased use in 2009 through 2011. Congress passed P.L. 112-96 in February 2012 to promote state adoption and implementation of STC programs; however, STC remains a little-used program. Currently, 27 states and the District of Columbia have active STC programs. Table A-1 displays how STC is implemented in those states. The basic structure of each state's STC program is broadly similar: eligible individuals have had their workweeks reduced by at least 10%, and this reduction in work hours must be in lieu of temporary layoffs. The amount of unemployment compensation payable to an individual is a pro rata share of the unemployment compensation to which that individual would have been entitled if he or she had been totally unemployed. Eligible employees are not required to meet the "able and available for work" requirement of regular unemployment compensation, but they must be available for their normal workweek. Finally, eligible employees may participate in an employer-sponsored training program. Within these broad outlines there is considerable variation among states. An employer's STC agreement cannot exceed a period of 6 months in 5 states but may span up to approximately 1 year in 20 states and the District of Columbia. An individual may receive STC benefits for up to 18 weeks in Colorado or for up to 52 weeks in 8 states. Alternatively, California, Michigan, Washington, and Wisconsin place no limits on the number of weeks a worker may receive STC benefits, although these states have caps on total benefits paid to an individual to the maximum potential total UC entitlement. | Short-time compensation (STC) is a program within the federal-state unemployment insurance system. In states that have STC programs, workers whose hours are reduced under a formal work sharing plan may be compensated with STC, which is a regular unemployment benefit that has been pro-rated for the partial work reduction. Although the terms work sharing and short-time compensation are sometimes used interchangeably, work sharing refers to any arrangement under which workers' hours are reduced in lieu of a layoff. Under a work sharing arrangement, a firm faced with the need to downsize temporarily chooses to reduce work hours across the board for all workers instead of laying off a smaller number of workers. For example, an employer might reduce the work hours of the entire workforce by 20%, from five to four days a week, in lieu of laying off 20% of the workforce. Employers have used STC combined with work sharing arrangements to reduce labor costs, sustain morale compared to layoffs, and retain highly skilled workers. Work sharing can also reduce employers' recruitment and training costs by eliminating the need to recruit new employees when business improves. On the employee's side, work sharing spreads more moderate earnings reductions across more employees—especially if work sharing is combined with STC—as opposed to imposing significant hardship on a few. Many states also require that employers who participate in STC programs continue to provide health insurance and retirement benefits to work sharing employees as if they were working a full schedule. Work sharing and STC cannot, however, avert layoffs or plant closings if a company's financial situation is dire. In addition, some employers may choose not to adopt work sharing because laying off workers may be a less expensive alternative. This may be the case for firms whose production technologies make it expensive or impossible to shorten the work week. For other firms, it may be cheaper to lay off workers than to continue paying health and pension benefits on a full-time equivalent basis. Work sharing arrangements in general also redistribute the burden of unemployment from younger to older employees, and for this reason the arrangements may be opposed by workers with seniority who are less likely to be laid off. From the perspective of state governments, concerns about the STC program have included the program's high administrative costs. Massachusetts has made significant strides in automating STC systems and reducing costs, but many other states still manage much of the STC program on paper. Currently, approximately half of the states and the District of Columbia have enacted STC programs to support work sharing arrangements. However, few UC beneficiaries are STC participants. At the peak of its use in 2010, the STC beneficiaries totaled nearly 3% of regular unemployment compensation first payments. The reasons for low take-up of the STC program are not completely clear, but key causes include lack of awareness of the program, administrative complexity for employers, and employer costs. P.L. 112-96, passed in February 2012, offered grants to states to help bring attention to the states' STC laws. In addition, P.L. 112-96 provided temporary federal funding to states that have existing STC programs or to create a new one. Despite these changes, the proportion of UC claimants receiving funds from STC remains low relative to overall UC claims. |
T he Ryan White HIV/AIDS Program makes federal funds available to eligible metropolitan areas, states and local community-based organizations to provide a number of health care services for HIV/AIDS patients, including medical care, drug treatments, dental care, home health care, and outpatient mental health and substance abuse treatment. The Centers for Disease Control and Prevention (CDC) estimates that more than 1.2 million people in the United States have HIV/AIDS. The Ryan White HIV/AIDS Program reports that in 2014 it served 512,214 low-income people with HIV/AIDS, 25.4% of whom were uninsured and 64.2% of whom were living at or below 100% of the federal poverty level. The majority of clients in 2014 were male (70.6% male, 28.3% female, 1.1% transgender), from racial/ethnic minority populations (47.2% Black/African American, 22.2% Hispanic/Latino, 0.5% American Indian/Alaska Native, 1.2% Asian, 0.2% Native Hawaiian/Pacific Islander, 1.8% Multiple Races, 27% white), and aged 50 years and older (40.4%). The Ryan White HIV/AIDS Program states that in 2014, 80.4% of clients were retained in HIV medical care (218,758 clients of 272,193 total clients). Clinical research has demonstrated that treatment of HIV patients with anti-HIV (also called antiretroviral) medication reduces the amount of virus in the blood to very low levels (also called viral suppression) and lowers the risk of HIV transmission by 96%. The Ryan White HIV/AIDS Program indicates that in 2014, 81.4% of clients achieved viral suppression (231,140 clients of 283,811 total clients). Among youth aged 13-24 years, retention in care was lower (10,988 youth clients of 14,639 total youth clients, or 75.1%) than the national Ryan White HIV/AIDS Program average and viral suppression was much lower (10,407 youth clients of 16,117 total youth clients, or 64.6%). The Ryan White HIV/AIDS Program was established in law in 1990 ( P.L. 101-381 ) and reauthorized and amended in 1996 ( P.L. 104-146 ), 2000 ( P.L. 106-345 ), 2006 ( P.L. 109-415 ), and 2009 ( P.L. 111-87 ). It was enacted as Title XXVI of the Public Health Service (PHS) Act and codified as Parts A, B, C, D, E, F, and G under 42 U.S.C. §300ff-11 et seq. The program is administered by the Health Resources and Services Administration (HRSA) HIV/AIDS Bureau. Most of the program funding is distributed to eligible entities based on formulas that take into account the number of people living with HIV/AIDS. FY2016 funding of $2.3 billion is divided among the individual grant programs (Parts A, B, C, D, and F) as shown in Figure 1 . At the end of this report, Table 1 provides FY1991-FY2017 request dollar amounts; the grant programs are summarized in the Appendix . Figure 1. Ryan White HIV/AIDS Program Funding, FY2016Total = $2.3 billionSource: HRSA FY2016 funding provided in the Consolidated Appropriations Act, 2016 (P.L. 114-113).Notes: ADAP = AIDS Drugs Assistance Program; ADR = AIDS Dental Reimbursement Program; AETC = AIDS Education and Training Centers; and SPNS = Special Projects of National Significance. P.L. 111-87 provided specific authorization levels for Parts A, B, C, D, and F for each fiscal year through FY2013, resulting in a four-year reauthorization for the Ryan White HIV/AIDS Program. The program's authority is currently expired, but Congress continues to appropriate funds for the program. P.L. 111-87 required that the Secretary establish a national HIV/AIDS testing goal of 5 million tests annually through programs administered by HRSA and the CDC. The Secretary is required to submit an annual report to Congress on the progress made in achieving the testing goal, including any barriers to meeting the goal, the amount of funding necessary to meet the goal, and the most cost-effective strategies for identifying individuals who are unaware of their HIV status. The Secretary is also required to review each of the programs and activities conducted by CDC as part of the Domestic HIV/AIDS Prevention Activities. Other provisions of P.L. 111-87 are discussed below in the sections of this report on the various parts of the Ryan White HIV/AIDS Program. The Patient Protection and Affordable Care Act of 2010 (ACA, P.L. 111-148 , as amended) contains general provisions to increase access to health insurance and is expected to increase coverage for people living with HIV/AIDS. These provisions include 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 help low- and middle-income individuals purchase coverage from health insurance exchanges. In addition, states have the option to broaden Medicaid eligibility to include single adults. ACA phases out the Medicare Part D so-called "doughnut hole"—a gap in prescription drug coverage—for individuals who are Medicare-eligible, including individuals with HIV/AIDS. The long-range impact of the health care law on HRSA's Ryan White HIV/AIDS Program (in which the health and treatment services provided under Ryan White are likely to be replaced to some extent by access to such services through health coverage via ACA) remains to be determined and may be of interest to policymakers given that authorization for the Ryan White HIV/AIDS Program has lapsed. Part A provides grant funds for medical and support services to eligible metropolitan and transitional areas with high numbers of people living with HIV, as well as mid-sized areas that have emerging needs for assistance with their HIV-infected populations. The boundaries of the areas are based on the Metropolitan Statistical Areas of the U.S. Census Bureau and may range in size from a single city or county to multiple counties that cross state boundaries. Part A provides funds to eligible metropolitan areas (EMAs) with a population of at least 50,000 that have had more than 2,000 reported AIDS cases in the prior five years. An EMA would stop being eligible if it failed for three consecutive years to have (1) a cumulative total of more than 2,000 reported cases of AIDS during the most recent five calendar years, and (2) a cumulative total of 3,000 or more living cases of AIDS as of December 31 of the most recent year. Part A currently provides grants to 24 EMAs. The 2006 reauthorization ( P.L. 109-415 ) established a grant program for transitional grant areas (TGAs), defined as metropolitan areas with at least 1,000 but fewer than 2,000 cumulative AIDS cases during the most recent five calendar years. Unless a TGA became an EMA, it would continue to be eligible as a TGA until it failed for three years to have (1) at least 1,000 but fewer than 2,000 cumulative cases of AIDS during the most recent five calendar years, and (2) 1,500 or more living cases of AIDS as of December 31 of the most recent calendar year. P.L. 111-87 permits a metropolitan area with a cumulative total of at least 1,400 but less than 1,500 living cases of AIDS to continue to be eligible as a TGA, provided that not more than 5% of the TGA grant award is unobligated at the end of the most recent fiscal year. If a metropolitan area loses TGA eligibility, the entire amount of the former TGA's formula grant for the preceding fiscal year plus $500,000 is made available for Part B grants. During FY2015, Part A provided grants to 29 TGAs and 24 EMAs for a total of 53 jurisdictions. For each Part A grant, 75% of the funds must be spent on core medical services, defined as outpatient/ambulatory medical care services, AIDS Drug Assistance Program (ADAP) treatments and pharmaceutical assistance, oral health care, early intervention services, health insurance premium and cost-sharing assistance, home health care, medical nutrition therapy, hospice, home and community-based health services, mental health and substance abuse outpatient services, and medical case management. The core services spending requirement may be waived if (1) there is no waiting list for receiving treatment (under the Part B ADAP program), and (2) core medical services were available to all individuals with HIV/AIDS who were eligible to receive such services under Part A. The remaining 25% of funds may be used for support services, such as outreach services, medical transportation, language services, respite care for persons caring for individuals with HIV/AIDS, and referrals for health care and support services. Payments under Part A (and all other parts of the Ryan White HIV/AIDS Program) must be coordinated with other federal and nonfederal sources of funds. In particular, HRSA must coordinate with Medicare and Medicaid and private health insurance because the Ryan White HIV/AIDS Program is considered to be the "payer of last resort," meaning the program will pay only for services that cannot be provided using another funding source (see text box). Two-thirds of the Part A appropriation is distributed through formula grants, and the remaining one-third is distributed via competitive supplemental grants awarded on the basis of need. The awarding of supplemental Part A grants is based on weighting factors. Under P.L. 111-87 , success in testing for HIV/AIDS and making individuals aware of their HIV status is counted as one-third in making such determinations. CDC collects the HIV case surveillance data used in the Ryan White HIV/AIDS Program formula. In the past, some states reported their cases by name, while others used a code-based system to protect privacy. CDC initially indicated its preference for name-based reporting in 1999 in order to avoid double counting. In 2005, the agency recommended that all jurisdictions transition to name-based reporting. In contrast to EMA and TGA eligibility definitions based on cumulative AIDS cases, grant award amounts are based on living HIV/AIDS cases. Prior to the 2006 reauthorization, formula grants had been distributed to EMAs in proportion to an estimate of the number of living AIDS cases in each EMA. P.L. 109-415 changed the funding distribution, basing it on the number of living HIV and AIDS cases in each EMA or TGA for states that use a name-based HIV reporting system. The requirement for name-based HIV reporting in P.L. 106-345 and P.L. 109-415 influenced states to change from code-based reporting to name-based reporting, although many states were reluctant to do so because of privacy concerns. P.L. 109-415 provided a transition period for states that did not have a fully mature name-based reporting system, and subsequently P.L. 111-87 provided a continuation of the transition period. Beginning with FY2013, only living name-based cases of HIV/AIDS are used in making Part A grant determinations. Part A grants are made to the chief elected official of the city or county in the EMA or TGA that administers the health agency providing services to the greatest number of persons with HIV. Priorities for care delivery are set by the HIV Health Services Planning Councils, which are established by the chief elected official. Membership of the council must reflect the ethnic and racial makeup of the local HIV epidemic. Although planning councils may not be mandatory for TGAs, HRSA strongly encourages TGAs to maintain their planning councils. Councils may not be directly involved in the administration of any Part A grant. P.L. 111-87 required the Part A Planning Councils to develop a strategy for identifying individuals with HIV/AIDS who do not know their HIV status, making them aware of their status, and connecting them with health care and support services. Particular attention is given to "reducing barriers to routine testing and disparities in access and services among affected subpopulations and historically underserved communities." The 2006 reauthorization introduced restrictions on the use of unexpended funds. Starting in FY2007, if an eligible area did not obligate all supplemental grant funds within one year of receiving an award, the eligible area was required to return any unobligated funds. Similarly, starting in FY2007, if an eligible area did not obligate all formula grant funds within one year of receiving the award, the eligible area was required to return any unobligated funds. The eligible area may request a waiver of the cancellation of formula grant funds, explaining how the eligible area intends to spend the funds. If the waiver is approved, the eligible area has one additional year in which to spend the funds, called the carryover year . If the funds are not spent by the end of the carryover year, the eligible area is required to return the unexpended funds. Regardless of whether the waiver for carryover was granted, under the 2006 reauthorization, the eligible area's formula grant funds would be reduced for the following year by an amount equal to the unobligated balance. The 2009 reauthorization, however, stipulated that the amount of the reduction would not include any unobligated balance that was approved by HRSA for carryover, and the reduction in formula grant funds does not apply if the unobligated balance is 5% or less. Any returned grant funds are additional amounts available for Part A supplemental grants. Part B provides grants to all 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, and 5 jurisdictions in the Pacific. Grant funds may be used for drug treatments, home and community-based health care, and support services or health insurance coverage for low-income persons. Congress provides a specific appropriation for ADAP within the total Part B funding. The remaining funds (non-ADAP) are used for Part B base grants and a supplemental grant program. ADAP provides drug treatments for individuals with HIV who cannot afford to pay for drugs and have limited or no coverage from private insurance, Medicaid, or Medicare Part D. ADAP funds also may be used to purchase health insurance for eligible clients or to pay for services that enhance access, adherence, and monitoring of drug treatments. As under Part A, 75% of Part B funds must be spent on core medical services, and 25% may be spent on support services (defined in " Core Medical Services vs. Support Services "). P.L. 111-87 required that the Part B grant application provide a comprehensive plan for identifying individuals with HIV/AIDS who are unaware of their HIV/AIDS status and enabling those individuals access to medical treatment for HIV/AIDS. The comprehensive plan must include efforts to remove any legal barriers, including states laws and regulations, to routine testing. Of the non-ADAP Part B funds, two-thirds is used for the Part B base awards, and one-third is reserved for a supplemental grant program (see " Supplemental Grants "). The Part B base award formula is based on three factors: (1) 75% of the award is based on the state's proportion of the nation's HIV/AIDS cases; (2) 20% is based on the state's proportion of HIV/AIDS cases outside Part A-funded areas (EMAs and TGAs); and (3) 5% is based on the state's proportion of HIV/AIDS cases in states with no Part A funding. Prior to the 2006 reauthorization, formula grants had been distributed to states in proportion to an estimate of the number of living AIDS cases in each state. Under P.L. 109-415 , funding distribution is based on the number of living HIV and AIDS cases for states that use a name-based HIV reporting system. The requirement for name-based HIV reporting influenced states to change from code-based reporting to name-based reporting, however many states were reluctant to do so because of privacy concerns. P.L. 109-415 provided a transition period for states that did not have a fully mature name-based reporting system. If the transition period was not extended, some grantees might not receive funding in proportion to their number of HIV/AIDS cases, "which is the intended basis of the formula grant." P.L. 111-87 provided a continuation of the transition period. Beginning with FY2013, only living name-based cases of HIV/AIDS are used in making Part B grant determinations. Under Section 2623(b)(2) of the PHS Act, one-third of the non-ADAP Part B appropriation is reserved for a supplemental grant program. Eligible states must have a demonstrated need for supplemental financial assistance and no cancelled grant funds or waivers permitting carryover of funds (see " Unexpended Funds "). Priority in making supplemental grants is given to states with a decline in funding under Part B due to the changes in the distribution formula. Supplemental grant funds must be used for core medical services. Not later than 45 days after awarding supplemental funds under Part B, HRSA must submit a report to Congress concerning such funds. An "emerging community" is defined as a metropolitan area with cumulative total of at least 500 and fewer than 1,000 reported cases of AIDS during the most recent five calendar years. The metropolitan area continues as an emerging community until it fails for three consecutive fiscal years (1) to have the required number of AIDS cases and (2) to have a cumulative total of 750 or more living cases of AIDS as of December 31 of the most recent calendar year. The grant amount is determined by the amount set aside by the Secretary (authorized at $5 million) and by the proportion of the total number of living cases of HIV/AIDS in emerging communities in the state to the total number of living cases of HIV/AIDS in emerging communities nationwide. In 2013, a total of 264,955 clients—or about 55.2% of HIV-positive people in regular care (defined as two or more medical visits per year) in the United States—received their medications through state ADAPs. ADAP funds are distributed via a formula based on each state's proportion of living HIV and AIDS cases. P.L. 111-87 provided a continuation of the transition period for states that did not have a fully mature name-based HIV reporting system. Beginning with FY2013, only living name-based cases of HIV/AIDS are used in making ADAP grant determinations. Five percent of the ADAP appropriation is set aside for ADAP supplemental grants. States are eligible for these grants if they demonstrate a severe need to increase the availability of HIV/AIDS drugs. There is a state-match requirement ($1 state for every $4 federal) for ADAP supplemental grants that may be waived under certain circumstances. The state's ADAP formulary—a list of therapeutics—must have at least one drug from every class of HIV/AIDS drugs. The list is based on the clinical practice guidelines issued by HHS for the use of HIV/AIDS drugs. According to a May 2015 report produced by the National Alliance of State and Territorial AIDS Directors (NASTAD), in FY2014 federal funds provided 43% of the national ADAP budget, state contributions provided 11%, and drug rebates provided another 43%. In the past, many states had to implement cost containment measures—such as waiting lists, lowered income eligibility criteria, reduced formulary, capped enrollment, monthly or annual expenditure cap, client cost sharing—because of insufficient ADAP funds. The George W. Bush Administration and Barack Obama Administration provided supplemental ADAP grants to help alleviate this problem. ADAP is the payer of last resort for HIV/AIDS drugs. As such, it coordinates with other programs available to pay for HIV/AIDs drugs and helps people enroll in other programs (including private insurance) that could be used to pay for HIV/AIDS drugs. In particular, ADAPs coordinate with state Medicaid programs and seek to enroll people in Medicaid when eligible. It also retroactively bills Medicaid for services provided to people who obtain Medicaid eligibility retroactively. Starting in FY2007, states were required to obligate grant funds by the end of the grant year for Part B formula grants, supplemental grants, emerging communities grants, ADAP grants, and supplemental ADAP grants. For supplemental ADAP grants, supplemental grants, and emerging communities grants, if there is an unobligated balance at the end of the grant year, states must return the amount and the funds will be used for additional supplemental grants. For Part B formula grants and ADAP grants, if there is an unobligated balance, states must either return the unexpended funds or apply for a waiver to use the funds in the next year. If the waiver is approved, the funds would be available for one more year, called the carryover year. If a state fails to use the funds in the carryover year, the state must return the funds, which will be used for supplemental grants. For states with an unobligated balance for their Part B formula grant or an ADAP grant, the amount of the grant for the next year would be reduced by the amount of the unobligated balance. The 2009 reauthorization allowed that the amount of the reduction would not include any unobligated balance that was approved by HRSA for carryover; if the amount of the unobligated balance was 5% or less, the grant reduction would not apply. The funds from grant reduction are used for supplemental grants. Drug rebates are received by Part B grantees from pharmaceutical manufacturers following the purchase of drugs for ADAPs. There is a federal requirement that drug rebate funds be spent before federal funds are obligated. Because states may receive the rebates late in the year, some states may incur an unobligated balance penalty. In September 2009 GAO reported that both grantees and HRSA found that the requirement to spend drug rebate funds before obligating federal funds makes it more difficult to avoid unobligated balances. According to GAO, HRSA tried to address this problem by asking HHS for an exemption from the relevant regulations for grantees using drug rebates, but the request was denied. Under P.L. 111-87 , if an expenditure of ADAP rebate funds triggered a penalty, the Secretary may deem a state's unobligated balance to be reduced by the amount of the rebate. Any unobligated amount returned to the Secretary would be used for ADAP supplemental grants or Part B supplemental grants. Part C grants provide HIV primary care in the outpatient setting to low-income, medically underserved people living with HIV/AIDS. Part C "provides grants directly to community and faith based primary health clinics and public health providers in 49 states, Puerto Rico, the District of Columbia and the U.S. Virgin Islands." Under current law, 75% of a Part C grant must be used for core medical services, and not less than 50% of a grant must be used for early intervention services. Part C grants are awarded to facilities that focus on underserved populations, including federally qualified health centers, family planning clinics, hemophilia centers, rural health clinics, Indian Health Service facilities, and certain health facilities and community-based organizations that provide early intervention services to people infected with HIV/AIDS through intravenous drug use. Part C services include counseling, HIV testing, referrals, clinical and diagnostic services regarding HIV/AIDS, drug treatments under ADAP, treatment adherence, oral health, mental health, substance abuse services, and support services. A small portion of Part C funds are used for capacity development grants. The Consolidated Appropriations Act, 2016 ( H.R. 2029 , P.L. 114-113 ), provides a $4 million increase for Part C in FY2016. Part D provides grants to public and nonprofit entities for family-centered care for women, infants, children, and youth with HIV/AIDS. Such individuals are provided outpatient/ambulatory health care, case management, referrals, and other services to enable participation in the program, including services designed to recruit and retain youth with HIV. Grantees must coordinate with programs promoting the reduction and elimination of risk of HIV/AIDS for youth. P.L. 111-87 clarified that Part D should be the payer of last resort when Part D clients have access to other forms of health care coverage, such as Medicaid and the Children's Health Insurance Program. The FY2015 and FY2016 Obama Administration budget requests proposed consolidating Part D with Part C in order to "expand the focus on women, infants, children and youth across all the funded recipients, increase points of access for these populations and reduce duplication of effort and reporting/administrative burden among co-funded recipients. In 2014, approximately 67% of Part D Programs funded by the Ryan White HIV/AIDS Program were dually funded under Part C." The House and the Senate rejected the consolidation proposal in FY2015 and in FY2016. In the past, Part E authorized grants for emergency response employees and established procedures for notifications of infectious diseases exposure; Part E was never funded. The 2006 reauthorization ( P.L. 109-415 ) deleted the sections of Part E on emergency response and inserted into Part E several sections, with some text changes, from Part D (on coordination, audits, definitions, and a prohibition on promotion of intravenous drug use or sexual activity) and two new sections on public health emergencies and certain privacy protections. P.L. 109-415 inadvertently deleted language on "procedures for the notification of occupational infectious diseases exposure" from Part E of Ryan White. This was a matter of some concern for the emergency response community, and reinstatement of the relevant language was requested. P.L. 111-87 reinserted the deleted language on "procedures for the notification of occupational infectious diseases exposure" into a new Part G of Title XXVI of the PHS Act, including a change from the original language that would permit the Secretary to suspend the requirements in a public health emergency. Part F provides support for the AIDS Dental Reimbursement (ADR) Program, the Community-Based Dental Partnership Program, the AIDS Education and Training Centers (AETCs), the Special Projects of National Significance (SPNS) Program, and the Minority AIDS Initiative (MAI). The ADR reimburses dental schools for oral health care to HIV/AIDS patients and the Community-Based Dental Partnership Program provides oral health care to HIV/AIDS patients in underserved areas and supports the training of dental students and residents. The AETC program provides specialized clinical education and consultation for health providers on HIV transmission, treatment, and prevention. The SPNS program awards grants to support the development of innovative models of HIV treatment. Under statute, the SPNS program is to be funded, up to $25 million, from amounts appropriated for Parts A, B, C, and D; this was not changed by reauthorization. However, from FY2003 through FY2014, each Labor-HHS appropriations bill provided $25 million for the SPNS program via a funding mechanism known as the "PHS evaluation tap." The FY2015 appropriation, FY2016 request, and FY2016 House appropriation bill include funding for SPNS directly via budget authority rather than through the PHS evaluation tap. The Senate did not propose funding for SPNS in FY2016. The Consolidated Appropriations Act, 2016 ( H.R. 2029 , P.L. 114-113 ), provides $25 million in budget authority for SPNS in FY2016. The FY2017 request would provide $34 million for SPNS via the PHS evaluation tap. The $9 million increase over FY2016 is requested for a new SPNS initiative to expand screening for and treatment of hepatitis C in people living with HIV. P.L. 109-415 codified MAI as part of the Ryan White HIV/AIDS Program under Part F of Title XXVI of the PHS Act. Under P.L. 109-415 , MAI provided funding for competitive grants (via Parts A, B, C, D, and F-AETC) that evaluate and address the disproportionate impact of HIV/AIDS on racial and ethnic minorities. P.L. 111-87 directed HRSA to develop a formula for awarding MAI grants under Part A and Part B "that ensures that funding is provided based on the distribution of populations disproportionately impacted by HIV/AIDS." The law directed HRSA to synchronize the schedule of application submissions and funding of MAI grants with the schedule of the corresponding Ryan White HIV/AIDS Program part. P.L. 111-87 required GAO to provide a report for Congress within one year of enactment that describes MAI activities across HHS. The GAO report found that MAI grantees were providing mostly support services similar to the support services (community outreach and education, staff/provider training) the grantees provided with core HIV/AIDS funding from HRSA. GAO found that the multiple funding streams "carried separate administrative requirements that caused administrative challenges" for the grantees. The use of multiple funding streams "raises the possibility of inefficiencies and requires unnecessarily duplicative application and reporting requirements of grantees that could otherwise be using their resources to provide needed services." GAO recommended that MAI funding should be consolidated into core HIV/AIDS funding, and HHS stated that this would "align with the National HIV/AIDS Strategy and federal program accountability goals." P.L. 111-87 also required, within six months of publication of the GAO report, that HHS submit to Congress a departmental plan for using MAI funds, taking into consideration the best practices described in the GAO report. The National HIV/AIDS Strategy (NHAS) is a five-year plan detailing the "principles, priorities, and actions" to guide the "collective national response to the HIV epidemic." The NHAS was first released in July 2010 and updated in July 2015. The current NHAS goals are as follows: 1. Reduce new infections. 2. Increase access to care and improve health outcomes for people living with HIV. 3. Reduce HIV-related health disparities and health inequities. 4. Achieve a more coordinated national response to the HIV epidemic. The NHAS cites the Ryan White HIV/AIDS Program as a critical source of lifesaving care and treatment for indi viduals living with HIV. Moreover, providing such treatment "not only improves the health outcomes for individuals with HIV, it serves the public health benefit of helping to prevent HIV transmission." Clinical research has demonstrated that early treatment of HIV patients with antiretroviral medication results in viral suppression and reduces the risk of HIV transmission by 96%. However, CDC data indicate that in 2012, only 30% of people living with HIV were virally suppressed. According to HRSA, the Ryan White HIV/AIDS Program grant awards, by supporting cities, states, and communities in the treatment of HIV patients, will allow the goals of the updated NHAS to be achieved. Prior to the implementation of the ACA ( P.L. 111-148 , as amended), obtaining private health insurance was difficult for individuals with HIV/AIDS and others living with serious preexisting medical conditions. A 2011 Institute of Medicine (IOM) report estimated that in urban areas, only about 13% of HIV patients in 2010 had private health insurance; most HIV patients were covered by Medicaid (36%), Medicare (12%), or a combination of these two programs (6%). The remaining individuals were either uninsured and obtained services through the Ryan White HIV/AIDS Program (24%), or their insurance coverage information was missing or unknown (8%). In 2012, the Ryan White HIV/AIDS Program served more than a half million low-income individuals with HIV/AIDS in the United States, of whom 28% were uninsured and 59% were underinsured. The CDC estimates that more than 1.2 million people have HIV/AIDS, but does not indicate the percentage of this population that is low income. Among those who were underinsured, Ryan White HIV/AIDS Program funds were used to supplement insurance gaps. The ACA expanded insurance coverage through a number of different provisions. Specifically, it expanded public coverage for low-income individuals through the Medicaid program. It also made a number of changes to the private insurance market, created a standardized marketplace for individuals to purchase insurance coverage and premium subsidies for individuals whose incomes were too high for Medicaid, but were otherwise unable to afford private insurance coverage. The ACA may affect the need for, and use of, certain services provided by the Ryan White HIV/AIDS Program. For example, about half of ADAP clients would be Medicaid-eligible in expansion states, and the remainder would likely be eligible for premium subsidies to purchase health coverage on the exchange. This section describes the ACA changes that are relevant to the Ryan White HIV/AIDS Program and its service population. The section also highlights some of the services provided under the Ryan White HIV/AIDS Program that are not covered by the ACA. Beginning January 2014, states have the option to expand Medicaid coverage for adults under the age of 65 with incomes up to 133% of the federal poverty level (FPL). This expansion, where implemented, is a significant change for the Medicaid program, which generally requires individuals to belong to a categorically eligible group: children, pregnant women, parents of dependent children, the elderly, or the disabled. Some states elected to implement the Medicaid expansion prior to January 2014; these states include California, Colorado, Connecticut, the District of Columbia, Minnesota, New Jersey, and Washington State. As of November 2015, more than half of all states (including the District of Columbia) have adopted the Medicaid expansion. The Medicaid expansion may have a significant impact on the Ryan White ADAP program. NASTAD indicates that about half of ADAP clients would be Medicaid-eligible in expansion states. HRSA is examining the effects of Medicaid expansion on the ADAP program. So far, HRSA has found that Medicaid expansion states reduced their number of ADAP clients; in contrast, non-expansion states saw an increase in ADAP clients. In expansion states ADAP funds may still be used to supplement Medicaid coverage. For example, ADAP funds can be used to assist people with Medicaid cost sharing and to pay for monthly prescriptions because some states limit the number of monthly prescriptions its Medicaid program will pay for. HRSA predicts that the Medicaid expansion will have minimal effects on the non-ADAP parts of the Ryan White HIV/AIDS Program, primarily because data show that, prior to the ACA, Medicaid beneficiaries accessed Ryan White primary medical care services. HRSA predicts that the use of these services by Medicaid beneficiaries will continue. HRSA also found that most non-ADAP clients are insured (either publicly or privately). In addition, the Ryan White HIV/AIDS Program provides certain services, such as dental care, that not all state Medicaid programs provide to adults. As such, even in states that have expanded their Medicaid program, there may be services that the Ryan White HIV/AIDS Program can provide. Private health insurance is generally of two types: group (e.g., employer sponsored) and non-group. The ACA generally made changes to non-group coverage in ways that may increase access to health insurance for the U.S. population as well as coverage for people living with HIV/AIDS. Specifically, the ACA prohibits the cancellation of coverage by an insurer due to a preexisting condition, and eliminates the lifetime caps on insurance benefits. Individuals with HIV/AIDs may have been at risk for either policy cancellation or of reaching lifetime caps. It is expected that these ACA changes will benefit the HIV/AIDS population. The ACA required that U.S. citizens and legal residents have qualifying health insurance or pay a penalty. Private insurance plans are considered to be qualifying health insurance if they cover certain "essential health benefits," which are 10 broad benefit categories, such as outpatient and ambulatory care and prescription drugs. Although a number of essential health benefit categories overlap with the services that the Ryan White HIV/AIDS Program can provide, the overlap is not complete. For example, the Ryan White HIV/AIDS Program provides case management, oral health care, hospice services, and home and community-based services, among others, that are not required to be covered in exchange plans. Conversely, exchange plans are required to cover some services—such as inpatient hospital care—that the Ryan White HIV/AIDS Program cannot. As noted, the ACA required that U.S. citizens and legal residents have qualifying health insurance or pay a penalty. To help people meet this requirement, the ACA created health insurance exchanges—marketplaces—and provided subsidies to individuals with incomes between 100% and 400% of the federal poverty level. NASTAD indicates that about half of ADAP clients would be eligible for premium subsidies to purchase health coverage on the exchange. Ryan White HIV/AIDS Program funds may also be used to pay premiums or cost sharing for individuals who enroll in private insurance plans, including plans offered on an exchange. The Ryan White HIV/AIDS Program continues to be the payer of last resort; as such, the use of funds for insurance coverage is and has been a goal of the program. HRSA and others note that Ryan White funds are increasingly being used for insurance premiums and cost sharing. A 2014 study by the Kaiser Family Foundation looked at ACA implementation in five states, examining the use of Ryan White HIV/AIDS Program funds and challenges that individuals faced. This study suggests that Ryan White HIV/AIDS Program funds were being increasingly used to help people enroll in exchange plans and then to educate people about how to use insurance coverage. This was particularly a challenge, as some Ryan White clients had little experience with the use of health insurance. In some cases, this lack of experience resulted in individuals enrolling in a high-deductible plan, which would pay only after the deductible had been met. As such, some could not afford to meet this deductible and continued to rely on the ADAP program for their medication. The Kaiser study found that the ACA changes to insurance coverage has enabled some Ryan White clients to better manage their non-HIV related medical conditions. HRSA notes that there have been challenges with coverage of HIV medication under exchange plans. Other studies have also found that some individuals who transitioned from the Ryan White HIV/AIDS Program to an exchange plan have experienced difficulty obtaining their HIV medication. Specifically, there was large variation in cost of HIV drugs depending on the plan design; certain insurance plans placed all HIV drugs in the most expensive tier, resulting in greater out of pocket spending (an estimated $3,000 annually), or causing individuals to rely on Ryan White funds to pay their drug costs. Some contend that, as a result, Ryan White funds are being used for expenses that could be covered by insurance plans. Because ACA expands insurance coverage to those previously uninsured, the law also includes provisions that support changes to physician training, compensation, and practice. These changes are intended to increase the size of the medical workforce, alter its composition (more primary care providers or other specialties in shortage), and incentivize practice in rural or other underserved areas. The ACA includes a number of sections that aim to incentivize changes to the delivery of health care services. Specifically, the ACA supports models of care that are patient-centered with an emphasis on improved care coordination, the integrated delivery of health care services, and an increased emphasis on primary and preventive care. For example, the law creates the option for states to establish "health homes" for individuals with chronic conditions, including behavioral health disorders, in the Medicaid program. ACA also permanently authorized the federal health center program administered by HRSA and created the Community Health Center Fund, including $9.5 billion to be appropriated for health center operations in FY2011 through FY2015. Although these funds were initially intended to expand the health center program, they have been partially used to supplement its annual appropriation. Despite this, the overall funding, the number of health centers available, and the services they provide have increased during this period. Many health centers receive Ryan White HIV/AIDS Program funds to provide health services, including HIV testing. The long-range impact of ACA on the Ryan White HIV/AIDS Program—in which HIV care and treatment services provided under the Ryan White HIV/AIDS Program are replaced by access to such services through health coverage via ACA—remains to be determined. In those states that do not participate in the Medicaid expansion, the need for the full range of services under Ryan White would remain. However, even if all states decide to cover the new Medicaid-eligible group provided under ACA, there will be gaps that the Ryan White HIV/AIDS Program could continue to fill, such as coverage of those individuals with HIV/AIDS who are undocumented immigrants or legal immigrants within the five-year Medicaid ban. Ryan White also provides dental care and support services, such as medical transportation, that may not be provided under Medicaid or private health insurance. Some analysts expect that the need for Ryan White funds to pay premiums and out of pocket expenses for individuals who are able to obtain private health insurance coverage on an exchange should continue and may grow. Such expenses may be significant if individuals enroll in high-deductible plans or for those who are on long-term medication. Ryan White HIV/AIDS Program funds are also used to train health care providers. The ACA, by expanding coverage, could increase the need for such training. Although this issue is debated, some analysts have voiced concerns about whether enough physicians will be available to care for individuals who were previously uninsured. There may also be shortages in particular geographical areas or certain specialists, such as primary care or those who are knowledgeable about HIV/AIDS. Advocates for the Ryan White HIV/AIDS Program also note that the program plays a public health role by providing health education and seeking to increase treatment compliance as a way of reducing HIV transmission thereby seeking to prevent the infection of other individuals. This public health role differs from the role of payers, who generally do not focus on public health initiatives. In addition, much of the work to retain people in treatment is accomplished by the Ryan White HIV/AIDS Program's case management services, which are less likely to be duplicated by the coverage that insurance programs provide under the ACA. P.L. 111-87 provided authority for the Ryan White HIV/AIDS Program through FY2013. Section 2(a) of P.L. 111-87 removed the sunset provision that had been included in the 2006 reauthorization (§703 of P.L. 109-415 ). The program's authority is currently expired, but Congress continues to appropriate funds for the program to carry out Title XXVI and Title III of the PHS Act. As noted above (" ACA and the Ryan White HIV/AIDS Program "), the role of the Ryan White HIV/AIDS Program has been and may continue to be altered by the ACA, particularly state decisions on Medicaid expansion. Such changes may be taken into consideration should Congress undertake another reauthorization of the Ryan White HIV/AIDS Program or consider making changes to the ACA. For FY2016, the Obama Administration requested a total of $2.323 billion for the Ryan White HIV/AIDS Program, an increase of $4 million compared with FY2015; the increase would go to Part C. As in FY2015, the FY2016 budget request again proposed consolidating Part D funds into Part C. The House Appropriations Committee reported H.R. 3020 , the FY2016 Labor/HHS/Education bill on June 24, 2015 ( H.Rept. 114-195 ). The House bill would have provided $2.319 billion for the Ryan White HIV/AIDS Program, the same as the FY2015-enacted level, without the consolidation of Parts C and D. The Senate Appropriations Committee reported S. 1695 on June 25, 2015 ( S.Rept. 114-74 ). The Senate bill would have provided $2.294 billion for the Ryan White HIV/AIDS Program, $25 million less than the FY2015-enacted level. The Senate bill did not agree to the proposed consolidation of Parts C and D and did not provide $25 million in funding for SPNS. On September 30, 2015, the President signed into law the Continuing Appropriations Act, 2016 ( P.L. 114-53 , H.R. 719 ), which provided funding for the Ryan White HIV/AIDS Program through December 11, 2015, at the same level as in the FY2015 Consolidated and Further Continuing Appropriations Act ( P.L. 113-235 ), minus an across-the-board reduction of 0.2108%. The Further Continuing Appropriations Act, 2016, ( H.R. 2250 , P.L. 114-96 ) provided funding through December 16, 2015, under the same conditions and funding rate as P.L. 114-53 . On December 17 and 18, 2015, the House and Senate passed the Consolidated Appropriations Act, 2016 ( H.R. 2029 , P.L. 114-113 ), which the President signed on December 18, 2015. The measure provides a total of $2.323 billion for the Ryan White HIV/AIDS Program in FY2016, including the $25 million for SPNS, but did not agree to the consolidation of Parts C and D. The Obama Administration requests $2.298 billion in budget authority and $34 million via the PHS evaluation tap—for SPNS—resulting in a total of $2.332 billion for the Ryan White HIV/AIDS Program in FY2017. The $9 million increase over FY2016 would be for a new SPNS initiative to expand screening for and treatment of hepatitis C in people living with HIV. The FY2017 budget request again proposes a consolidation of Part C and Part D, which was proposed in the FY2015 and FY2016 budget requests and rejected by Congress. | The Ryan White HIV/AIDS Program makes federal funds available to eligible metropolitan areas, states, and local community-based organizations to assist with health care costs and support services for individuals and families affected by the human immunodeficiency virus (HIV) or acquired immune deficiency syndrome (AIDS). The Ryan White HIV/AIDS Program reports that in 2014 it served 512,214 low-income people with HIV/AIDS in the United States, 25.4% of whom were uninsured and 64.2% of whom were living at or below 100% of the federal poverty level. The Ryan White HIV/AIDS Program is administered by the Health Resources and Services Administration (HRSA) of the Department of Health and Human Services (HHS). Its statutory authority is Title XXVI of the Public Health Service (PHS) Act, originally enacted in 1990 and composed of four major parts and several other components. Part A provides grants to urban areas and mid-sized cities. Part B provides grants to states and territories; it also provides funds for the AIDS Drug Assistance Program (ADAP). Part C provides early intervention grants to public and private nonprofit entities. Part D provides grants to public and private nonprofit entities for family-centered care for women, infants, children, and youth with HIV/AIDS. The other components under Part F include the AIDS Dental Reimbursement (ADR) Program, the Community-Based Dental Partnership Program, the AIDS Education and Training Centers (AETCs), the Special Projects of National Significance (SPNS) Program, and the Minority AIDS Initiative (MAI). In October 2009, the 111th Congress passed and President Obama signed the Ryan White HIV/AIDS Treatment Extension Act of 2009 (P.L. 111-87), which reauthorized the Ryan White HIV/AIDS Program through September 30, 2013. The program's authority is currently expired, but Congress continues to appropriate funds for the program. The Patient Protection and Affordable Care Act of 2010 (ACA, P.L. 111-148, as amended) contains general provisions to increase access to health insurance; therefore, the ACA has the potential to increase coverage for people living with HIV/AIDS. For example, ACA includes 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 help low- and middle-income individuals purchase coverage from a health insurance exchange. ACA phases out the Medicare Part D "doughnut hole" (i.e., payment gap) for HIV/AIDS individuals who are Medicare eligible, which should increase coverage of HIV/AIDS drugs. Finally, the ACA permits states to broaden Medicaid eligibility to include non-elderly adults. There could be a significant impact on Ryan White ADAP clients in states that expand their Medicaid program; specifically, about half of ADAP clients would be Medicaid-eligible in expansion states, and the remainder would likely be eligible for premium subsidies to purchase health coverage on the exchange. The long-range impact of ACA on the Ryan White HIV/AIDS Program—in which HIV care and treatment services provided under Ryan White are replaced by access to such services through health insurance coverage via ACA—remains to be determined. Prior to the ACA's implementation, many Ryan White patients were insured and used Ryan White funds to pay premiums and cost sharing, and this need for funds is likely to remain as some Ryan White patients transition to private insurance. In states that decide not to participate in the Medicaid expansion, the need for the full range of Ryan White services would remain. However, even if all states decide to cover the new Medicaid-eligible group, there will be gaps that the Ryan White HIV/AIDS Program could continue to fill, such as coverage of those individuals with HIV/AIDS who are undocumented immigrants, and training of health providers in HIV-related care. In addition, Ryan White provides dental care and support services, such as medical transportation, that may not be provided under Medicaid or private health insurance. The Ryan White HIV/AIDS Program serves a public health role by keeping people in treatment and thereby decreasing the risk of transmitting HIV to others. Funding for the Ryan White HIV/AIDS Program in FY2016, provided in the Consolidated Appropriations Act, 2016 (H.R. 2029, P.L. 114-113), is $2.323 billion. For FY2017, the Obama Administration requests $2.298 billion in budget authority and $34 million via a PHS transfer for the SPNS program, resulting in an FY2017 total of $2.332 billion for the Ryan White HIV/AIDS Program. The $9 million increase over FY2016 is for a new SPNS initiative to expand screening for and treatment of hepatitis C in people living with HIV. The FY2017 budget request again proposes a consolidation of Part C and Part D, which was proposed in the FY2015 and FY2016 budget requests and rejected by Congress. |
On January 5, 2011, the House of Representatives adopted an amendment to House Rule XII adding a requirement to all measures introduced in the House of Representatives that are intended to become law. Specifically, Rule XII, clause 7(c) requires that, to be accepted for introduction by the House Clerk, all bills (H.R.) and joint resolutions (H.J.Res.) must provide a document stating "as specifically as practicable the power or powers granted to Congress in the Constitution to enact the bill or joint resolution." The requirement is mandatory, and the House Clerk appears to have the authority to reject introduction of any bill and/or joint resolution that is not accompanied by such a statement. It should be noted, however, that the rule does not appear to vest the House Clerk with the responsibility or authority to evaluate the substantiality of the required statement. Further, based on the plain language of the rule, such a statement is not required for House Resolutions (H.Res.), proposed amendments to already introduced bills, or other types of measures that may be considered by the House. With respect to measures from the Senate that are intended to become law, such as Senate bills (S.) and Senate joint resolutions (S.J.Res.), the rule provides that, prior to their consideration by the House, "the chair of a committee of jurisdiction may submit the statement … as though the chair were the sponsor of the Senate bill or joint resolution." As this requirement is by its plain language permissive, it appears as though consideration of Senate bills and joint resolutions will not be procedurally affected if a statement of constitutional authority is not provided. It is important to note that the rule does not require that the statement of constitutional authority be made part of the text of a proposed bill or joint resolution. Rather, it appears that these statements are to be provided to the House Clerk at the time of introduction as a separate document. Although the statements will not be part of the bill text, the rule does provide that the statements are to be signed by the sponsoring Member, printed in the Congressional Record , and are to be made publicly available in electronic form by the Clerk. While the rule appears to only apply to the introduction of bills and joint resolutions in the House, there is nothing in the rule's text to indicate that the constitutional authority statement cannot be updated or amended at other points in the legislative process. As bills work their way through committee and onto the floor, they are often amended and, as a result, sponsoring Members may feel that the basis for constitutional authority provided at introduction is no longer relevant or accurate. While the rule does not require that Members ensure that the statement of constitutional authority be updated to reflect changes to the bill, there appears to be nothing that prevents or prohibits a sponsoring Member from amending or updating the statement to respond to changes made during the due course of the legislative process. The rule appears to adopt a subjective standard for determining what specific constitutional authority exists to enact an introduced bill. In other words, the rule appears to leave each individual Member free to ascertain, by whatever means the Member deems appropriate, his/her own basis for constitutional authority. Should a Member choose to consider the Constitution as interpreted by the Supreme Court through its majority opinions, that appears to be permissible under the rule. Equally permissible sources for Members to rely on could include their own personal interpretations of the text of the Constitution; documents produced at the Constitutional Convention, such as James Madison's Notes on the Constitutional Convention of 1787 ; sources published contemporaneously with the consideration and ratification of the Constitution by the states, such as the Federalist Papers , Anti-Federalist Papers , and the ratification debates of the state legislatures; commentaries on the Constitution, such as Joseph Story's Commentaries on the Constitution of the United States or The Heritage Guide to the Constitution ; academic journal articles, constitutional law treatises, and other publications; the advice of congressional support agencies; the advice of outside groups or think tanks; submitted statements for similar proposed legislation; and any other source that the Member believes to be relevant and authoritative. The language "as specifically as practicable" suggests that the Members should cite a specific clause or provision of the Constitution as the basis for authority, but the rule does not appear to actually require such a citation. As discussed above, while the Clerk appears to have the ability to reject bills that are introduced without an accompanying statement of constitutional authority, no other enforcement mechanism or procedural action appears to be provided for by the rule. In other words, once the statement is properly included with the bill at introduction, the rule is satisfied and Members have no legal or procedural recourse against a statement, even if they believe the constitutional authority statement is incomplete, inaccurate, or improper. Thus, the fact that a Member may disagree with a statement of constitutional authority does not appear to provide the Member with a legal or procedural basis on which to prevent or delay consideration of a properly introduced bill or joint resolution. Conceptually and analytically, it seems critical to make a distinction between what the rule requires of Members and what it does not. Specifically, this requires understanding the difference between "a statement of constitutional authority to act" and "an analysis of the constitutionality" of a proposed bill or joint resolution. These are two separate and discrete questions that require different types of analysis and, most importantly, may produce different results. The House rule is asking the Member to identify the provision or clause of the Constitution that grants Congress the authority to enact the bill that is being introduced. Phrased another way, the question that the House rule is arguably asking of Members is, what part of the Constitution gives Congress the power to act in the manner being proposed. The rule does not appear to be asking whether the specifics of what the Member is proposing in the bill are consistent with the Constitution. That is a separate, often times much more complex inquiry. For example, legislation intending to prohibit the interstate sale and distribution of material related to animal cruelty or depictions of child pornography is arguably within Congress's authority to act under Article I, §8, clause 3, commonly referred to as the Commerce Clause. Thus, to comply with the House rule, a statement accompanying the bill identifying the Commerce Clause as the basis for Congress's authority to act appears to fully satisfy the Member's obligation. Nothing in the statement required by the rule, however, speaks to whether the particular components of the legislation are in fact constitutionally permissible in light of provisions in the Constitution that may place limitations or disabilities on Congress's authority to act. Although Congress may have the requisite constitutional authority to regulate the interstate sale of material related to animal cruelty or child pornography, reaching that conclusion in no way requires the consideration of whether the First Amendment constrains or disables Congress's authority with respect to these materials. The consideration of constitutional limitations or disabilities on Congress's authority, such as the First, Ninth, and Tenth Amendments, appears to be outside the scope of the House rule. The House rule arguably only requires the Member to state the constitutional basis for authority to act, not whether the action is constitutionally permissible in light of other potentially disabling or limiting provisions. Another factor potentially complicating analysis under the rule is the likelihood that Congress may be able to rely on multiple constitutional provisions for authority to enact a proposed bill. The recently enacted Patient Protection and Affordable Care Act (PPACA) is an example of such a statute. Had this rule been in effect when PPACA was introduced, the constitutional authority cited could arguably have been the Commerce Clause, Article I, §8, clause 3, as PPACA attempts to regulate the national market for heath insurance and health care. PPACA, however, in addition to regulating interstate commerce, also contains language that can be authorized by other provisions of the Constitution. For instance, PPACA, in several sections, provides appropriated funds to agencies to carry out the requirements of the act. Appropriations are authorized by Article I, §9, clause 7, not the Commerce Clause. Additionally, PPACA contains several sections that provide for "fast track" consideration of certain types of legislation by the Senate. Legislation governing the internal rules and procedures utilized by Congress is authorized by Article I, §5, clause 2, not the Commerce Clause. Given the analytical and conceptual distinction between Congress's constitutional authority to act and an act's constitutionality, the possibility of conflicting results is clear. Again, PPACA can serve as an illustrative example. The fact that there is arguably a basis for constitutional authority to act under the Commerce Clause in no way impacts an analysis of whether the specific provisions within PPACA are legitimate exercises of Congress's power under the Commerce Clause. As a result, there has been litigation regarding PPACA's individual mandate, which, to date, has resulted in conflicting judicial decisions with respect to the mandate's constitutionality. Although there are thousands of bills introduced in the House of Representatives each Congress, they can be broadly categorized into selected groupings for purposes of discussing possible bases of constitutional authority. This section of the report will discuss four such broad categories of legislation: authorization legislation; appropriations legislation; legislation that places conditions on the availability of federal funds; and, finally, legislation that repeals existing laws and/or programs. This is not intended to be an exhaustive discussion of types of legislation, but is provided to illustrate the analytical framework for determining proposed legislation's constitutional authority. As discussed above, nothing in this discussion considers or discusses the constitutionality of specific proposed legislation. Perhaps the most commonly used general category of legislation introduced during a Congress is authorization legislation. Generally, authorization bills will propose the establishment, or continuation (referred to as a reauthorization bill) for an agency or program, and will provide the necessary legal authority for that agency to operate and/or for the program to be carried out. As there is no specific clause in the Constitution that provides general authority for authorization bills, most will require an analysis based on the specific subject matter of the proposed bill. For example, a bill authorizing activities of the military or defense department programs would arguably be constitutionally authorized by Article I, §8, clauses 12, 13, or 14, which grant Congress the power to regulate the Army, Navy, and Military respectively. Alternatively, a proposed bill authorizing or reauthorizing the Federal Aviation Administration (FAA) would arguably be constitutionally authorized by Article I, §8, clause 3, the Commerce Clause. The Commerce Clause could serve as the basis for constitutional authority, as the regulation of aviation arguably has a direct impact on commerce between the states as well as between foreign nations. As discussed above, the only requirement imposed by the House rule is to provide a basis for constitutional authority; the rule does not require an assessment of a proposed bill's constitutionality. Thus, it would appear that many introduced bills that authorize general federal government activity and/or programs will be able to cite Article I, §8, clause 3, the Commerce Clause, as the basis for constitutional authority. Funding the activities of the federal government is typically done through the enactment of annual appropriations bills. There are three main types of appropriations bills: (1) regular or general, of which there are typically 12 annual appropriations bills; (2) supplemental appropriations bills, which are used to address emergency funding and other unexpected contingencies; and (3) continuing appropriation resolutions or CRs, which provide stop-gap funding for agencies and programs that have not had their annual appropriations bills enacted by the end of the fiscal year. Article I, §9, clause 7 specifically provides the constitutional authority for each of the various types of appropriations bills. As previously discussed, larger, more complex bills may include provisions that appropriate funds, even though the bill has other more general purposes. Thus, while individual provisions of a bill may be constitutionally authorized by the appropriations power, a Member may still consider it necessary to provide a statement of constitutional authority for those parts of the bill not covered by the Appropriations Clause. Often Members of Congress will introduce bills that are intended to provide incentives for the states to perform certain functions that the federal government is not authorized to perform directly. An example of such legislation is the requirement for there to be a minimum drinking age, which is not directly imposed by federal law, but rather has been adopted by the states so that they annually receive the full allotment of federal highway funds. States that opt not to maintain the minimum drinking age are required to have their allotment of highway funds reduced by 10% annually. Bills that are introduced that purport to take similar actions can arguably be constitutionally authorized by the "general welfare" language found in Article I, §8, clause 1, commonly referred to as the Spending Clause. Again, as discussed above, this analysis does not address the question of whether the specific bill in question exceeds the scope of the Spending Clause, as articulated by the Supreme Court. That is a question of constitutionality, not of constitutional authority. It is expected that many Members may introduce legislation that proposes to repeal an existing law, eliminate a federal agency, and/or defund a specific program. As the Constitution contains no direct language addressing the power of repeal, determining the constitutional authority for such a proposal may prove elusive. One potential argument for the constitutional authority to repeal laws, agencies, or programs is that the authority to repeal is the same as the authority to create. If, for example, a Member wished to introduce a bill proposing the elimination of the Department of Education, he/she might choose to cite the Commerce or Spending Clauses discussed above, as they were arguably the source of constitutional authority for having created the Department of Education. While a Member may believe that the reason for introducing the bill is to restore the proper balance between the states and the national government pursuant to the Tenth Amendment, such a citation is arguably not consistent with the House rule. The Tenth Amendment is not an affirmative grant of authority to Congress; rather, it is a limitation or disability on Congress's authority to legislate. Hence, because the House rule requires "a statement citing … the power or powers granted to Congress …," not merely a statement of constitutional provisions, citations to the Tenth Amendment do not appear to satisfy the requirement of the House rule. Another closely related type of legislation is legislation intended to revoke a final agency regulation pursuant to the Congressional Review Act (CRA). The CRA permits any Member to introduce a joint resolution of disapproval of any federal agency rule within 60 legislative days after Congress has received the rule. Because such resolutions must be presented to the President for his signature or veto, they are intended to become law. Therefore, resolutions pursuant to the CRA are subject to the rule in the House upon their introduction. The CRA provides a statutory basis for the introduction of the resolution, but the House rule requires a statement of constitutional, not statutory, authority. Arguably, the advantage to introducing a resolution under the CRA is that, if done properly, the resolution is eligible for certain expedited procedures, particularly when it comes to Senate consideration, that potentially make it easier to move through Congress. Thus, the constitutional authority for joint resolutions of disapproval is arguably Article I, §5, clause 2, which provides Congress the authority to determine the rules of its proceedings. As noted above, it may be difficult to fully articulate the textual constitutional authorities which can serve as the basis for a proposed bill, as the various powers of the federal government may overlap, so that several constitutional authorities might individually suffice to authorize Congress's authority over a particular subject matter. Further, case law may have either expanded or limited the apparent reach of these authorizations. In addition, the "Necessary and Proper Clause" and other implied powers may also support the expansion of congressional authority beyond these explicit authorities in ways not easily discernible from the text. Outlined on the following pages is a list of general types of legislation and related provisions of the Constitution that might arguably provide the power to legislate on some aspects of an issue. An analysis of relevant case law regarding all provisions of the Constitution may be found in the treatise Constitution of the United States of America: Analysis and Interpretation, prepared by the American Law Division of the Congressional Research Service. Under P.L. 91-589, a hard copy of this treatise has been provided to all Members of Congress, and a searchable version of the treatise is available on the CRS website under the Quick Link "Constitution Annotated." Article I, Section 9, Clause 7 No Money shall be drawn from the Treasury but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time. Article I, Section 8, Clause 12 To raise and support Armies, but no Appropriation of Money to that Use shall be for a longer Term than two Years. Article I, Section 8, Clause 4 The Congress shall have Power *** To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States. Article I, Section 8, Clause 3 The Congress shall have Power *** To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes. Article I, Section 2, Clause 3 The actual Enumeration shall be made within three Years after the first Meeting of the Congress of the United States, and within every subsequent Term of ten Years, in such Manner as they shall by Law direct. The Number of Representatives shall not exceed one for every thirty Thousand, but each State shall have at Least one Representative; and until such enumeration shall be made, the State of New Hampshire shall be entitled to chuse three, Massachusetts eight, Rhode Island and Providence Plantations one, Connecticut, five, New York six, New Jersey four, Pennsylvania eight, Delaware one, Maryland six, Virginia ten, North Carolina five, South Carolina five, and Georgia three. Fourteenth Amendment, Section 5 Section 1: All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and 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. **** Section 5: The Congress shall have power to enforce, by appropriate legislation, the provisions of this article. Article I, Section 8, Clause 3 The Congress shall have Power *** To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes. Article I, Section 8, Clause 3 The Congress shall have Power *** To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes. Article V The Congress, whenever two thirds of both Houses shall deem it necessary, shall propose Amendments to this Constitution, or, on the Application of the Legislatures of two thirds of the several States, shall call a Convention for proposing Amendments, which in either Case, shall be valid to all Intents and Purposes, as Part of this Constitution, when ratified by the Legislatures of three fourths of the several States or by Conventions in three fourths thereof, as the one or the other Mode of Ratification may be proposed by the Congress; Provided that no Amendment which may be made prior to the Year One thousand eight hundred and eight shall in any Manner affect the first and fourth Clauses in the Ninth Section of the first Article; and that no State, without its Consent, shall be deprived of its equal Suffrage in the Senate. Article I, Section 8, Clause 8 The Congress shall have Power *** To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries. Article I, Section 8, Clause 5 *** To provide for the Punishment of counterfeiting the Securities and current Coin of the United States. Article I, Section 8, Clause 6 The Congress shall have Power *** To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures. Article I, Section 8, Clause 2 The Congress shall have Power *** To borrow Money on the credit of the United States. Article I, Section 8, Clause 17 Congress shall have power *** To exercise exclusive Legislation in all Cases whatsoever, over such District (not exceeding ten Miles square) as may, by Cession of particular States, and the Acceptance of Congress, become the Seat of Government of the United States, and to exercise like Authority over all Places purchased by the Consent of the Legislature of the State in which the same shall be, for the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful Buildings. Fourteenth Amendment, Section 5 Section 1: All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and 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. **** Section 5: The Congress shall have power to enforce, by appropriate legislation, the provisions of this article. Twenty-Fourth Amendment, Section 2 Section 1: The right of citizens of the United States to vote in any primary or other election for President or Vice President, for electors for President or Vice President, or for Senator or Representative in Congress, shall not be denied or abridged by the United States or any State by reason of failure to pay any poll tax or other tax. Section 2: The Congress shall have power to enforce this article by appropriate legislation. Article I, Section 4, Clause 1 The Times, Places and Manner of holding Elections for Senators and Representatives, shall be prescribed in each State by the Legislature thereof; but Congress may at any time make or alter such Regulations, except as to the Place of chusing Senators. Article I, Section 9, Clause 8 No Title of Nobility shall be granted by the United States: And no Person holding any Office of Profit or Trust under them, shall, without the Consent of the Congress accept of any present, Emolument, Office, or Title, of any kind whatever, from any King, Prince, or foreign State. Fourteenth Amendment, Section 5 Section 1: All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and 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. **** Section 5: The Congress shall have power to enforce, by appropriate legislation, the provisions of this article. Article I, Section 8, Clause 9 The Congress shall have Power *** To constitute Tribunals inferior to the supreme Court. 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. Article III, Section 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. Article IV, Section 1 Full Faith and Credit shall be given in each State to the public Acts, Records, and judicial Proceedings of every other State. And the Congress may by general Laws prescribe the Manner in which such Acts, Records, and Proceedings shall be proved, and the Effect thereof. Article I, Section 9, Clause 2 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. Article I, Section 8, Clause 4 The Congress shall have Power *** To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States. Article I, Section 8, Clause 3 The Congress shall have Power *** To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes. Article I, Section 8, Clause 3 The Congress shall have Power *** To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes. Article I, Section 8, Clause 11 The Congress shall have power *** To declare War, grant Letters of Marque and Reprisal, and make Rules concerning Captures on Land and Water. Article I, Section 8, Clause 14 To make Rules for the Government and Regulation of the land and naval Forces. Article I, Section 8, Clause 16 The Congress shall have Power *** To provide for organizing, arming, and disciplining, the Militia, and for governing such Part of them as may be employed in the Service of the United States, reserving to the States respectively, the Appointment of the Officers, and the Authority of training the Militia according to the discipline prescribed by Congress. Article I, Section 8, Clause 15 The Congress shall have Power *** To provide for calling forth the Militia to execute the Laws of the Union, suppress Insurrections and repel Invasions. Article I, Section 8, Clause 13 The Congress shall have Power *** To provide and maintain a Navy. Article I, Section 8, Clause 18 The Congress shall have Power *** To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by the Constitution in the Government of the United States, or in any Department or Officer thereof. Article I, Section 8, Clause 8 The Congress shall have Power *** To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries Article I, Section 8, Clause 10 The Congress shall have Power *** To define and punish Piracies and Felonies committed on the high Seas, and Offences against the Law of Nations. Article I, Section 8, Clause 7 The Congress shall have Power *** To establish Post Offices and post roads. Article II, Section 1, Clause 6 In Case of the Removal of the President from Office, or of his Death, Resignation, or Inability to discharge the Powers and Duties of the said Office, the Same shall devolve on the Vice President, and the Congress may by law provide for the Case of Removal, Death, Resignation or Inability, both of the President and Vice President declaring what Officer shall then act as President, and such Officer shall act accordingly until the Disability be removed, or a President shall be elected. Article II, Section 1, Clause 4 The Congress may determine the Time of chusing the Electors, and the Day on which they shall give their Votes; which Day shall be the same throughout the United States. Twenty-Third Amendment, Section 2 Section 1: The District constituting the seat of Government of the United States shall appoint in such manner as the Congress may direct: A number of electors of President and Vice President equal to the whole number of Senators and Representatives in Congress to which the District would be entitled if it were a State, but in no event more than the least populous State; they shall be in addition to those appointed by the States, but they shall be considered, for the purposes of the election of President and Vice President, to be electors appointed by a State; and they shall meet in the District and perform such duties as provided by the twelfth article of amendment. Section 2: The Congress shall have power to enforce this article by appropriate legislation. Twentieth Amendment, Section 4 **** Section 4: The Congress may by law provide for the case of the death of any of the persons from whom the House of Representatives may choose a President whenever the right of choice shall have devolved upon them, and for the case of the death of any of the persons from whom the Senate may choose a Vice President whenever the right of choice shall have devolved upon them. Twenty-Fifth Amendment, Section 4 Section 1: In case of the removal of the President from office or of his death or resignation, the Vice President shall become President. Section 2: Whenever there is a vacancy in the office of the Vice President, the President shall nominate a Vice President who shall take office upon confirmation by a majority vote of both Houses of Congress. Section 3: Whenever the President transmits to the President pro tempore of the Senate and the Speaker of the House of Representatives his written declaration that he is unable to discharge the powers and duties of his office, and until he transmits to them a written declaration to the contrary, such powers and duties shall be discharged by the Vice President as Acting President. Section 4:Whenever the Vice President and a majority of either the principal officers of the executive departments or of such other body as Congress may by law provide, transmit to the President pro tempore of the Senate and the Speaker of the House of Representatives their written declaration that the President is unable to discharge the powers and duties of his office, the Vice President shall immediately assume the powers and duties of the office as Acting President. Thereafter, when the President transmits to the President pro tempore of the Senate and the Speaker of the House of Representatives his written declaration that no inability exists, he shall resume the powers and duties of his office unless the Vice President and a majority of either the principle officers of the executive department or of such other body as Congress may by law provide, transmit within four days to the President pro tempore of the Senate and the Speaker of the House of Representatives their written declaration that the President is unable to discharge the powers and duties of his office. Thereupon Congress shall decide the issue, assembling within forty-eight hours for that purpose if not in session. If the Congress within twenty-one days after receipt of the latter written declaration, or, if Congress is not in session within twenty-one days after Congress is required to assemble, determines by two-thirds vote of both Houses that the President is unable to discharge the powers and duties of his office, the Vice President shall continue to discharge the same as Acting President; otherwise, the President shall resume the powers and duties of his office. Fourteenth Amendment, Section 5 Section 1: 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. **** Section 5: The Congress shall have power to enforce, by appropriate legislation, the provisions of this article. Article IV, Section 3, Clause 2 The Congress shall have Power to dispose of and make all needful Rules and Regulations respecting the Territory or other Property belonging to the United States; and nothing in this Constitution shall be so construed as to Prejudice any Claims of the United States, or of any particular State. Article IV, Section 4 The United States shall guarantee to every State in this Union a Republican Form of Government, and shall protect each of them against Invasion; and on Application of the Legislature, or of the Executive (when the Legislature cannot be convened) against domestic Violence. Article I, Section 5, Clause 2 Each House may determine the Rules of its Proceedings, punish its Members for disorderly Behaviour, and, with the Concurrence of two thirds, expel a Member. Thirteenth Amendment, Section 2 Sections 1: Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction. Section 2: Congress shall have power to enforce this article by appropriate legislation. 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; but all Duties, Imposts and Excises shall be uniform throughout the United States. Article IV, Section 3, Clause 1 New States may be admitted by the Congress into this Union; but no new State shall be formed or erected within the Jurisdiction of any other State; nor any State be formed by the Junction of two or more States, or Parts of States, without the Consent of the Legislatures of the States concerned was well as of the Congress. Article I, Section 10, Clause 2 No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it's inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Control of the Congress. Article I, Section 10, Clause 3 No State shall, without the Consent of Congress, lay any Duty of Tonnage, keep Troops, or Ships of War in time of Peace, enter into any Agreement or Compact with another State, or with a foreign Power, or engage in War, unless actually invaded, or in such imminent Danger as will not admit of delay. Article I, Section 10, Clause 3 No State shall, without the Consent of Congress, lay any Duty of Tonnage, keep Troops, or Ships of War in time of Peace, enter into any Agreement or Compact with another State, or with a foreign Power, or engage in War, unless actually invaded, or in such imminent Danger as will not admit of delay. Article I, Section 10, Clause 3 No State shall, without the Consent of Congress, lay any Duty of Tonnage, keep Troops, or Ships of War in time of Peace, enter into any Agreement or Compact with another State, or with a foreign Power, or engage in War, unless actually invaded, or in such imminent Danger as will not admit of delay. 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; but all Duties, Imposts and Excises shall be uniform throughout 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; but all Duties, Imposts and Excises shall be uniform throughout the United States. Sixteenth Amendment The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration. Article IV, Section 3, Clause 2 The Congress shall have Power to dispose of and make all needful Rules and Regulations respecting the Territory or other Property belonging to the United States; and nothing in this Constitution shall be so construed as to Prejudice any Claims of the United States, or of any particular State. Article III, Section 3, 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. Twenty-Sixth Amendment, Section 2 Section 1: The right of citizens of the United States, who are eighteen years of age or older, to vote shall not be denied or abridged by the United States or by any State on account of age. Section 2: The Congress shall have power to enforce this article by appropriate legislation. Fifteenth Amendment, Section 2 Section 1: The right of citizens of the United States to vote shall not be denied or abridged by the United States or by any State on account of race, color, or previous condition of servitude. Section 2: The Congress shall have power to enforce this article by appropriate legislation. Article I, Section 8, Clause 11 The Congress shall have power *** To declare War, grant Letters of Marque and Reprisal, and make Rules concerning Captures on Land and Water. Nineteenth Amendment, Section 2 Section 1: The right of the citizens of the United States to vote shall not be denied or abridged by the United States or by any State on account of sex. Section 2: Congress shall have power to enforce this article by appropriate legislation. | On January 5, 2011, the House of Representatives adopted an amendment to House Rule XII adding a requirement to all measures introduced in the House of Representatives that are intended to become law. Specifically, Rule XII, clause 7(c) requires that, to be accepted for introduction by the House Clerk, all bills (H.R.) and joint resolutions (H.J.Res.) must provide a document stating "as specifically as practicable the power or powers granted to Congress in the Constitution to enact the bill or joint resolution." The requirement is mandatory, and the House Clerk appears to have the authority to reject introduction of any bill and/or joint resolution that is not accompanied by such a statement. It should be noted, however, that the rule does not appear to vest the House Clerk with the responsibility or authority to evaluate the substantiality of the required statement. Further, based on the plain language of the rule, such a statement is not required for House Resolutions (H.Res.), proposed amendments to already introduced bills, or other types of measures that may be considered by the House. Rule XII, clause 7(c) appears to adopt a subjective standard for determining what specific constitutional authority exists to enact an introduced bill. In other words, the rule appears to leave each individual Member free to ascertain, by whatever means the Member deems appropriate, his/her own basis for constitutional authority. Should a Member choose to consider the Constitution as interpreted by the Supreme Court through its majority opinions, that appears to be permissible under the rule. Equally permissible sources for Members to rely on could include their own personal interpretation of the text of the Constitution; documents produced at the Constitutional Convention; sources published contemporaneously with the consideration and ratification of the Constitution by the states; commentaries on the Constitution, academic journal articles, constitutional law treatises, and other publications; the advice of congressional support agencies; the advice of outside groups or think tanks; and any other source that the Member believes to be relevant and authoritative. The language of the rule requires an articulation of the specific textual constitutional basis for a piece of legislation to be made "as specifically as practicable." In some cases, however, it may be difficult to fully articulate textual constitutional authorities which can serve as the basis for a proposed bill in a summary form. For instance, as the powers of the federal government often overlap with each other, several constitutional authorities may individually suffice to authorize Congress's authority over a particular subject matter. Further, case law may have either expanded or limited the apparent reach of these authorizations in ways not apparent from constitutional text. In addition, the "Necessary and Proper Clause" and other implied powers may also support the expansion of congressional authority beyond these explicit authorities in ways not easily discernible from the text. This report will discuss the constitutional authority for four selected categories of legislation: authorization legislation; appropriations legislation; legislation that places conditions on the availability of federal funds; and, finally, legislation that repeals existing laws and/or programs. The report will then set out a list of general types of legislation in alphabetical order, which will be followed by constitutional provisions that might arguably provide the power to legislate on some aspects of this issue. Please refer to the Table of Contents for a convenient list of the types of legislation so addressed. |
The November 13, 2015, terrorist attacks in Paris have refocused attention on U.S. visa issuance and national security screening procedures that undergird the admission of foreign nationals to the United States. The visa issuance process is widely recognized as an integral part of immigration control and border security. Foreign nationals (i.e., aliens) not already legally residing in the United States who wish to come to the United States generally must obtain a visa to be admitted. The foreign national must establish that he/she is qualified for the visa under one of the various admission criteria. He or she must also establish that he/she is not ineligible for the visa due to one or more of the legal bars to admission. Applying for a visa is the first gateway for foreign nationals to seek admission to the United States, and the data collected as part of that process forms the core of the biometric and associated biographic data that the United States collects on foreign nationals. Under current law, two departments—the Department of State (DOS) and the Department of Homeland Security (DHS)—play key roles in administering the law and policies on immigration visas. DOS's Bureau of Consular Affairs (Consular Affairs) is responsible for issuing visas, DHS's Citizenship and Immigration Services Bureau (USCIS) is charged with approving immigrant petitions (and nonimmigrant petitions stateside), DHS's Immigration and Customs Enforcement (ICE) operates the Visa Security Program in selected embassies abroad, and DHS's Customs and Border Protection Bureau (CBP) is tasked with inspecting all people who enter the United States. Today's visa issuance policy dates back to 1924, when Congress first passed legislation assigning consular officers with the responsibility to approve or deny visas. The Immigration Act of 1924 codified a decree in 1917 as a consequence of World War I that proclaimed aliens must present certain documents as a prerequisite to entering the United States. When the Senate Committee on the Judiciary was tasked with investigating the immigration system in 1947, their report offered the following observation: After a study of this problem, the Congress provided in the Immigration Act of 1924 for a double check of aliens by separate independent agencies of the Government, first by consular officers before the visas were issued, and by immigration officers after the aliens reached the port of entry. If a double check was essential 25 years ago to protect the United States against criminals or other undesirables, it is the opinion of the subcommittee that it is even more necessary in the present critical condition of the world to use the double check to screen aliens seeking to enter the United States. This view prevailed in 1952 when Congress codified the various statutes on immigration and nationality into the Immigration and Nationality Act of 1952 (P.L. 82-414), which remains the basis of governing law. At its core, visa integrity protects the United States from foreign nationals who threaten public health and safety or national security, while at the same time welcomes legitimate foreign nationals who bolster the U.S. economy and foster international exchanges. Balancing these dual, and some would say competing, missions is an ongoing challenge. The policy questions center on the efficacy of the process, the security features of the policies, and whether the law needs to be revised to improve efficiency and strengthen security. The report opens with an overview of visa issuance policy. It then explains the key provisions that guide the documentary requirements and approval/disapproval process. The section on consular screening procedures includes an analysis of trends over time in denying visas. Visa revocation, a reoccurring issue of concern to Congress, and the visa security program are discussed as well. There are two broad classes of aliens that are issued visas: immigrants and nonimmigrants. Humanitarian admissions, such as asylees, refugees, parolees and other aliens granted relief from deportation, are handled separately under the Immigration and Nationality Act (INA). Persons granted asylum or refugee status are ultimately eligible to become legal permanent residents (LPRs). Illegal aliens or unauthorized aliens include those noncitizens who entered the United States without an official inspection at a port of entry, entered with fraudulent documents, or who violated the terms of their visas after entering the United States. Aliens who wish to come to live permanently in the United States must meet a set of criteria specified in the INA. They must qualify as a spouse or minor child of a U.S. citizen; a parent, adult child, or sibling of an adult U.S. citizen; a spouse or minor child of a legal permanent resident; an employee that a U.S. employer has gotten approval from the Department of Labor to hire; a person of extraordinary or exceptional ability in specified areas; a refugee or asylee determined to be fleeing persecution; winner of a visa in the diversity lottery; or a person having met other specialized provisions of law. Petitions for immigrant (i.e., LPR) status are first filed with USCIS by the sponsoring relative or employer in the United States. If the prospective immigrant is already residing in the United States, the USCIS handles the entire process, which is called "adjustment of status." If the prospective LPR does not have legal residence in the United States, the petition is forwarded to Consular Affairs in their home country after USCIS has reviewed it. The Consular Affairs officer (when the alien is coming from abroad) and USCIS adjudicator (when the alien is adjusting status in the United States) must be satisfied that the alien is entitled to the immigrant status. Foreign nationals who seek to come to the United States temporarily rather than to live permanently are known as nonimmigrants. These aliens are admitted to the United States for a temporary period of time and for an expressed reason. There are 24 major nonimmigrant visa categories, and over 70 specific types of nonimmigrant visas are issued currently. Most of these nonimmigrant visa categories are defined in §101(a)(15) of the INA. These visa categories are commonly referred to by the letter and numeral that denotes their subparagraph in §101(a)(15), e.g., B-2 tourists, F-1 foreign students, H-1B temporary professional workers, or J-1 cultural exchange participants. Most visitors, however, enter the United States without nonimmigrant visas through the Visa Waiver Program (VWP). This provision of the INA allows the Attorney General to waive the visa documentary requirements for aliens coming as visitors from 38 countries. Since aliens entering through VWP do not have visas, CBP inspectors at the port of entry perform the background checks and admissibility reviews. The documentary requirements for visas are stated in §§221-222 of the INA, with some discretion for further specifications or exceptions by regulation. Generally, the application requirements are more extensive for aliens who wish to permanently live in the United States than those coming for visits. The amount of paperwork required and the length of adjudication process to obtain a visa to come to the United States are analogous to that of the Internal Revenue Service's (IRS's) tax forms and review procedures. Just as persons with uncomplicated earnings and expenses may file an IRS "short form" while those whose financial circumstances are more complex may file a series of IRS forms, so too an alien whose situation is straightforward and whose reason for seeking a visa is easily documented generally has fewer forms and procedural hurdles than an alien whose circumstances are more complex. The visa application files must be stored in an electronic database that is available to immigration adjudicators and immigration officers in DHS. There are over 70 U.S. Citizenship and Immigration Services (USCIS) forms as well as DOS forms that pertain to the visa issuance process. The visa issuance procedures delineated in the statute require the petitioner to submit his or her photograph, as well as full name (and any other name used or by which he or she has been known), age, gender, and the date and place of birth. Depending on the visa category, certain documents must be certified by the proper government authorities (e.g., birth certificates and marriage licenses). All prospective LPRs must submit to physical and mental examinations, and prospective nonimmigrants also may be required to have physical and mental examinations. The statutory provision that gives the consular officer the authority to disqualify a visa applicant is broad and straightforward: No visa or other documentation shall be issued to an alien if (1) it appears to the consular officer, from statements in the application, or in the papers submitted therewith, that such alien is ineligible to receive a visa or such other documentation under section 212 [8 USC §1182], or any other provision of law, (2) the application fails to comply with the provisions of this Act, or the regulations issued there under, or (3) the consular officer knows or has reason to believe that such alien is ineligible to receive a visa or such other documentation under section 212 [8 USC §1182], or any other provision of law.... These determinations are based on the eligibility criteria of the various and numerous visa categories. The shorthand reference for these disqualifications is §221(g), which is the subsection of the INA that provides the authority. A §221(g) disqualification is generally the most common reason an LPR visa is denied. DOS disqualified 290,369 LPR visas in FY2013 and 240,876 LPR visas in FY2014. In terms of nonimmigrant visas, DOS disqualified 775,201 visas in FY2013 and 689,379 visas in FY2014. Overwhelmingly, the most common reason that DOS denies nonimmigrant visas is the "failure to establish entitlement to nonimmigrant status." Specifically, §214(b) of the INA generally presumes that all aliens seeking admission to the United States are coming to live permanently; as a result, most aliens seeking a nonimmigrant visa must demonstrate that they are not coming to reside permanently. DOS denied 1.4 million nonimmigrant visas in FY2013 and 1.7 million nonimmigrant visas in FY2014 on the basis of INA §214(b). In addition to the determination that a foreign national is qualified for a visa, a decision must be made as to whether the foreign national is admissible or excludable under the INA. The grounds for inadmissibility are spelled out in §212(a) of the INA. These INA §212(a) inadmissibility criteria are health-related grounds, criminal history, security and terrorist concerns, public charge (e.g., indigence), seeking to work without proper labor certification, illegal entrants and immigration law violations, ineligible for citizenship, and aliens previously removed. In some cases, the foreign national may be successful in overcoming the §212(a) exclusion if new or additional information comes forward. The decision of the consular officer, however, is not subject to judicial appeals. Foreign nationals seeking visas must undergo admissibility reviews performed by DOS consular officers abroad. The visa applicant is required to submit his or her photograph and fingerprints, as well as full name (and any other name used or by which he or she has been known), age, gender, and the date and place of birth. Depending on the visa category, certain documents must be certified by the proper government authorities (e.g., birth certificates and marriage licenses). All prospective LPRs must submit to physical and mental examinations, and prospective nonimmigrants also may be required to have physical and mental examinations. These reviews are intended to ensure that aliens are not ineligible for visas or admission under the INA §212(a) grounds for inadmissibility. Consular officers use the Consular Consolidated Database (CCD), a biometric and biographic database, to screen all visa applicants. Over 143 million records of visa applications are now automated in the CCD, with some records dating back to the mid-1990s. Since February 2001, the CCD has stored photographs of all visa applicants in electronic form; since 2007, the CCD has begun storing 10-finger scans. The number of visa cases in the CCD surpassed 100 million in 2009, including 75 million photographs. In addition to indicating the outcome of any prior visa application of the alien in the CCD and comments by consular officers, the system links with other databases to flag problems that may have an impact on the issuance of the visa. These databases linked with the CCD include DHS's Automated Biometric Identification System (IDENT) and the Federal Bureau of Investigation (FBI) Integrated Automated Fingerprint Identification System (IAFIS) results, and supporting documents. In addition to performing biometric checks of the fingerprints for all visa applicants, DOS uses facial recognition technology to screen visa applicants against a watchlist of photos of known and suspected terrorists obtained from the Terrorist Screening Center (TSC), as well as the entire gallery of visa applicant photos contained in the CCD. The CCD also links to the DHS's Traveler Enforcement Compliance System (TECS), a substantial database of law enforcement and border inspection information that enables CBP officers at ports of entry to have access to CCD. A limited number of consular officers have been granted access to DHS'Arrival Departure Information System (ADIS). ADIS tracks foreign nationals' entries into and most exits out of the United States. DOS credits access to ADIS with its ability to identify previously undetected cases of illegal overstays in the United States. As Figure 1 shows, §212(a) denials for LPR visas have fluctuated over the past 20 years. After spiking during the FY1998-FY1999 years, they declined during the FY2000-FY2003 period. Subsequently they increased during the FY2009-FY2012 period, then dropped in FY2013. The LPR denials inched up to 53,220 in FY2014. In terms of nonimmigrants, §212(a) denials have exhibited a slower, but steadier upward trend during the period examined. FY2014 was the peak year, reaching 71,500 nonimmigrant denials Public charge exclusions accounted for the spike during the period immediately after passage of the Illegal Immigration Reform and Immigrant Responsibility Act (IIRIRA) of 1996 (Division C of P.L. 104-208 ), as depicted in Figure 2 . IIRIRA had strengthened the enforceability of the inadmissibility provisions aimed at indigent or low-income people. Public charge exclusions dominated inadmissibility for LPRs until the FY2003-FY2005 period. Since FY2008, prior removals/illegal presence has become the top single ground of inadmissibility. IIRIRA had ramped up the consequences for foreign nationals attempting to return to the United States if they had prior orders of removal or had been illegally present in the United States, and the databases monitoring such violations improved over the years. The failure of some employers hiring foreign workers to meet the labor certification ground consistently ranked third over the period examined. In terms of nonimmigrants, prior removals/illegal presence has also become the top single ground of inadmissibility; however, the grounds for excluding nonimmigrants have otherwise exhibited a different pattern than that of immigrant exclusions. Two grounds less commonly cited for immigrant exclusions—criminal history and INA violations—have been frequent grounds for denying nonimmigrant visas. As Figure 3 shows, criminal history has been one of the leading bases of nonimmigrant exclusion. The FY2014 data indicate that prior removals/illegal presence comprised 41% of the basis of nonimmigrant exclusions and criminal history made up 25% of the basis of nonimmigrant exclusions. In contrast, criminal history comprised only 4% of immigrant exclusions in FY2014 and was too small to depict in Figure 2 . Another top basis of excluding nonimmigrants has been INA violations, i.e., nonimmigrants who sought to procure or had procured either admission into the United States or a benefit under the INA by fraud or willful misrepresentation of a material fact. This latter ground had been the most common basis for nonimmigrant exclusion in the late 1990s, as Figure 3 depicts. For some years, consular officers have been required to check the background of all aliens in the "lookout" databases. DOS specifically uses the Consular Lookout and Support System (CLASS) database, which surpassed 42.5 million records in 2012. Consular officers use name-searching algorithms to ensure matches between names of visa applicants and any derogatory information contained in CLASS. DOS reports that about 70% of the records in CLASS come from other agencies, including DHS, the Federal Bureau of Investigation (FBI), and the Drug Enforcement Administration (DEA). DOS also employs an automated CLASS search algorithm that runs the names of all visa applicants against the CCD to check for any prior visa applications, refusals, or issuances. DOS has relied on the Security Advisory Opinion (SAO) system, which requires a consular officer abroad to refer selected visa cases for greater review by intelligence and law enforcement agencies. The current interagency procedures for alerting officials about foreign nationals who may be suspected terrorists, referred to in State Department nomenclature as Visa Viper, began after the 1993 World Trade Center bombing and were institutionalized by enactment of the Enhanced Border Security and Visa Entry Reform Act of 2002. If consular officials receive information about a foreign national that causes concern, they send a Visa Viper cable (which is a dedicated and secure communication) to the National Counterterrorism Center (NCTC). In a similar set of SAO procedures, consular officers send suspect names, identified by law enforcement and intelligence information, to the FBI for a name check program called Visa Condor. There is also the "Terrorist Exclusion List" (TEL), which lists organizations designated as terrorist-supporting and includes the names of individuals associated with these organizations. In June 2013, DOS began "Kingfisher Expansion" (KFE) in partnership with the NCTC for conducting interagency counterterrorism screening of all visa applicants. The consular official submits the visa applicants' electronic visa applications as a "vetting package" to the NCTC. In turn NCTC uses an automated process to compare the vetting package with its holdings, most notably the Terrorist Identities Datamart Environment (TIDE) on known and suspected terrorists and terrorist groups. A "hit" in KFE triggers a Washington-based interagency review of the visa application. KFE also conducts post-issuance reviews of valid visas to check for new information on emerging threats. The impact KFE has had on national security screenings for visa applicants was underscored in the testimony of NCTC Director Matthew G. Olsen before the Senate Homeland Security Committee. KFE examines 100 percent of the approximately 11 million visa applicants each year to identify any connections to terrorism by comparing applicant data to the classified data holdings in TIDE, reducing unwarranted counterterrorism security advisory opinions (SAOs) by 80 percent and saving State Department millions of dollars annually in SAO processing costs. KFE is an interagency program with a secure on-line vetting platform that allows FBI, DHS, and the Terrorist Screening Center to participate in the applicant reviews. This allows for a more comprehensive and coordinated response back to State Department. Despite dipping somewhat in FY2013, the number of aliens denied nonimmigrant visas under terrorist grounds of inadmissibility has increased since the 1990s and mid-2000s. In terms of immigrant denials based upon national security grounds, the peak year was FY2012. As Figure 4 shows, the general trends hold for immigrant and nonimmigrant exclusions. After a visa has been issued, the consular officer as well as the Secretary of State has the discretionary authority to revoke a visa at any time. A consular officer must revoke a visa if the alien is ineligible under the INA §212(a) grounds of inadmissibility to receive such a visa, or was issued a visa and overstayed the time limits of the visa; the alien is not entitled to the nonimmigrant visa classification under INA §101(a)(15) definitions specified in such visa; the visa has been physically removed from the passport in which it was issued; or the alien has been issued an immigrant visa. This applies, for example, to findings of ineligibility under "misrepresentation," "terrorist activity" or "foreign policy." The Foreign Affairs Manual (FAM) further instructs: "pending receipt of the Department's advisory opinion, the consular officer must enter the alien's name in the CLASS under a quasi-refusal code, if warranted." According to DOS officials, they sometimes prudentially revoke visas (i.e., they revoke a visa as a safety precaution). When a consular officer suspects that a visa revocation may involve U.S. law enforcement interests, FAM instructs the consular officer to consult with law enforcement agencies at the consular post and inform the State officials of the case, to permit consultations with potentially interested entities before a revocation is made. The rationale for this consultation is that there may be legal or intelligence investigations that would be compromised if the visa were revoked and that law enforcement and intelligence officials may prefer to monitor the individual to further investigate their actions and associates. Visa revocation has been a ground for removal in the INA §237(a)(1)(B) since enactment of P.L. 108-458 in December 2004. This provision (§5304 of P.L. 108-458 ) permits limited judicial review of removal if visa revocation is the sole basis of the removal. On April 27, 2011, the DOS promulgated regulations that broadened the revocation authority. (a) Grounds for revocation by consular officers. A consular officer, the Secretary, or a Department official to whom the Secretary has delegated this authority is authorized to revoke a nonimmigrant visa at any time, in his or her discretion. (b) Provisional revocation. A consular officer, the Secretary, or any Department official to whom the Secretary has delegated this authority may provisionally revoke a nonimmigrant visa while considering information related to whether a visa holder is eligible for the visa. Provisional revocation shall have the same force and effect as any other visa revocation under INA 221(i). (c) Notice of revocation. Unless otherwise instructed by the Department, a consular officer shall, if practicable, notify the alien to whom the visa was issued that the visa was revoked or provisionally revoked. Regardless of delivery of such notice, once the revocation has been entered into the Department's Consular Lookout and Support System (CLASS), the visa is no longer to be considered valid for travel to the United States. The date of the revocation shall be indicated in CLASS and on any notice sent to the alien to whom the visa was issued. (d) Procedure for physically canceling visas. A nonimmigrant visa that is revoked shall be canceled by writing or stamping the word ``REVOKED" plainly across the face of the visa, if the visa is available to the consular officer. The failure or inability to physically cancel the visa does not affect the validity of the revocation. These regulations sought to address a series of concerns that have been raised in recent years about the visa revocation process, especially relating to the timely transmission of information among federal agencies. As discussed more fully in Appendix , §428 of the Homeland Security Act (HSA) gave the Secretary of DHS the authority to assign DHS employees to diplomatic and consular posts. The duties of these DHS employees were delineated in HSA §428 as provide expert advice and training to consular officers regarding specific security threats relating to the adjudication of individual visa applications or classes of applications; review any such applications, either on the initiative of DHS or upon request by a consular officer or other person charged with adjudicating such applications; and conduct investigations with respect to consular matters under the jurisdiction of the Secretary of DHS. This statutory language established what is currently known as the Visa Security Program (VSP). The Immigration and Customs Enforcement (ICE) Office of International Affairs (OIA) operates the VSP in consular posts deemed to be high-risk. As described by DHS, the VSP sends ICE special agents with expertise in immigration law and counterterrorism to diplomatic posts overseas to perform visa security activities, which aim to complement the DOS visa screening process with law enforcement resources not available to consular officers. The first VSP units were established in Saudi Arabia, as required by HSA §428. There were 21 VSP units in over a dozen countries as of June 2015. One of the major tasks of the VSP agents is to screen visa applicants to determine the applicant's risk profile. Unlike consular officers, VSP agents have access to DHS's Traveler Enforcement Compliance System (TECS). The ICE agent further vets visa applicants who are possible matches, performing additional research and investigation of the visa applicant (e.g., in-depth searches in law enforcement databases and other information systems, examining documents, and consulting with consular, law enforcement, or other officials). VSP agents are supposed to engage in informal discussions with consular officers, as well as develop formal, targeted training and briefings to inform consular officers and others about threats to the visa process. They "identify and monitor the threat environment and trends in the visa applicant pool specific to their post and host country.... Examples of topics covered in these briefings include fraud trends in specific visa categories and how to identify fraudulent documents and imposters." More recently, VSP has implemented a screening system called Pre-Adjudicated Threat Recognition Intelligence Operations Team (PATRIOT) at all of the Visa Security Units. This initiative provides the automated screening of visa application information against DHS holdings prior to the applicant's interview. VSP reports that PATRIOT performs 100% screening of nonimmigrant visas at these posts. Some have expressed the view that DOS retains too much power and control over visa security. They maintain the Homeland Security Act of 2002 intended DHS to be the lead department and that DOS was to merely administer the visa issuances. They warn that consular officers are too concerned about facilitating tourism and trade to scrutinize visa applicants thoroughly. Some argue that visa issuance is the real "front line" of homeland security against terrorists and that the principal responsibility should be in DHS, which does not have competing priorities of diplomatic relations and reciprocity with foreign governments. Others have indicated satisfaction with current law, arguing that it strikes the proper balance between the two departments and reflects the bifurcation envisioned in the act. They maintain that it plays off the strengths of the two departments and allows for refinement of the implementation in the future. Proponents of DOS playing the lead role in visa issuances assert that only consular officers in the field have the country-specific knowledge to make decisions about whether an alien is admissible and that staffing 250 diplomatic and consular posts around the world would stretch DHS beyond its capacity. The 114 th Congress has been concerned about visa security issues even prior to the November 13 terrorist attacks in Paris. Most notably, the House Committee on Homeland Security, Subcommittee on Border and Maritime Security held a hearing titled "The Outer Ring of Border Security: DHS's International Security Programs, "on June 2, 2015. Visa security provisions are included in legislation that the House Committee on the Judiciary ordered reported on March 18, 2015. More specifically, Title IV of the Michael Davis, Jr. in Honor of State and Local Law Enforcement Act ( H.R. 1148 ), as ordered to be reported, would give the Secretary of Homeland Security "exclusive authority to issue regulations, establish policy, and administer and enforce the provisions of the [INA] and all other immigration or nationality laws relating to the functions of consular officers of the United States in connection with the granting and refusal of a visa." The bill would broaden the exception to the confidentiality requirement relating to the sharing of information with foreign governments, including by allowing such sharing for purposes of "determining a person's deportability or eligibility for a visa, admission, or other immigration benefit,'' or any other instance when "the Secretary of State determines that it is in the national interest." Also, a Senate provision in S. 1635 (§401) would broaden the conditions under which the Secretary of State may release records pertaining to visa applications. H.R. 1148 would narrow DOS's authority to waive personal interviews for visa applicants and add national security and "high risk of degradation of visa program integrity" as reasons for requiring a personal interview. The legislation also would give consular officers the authority not to interview visa applicants deemed to be ineligible for the visas they are seeking. In addition, H.R. 1148 would give DHS the authority to refuse or revoke any visa if the Secretary determines that such refusal or revocation is necessary or advisable in the security interests of the United States. H.R. 1148 would seek to expand the VSP by requiring DHS to conduct an onsite review of all visa applications and supporting documentation before adjudication at the top 30 visa-issuing posts designated jointly by the Secretaries of State and Homeland Security as high-risk posts. It also would call for expedited clearance and placement of DHS personnel at overseas embassies and consular posts. In the 113 th Congress, a series of hearings were held that discussed visa issuances and security policy. One piece of legislation with provisions aimed at visa security ( H.R. 2278 ) received action in the 113 th Congress but was not enacted. The Senate-passed comprehensive immigration reform legislation, the Border Security, Economic Opportunity, and Immigration Modernization Act ( S. 744 ), did not include provisions on visa security, but it did include provisions aimed at enhanced processing of certain visas. Preventing terrorist travel to the United States is front and center after the coordinated terrorist attacks at six locations in Paris on November 13, 2015, that killed at least 129 people and left over 350 people injured. Visa security procedures are viewed by some as one of the most effective tools to stymie the admission of foreign nationals who pose security threats to the United States, presuming sound intelligence data are available. In an optimal situation, visa security builds on "proactive intelligence, monitoring, information-sharing and investigations." In an effort to improve intelligence gathering, some maintain that broadening the exception to the confidentiality requirement relating to the sharing of information on the visa application with foreign governments is essential. Others point out, however, that governments have a responsibility to protect the privacy of personal information in their custody. A principal concern is that once personal information is shared with a foreign government, that private data could move easily and without adequate oversight. Also at issue is whether visa security procedures should be applied more broadly. While some are proposing to make all foreign nationals who seek to come to the United States subject to the scrutiny of the consular screening procedures, others warn that such a move may create unnecessary hurdles and backlogs for many travelers who do not pose a threat. Still others see holes in the current visa issuance process that they argue should be addressed, such as limiting the circumstances under which a personal interview is waived. Congressional oversight of visa security is ongoing, and possible legislative reforms are under consideration. When the 107 th Congress weighed the creation of the Department of Homeland Security, considerable debate surfaced about whether or not any or all visa issuance functions should be located in the new agency. Enactment of the Homeland Security Act of 2002 ( P.L. 107-293 ) resolved most of these issues, but concerns over the roles and responsibilities of the two departments have frequently arisen. Immigration and Nationality Act The powers and duties of the Secretary of State are delineated in §104 of the INA. Most significantly, §104 (a) states: "The Secretary of State shall be charged with the administration and the enforcement of the provisions of this Act and all other immigration and nationality laws relating to (1) the powers, duties and functions of diplomatic and consular officers of the United States, except those powers, duties and functions conferred upon the consular officers relating to the granting or refusal of visas ; .... " The INA specifically gives consular officers the sole authority to issue visas in §221 of the act. Over the years, the courts have held that consular decisions are not appealable. Under proscribed circumstances, the Secretary of State may direct a consular officer to deny a visa to a particular inadmissible alien. Enhanced Border Security and Visa Entry Reform Act of 2002 After the terrorist attacks on September 11, 2001, Congress enacted the Enhanced Border Security and Visa Entry Reform Act of 2002 ( P.L. 107-173 ), which aimed to improve the visa issuance process abroad, as well as immigration inspections at the border. It expressly increased consular officers' access to electronic information needed for alien screening. Specifically, it required the development of an interoperable electronic data system to be used to share information relevant to alien admissibility and removability and the implementation of an integrated entry-exit data system. It also required that all visas issued by October 2004 have biometric identifiers. In addition to increasing consular officers' access to electronic information needed for visa issuances, it expanded the training requirements for consular officers who issue visas. §428 of the Homeland Security Act of 2002 The Homeland Security Act of 2002 (HSA) contained language stating that DHS is responsible for formulating regulations on visa issuances. In §428, the Secretary of DHS is expressly tasked as follows: [The Secretary of DHS] shall be vested exclusively with all authorities to issue regulations with respect to, administer, and enforce the provisions of such Act, and of all other immigration and nationality laws, relating to the functions of consular officers of the United States in connection with the granting or refusal of visas, and shall have the authority to refuse visas in accordance with law and to develop programs of homeland security training for consular officers (in addition to consular training provided by the Secretary of State), which authorities shall be exercised through the Secretary of State, except that the Secretary shall not have authority to alter or reverse the decision of a consular officer to refuse a visa to an alien . The HSA also enabled DHS to assign staff to consular posts abroad to advise, review, and conduct investigations, which is discussed more fully below. It further stated that DOS's Consular Affairs continued to be responsible for issuing visas. The HSA required DHS and DOS to reach an understanding on how the details of this division of responsibilities would be implemented. 2003 Memorandum of Understanding On September 28, 2003, then-Secretary of State Colin Powell and then-Secretary of Homeland Security Thomas Ridge signed the memorandum of understanding (MOU) implementing §428 of the HSA. The MOU described each department's responsibilities in the area of visa issuances. Among its major elements, the MOU stated that DOS may propose and issue visa regulations subject to DHS consultation and final approval. It further stated that DHS shall assign personnel to diplomatic posts, but that DOS will determine who, how many, and the scope of their functions. Then-Assistant Secretary of State for Consular Affairs Maura Harty described several key responsibilities that remain with the DOS. The Secretary of State will have responsibility over certain visa decisions, including decisions of a foreign policy nature.... He will also be responsible for establishing visa validity periods and fees based on reciprocity. In the case of visa validity periods, however, he will consult with Homeland Security before lengthening them, and Homeland Security will have authority to determine that certain persons or classes of persons cannot benefit from the maximum validity period for security reasons. The Secretary of State will also exercise all the foreign policy-related grounds of visa denial enumerated in Section 428 and the additional provision, not specifically enumerated, under which we deny visas to persons who have confiscated the property of American citizens without just compensation. She emphasized that the MOU "recognizes that the Secretary of State must have control over officers in his chain of command." She further stated that "DHS officers assigned visa duties abroad may provide input related to the evaluations of consular officers doing visa work, but the evaluations themselves will be written by State Department consular supervisors," and that "direction to consular officers will come from their State Department supervisors, and all officers assigned abroad, including DHS, come under the authority of the Chief of Mission." In congressional testimony during October 2003, C. Stewart Verdery, Jr., as then-DHS Assistant Secretary for Border and Transportation Security Policy and Planning, discussed DHS' role in visa security. Verdery reported that DHS officers were already in Saudi Arabia reviewing all visa applications prior to adjudication (as required by §428(i) of P.L. 107-296 ). He indicated that officers in Riyadh and Jeddah also provided assistance, expert advice and training to consular officers on fraudulent documents, fingerprinting techniques and identity fraud. More specifically, he stated: As part of the review process, DHS officers at home and abroad have full access to a variety of law enforcement databases, including the National Crime Information Center (NCIC); Treasury Enforcement Communication System (TECS); Interagency Border Inspections System (IBIS); National Security Entry Exit System (NSEERS); Student Exchange and Visitor Information System (SEVIS); Biometric 2-print fingerprint system (IDENT); and Advanced Passenger Information System (APIS). They also have access to selected legacy-INS automated adjudications data and certain commercial databases. Visa Security Program Memoranda of Understanding Additionally, §428 of the HSA gave the Secretary of DHS the authority to assign DHS employees to diplomatic and consular posts, which became the statutory basis of the Visa Security Program (VSP). In 2004, DHS and DOS signed a MOU on administrative aspects of assigning personnel overseas as part of the VSP. Among other things, this MOU described administrative support, security, facilities, security awareness training, and information systems for VSP personnel. On January 11, 2011, DHS and DOS signed another MOU which further delineates the roles, responsibilities, and collaboration of VSP agents, consular officers, and diplomatic security officers in daily operations of VSP at posts overseas. The 2011 MOU discusses general collaboration between ICE and State for VSP operations; roles and responsibilities of VSP agents and consular officers and routine interaction between the officers and agents; development of formal, targeted training and briefings by VSP agents for consular officers and other U.S. government officials at post; clarification of the dispute resolution process; and collaboration between diplomatic security officers and VSP agents on visa and passport fraud investigations. Intelligence Reform and Terrorism Prevention Act of 2004 Congress also relied on recommendations made by the National Commission on Terrorist Attacks Upon the United States (also known as the 9/11 Commission) to revise visa security policies. The Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ) mandated improvements in technology and training to assist consular and immigration officers in detecting and combating terrorist travel. Among other provisions, it required the Secretary of Homeland Security, in consultation with the Director of the National Counter Terrorism Center, to establish a program to oversee DHS's responsibilities with respect to terrorist travel and required the Secretary of State to establish a Visa and Passport Security Program within the Bureau of Diplomatic Security at the Department of State. The Intelligence Reform and Terrorism Prevention Act added requirements for an in-person consular interview of most applicants for nonimmigrant visas between the ages of 14 and 79. It further mandated that an alien applying for a nonimmigrant visa must completely and accurately respond to any request for information contained in his or her application. | The November 13, 2015, terrorist attacks in Paris have refocused attention on U.S. visa issuance and national security screening procedures that undergird the admission of foreign nationals to the United States. The visa issuance process is widely recognized as an integral part of immigration control and border security. Foreign nationals (i.e., aliens) not already legally residing in the United States who wish to come to the United States generally must obtain a visa to be admitted. The foreign national must establish that he/she is qualified for the visa under one of the various admission criteria. He or she must also establish that he/she is not ineligible for the visa due to one or more of the legal bars to admission. Applying for a visa is the first gateway for foreign nationals to seek admission to the United States, and the data collected as part of that process forms the core of the biometric and associated biographic data that the United States collects on foreign nationals. The visa applicant is required to submit his or her photograph and fingerprints, as well as full name (and any other name used or by which he or she has been known), age, gender, and the date and place of birth. Depending on the visa category, certain documents must be certified by the proper government authorities (e.g., birth certificates and marriage licenses). All prospective lawful permanent residents (LPRs) must submit to physical and mental examinations, and prospective nonimmigrants also may be required to have physical and mental examinations. Consular officers use the Consular Consolidated Database (CCD), a biometric and biographic database, to screen visa applicants. Records of all visa applications are now automated in the CCD, with some records dating back to the mid-1990s. Since February 2001, the CCD has stored photographs of all visa applicants in electronic form; since 2007, the CCD has begun storing 10-finger scans. The system links with other databases to flag problems that may have an impact on the issuance of the visa. For some years, consular officers have been required to check the background of all aliens in the "lookout" databases, specifically the Consular Lookout and Support System (CLASS) database, which contained over 42.5 million records in 2012. Consular officers use name-searching algorithms to ensure matches between names of visa applicants and any derogatory information contained in CLASS. Since 2013, U.S. consular officials have partnered with the National Counterterrorism Center (NCTC) to utilize the Terrorist Identities Datamart Environment (TIDE) on known and suspected terrorists and terrorist groups. Preventing terrorist travel to the United States is front and center after the coordinated terrorist attacks at six locations in Paris on November 13, 2015, left at least 129 people dead and over 350 injured. Congressional oversight of visa security is ongoing, and possible legislative reforms are under consideration. Visa security provisions are included in Title IV of the Michael Davis, Jr. in Honor of State and Local Law Enforcement Act (H.R. 1148), which the House Committee on the Judiciary ordered reported on March 18, 2015. At its core, visa integrity protects the United States from foreign nationals who threaten public health and safety or national security, while at the same time welcomes legitimate foreign nationals who bolster the U.S. economy and foster international exchanges. Balancing these dual, and some would say competing, missions is an ongoing challenge. The policy questions center on the efficacy of the process, the security features of the policies, and whether the law needs to be revised to improve efficiency and strengthen security. |
An American treaty ally since 1954, Thailand was for years praised as an economic and democratic success story. The U.S.-Thai relationship, solidified during the Cold War, expanded on the basis of shared perceptions of the two nations' economic and security interests. Thailand is an important trade and investment partner for the United States, and U.S. access to Thai military facilities and sustained military-to-military cooperation make Thailand an important element of the U.S. strategic presence in the Asia-Pacific region. Over 50 U.S. government agencies, with regional operations, also are based in Thailand. They implement a wide range of programs, including infectious diseases research, healthcare provision, and law enforcement training. Bangkok's political turmoil over the past decade has harmed the bilateral relationship. Thailand's two military coups, in 2006 and 2014, triggered U.S. suspension of some forms of assistance. With Bangkok consumed with its own political crises, analysts believe Thailand's ability to help with regional initiatives, including those supported by the United States, is severely limited. This raises opportunity costs given the country's central geographical location, broad-based economy, and relatively advanced infrastructure. Many have hoped that Thailand could play a larger role as a partner in the Obama Administration's strategic rebalance to Asia. Thailand's struggles are almost entirely domestic and generally not destabilizing for the region, but because of them Bangkok lacks the capacity to be a more productive force. While Thailand has played helpful roles in encouraging Myanmar's democratic transition and coordinating talks between the 10-member Association of Southeast Asian nations (ASEAN) and China on a Code of Conduct in the South China Sea, it has not claimed as much of a leadership role of ASEAN as it might if its own politics were more stable. With the prospect that Thailand's military may retain power for an extended period, possibly until the royal succession unfolds over several years, U.S. policymakers must judge how stridently to advocate for democratic principles in its relations with Bangkok. In the past, many analysts say Thailand has demonstrated a remarkable ability to "muddle through" its crises; despite periodic bouts of violence and political discord, accommodations have been made to allow Thailand's government and economy to move forward. Many experts say this time may be different and that Thailand is convulsing through a historic transition. The current monarch has been in place for over 65 years. Many analysts believe the inevitable royal succession, when it comes, could reshape the role the palace plays within Thailand's political structure. Many critical questions about Thailand's future remain: Without representative government, how will Thailand's disenfranchised majority respond? Is civil war possible? What are the possible succession scenarios? How could they affect the country's stability? What role will Thaksin and his supporters play? Will foreign investors shy away from Thailand given the uncertainties? Will the country continue to lead regional initiatives, including those supported by the United States? How stringently should the United States advocate democratic principles, particularly when doing so may strengthen the Sino-Thai relationship? If Thailand is under a military government for an extended period, what are the implications for U.S. relations with one of its Asian treaty allies and for U.S. policy in the region? Thai politics, in turmoil for several years, was thrown into crisis when the Royal Thai military declared martial law on May 20, 2014. Two days later, the military ousted the civilian government, and Army Commander Prayuth Chan-ocha seized power. The military dissolved Parliament, detained political leaders and academics, imposed a curfew, and restricted media outlets. Former Prime Minister Yingluck Shinawatra was placed under house arrest (she was later released). There was no widespread bloodshed associated with the coup. However, sporadic violence in the months prior left 28 people dead. After seizing power, Prayuth announced that Thailand would be governed by a group of senior military leaders known as the National Council for Peace and Order (NCPO). The NCPO created a new National Legislative Assembly (NLA) and selected the Assembly's members. On August 21, 2014, the new body elected Prayuth as Prime Minister. Prayuth has not set a date for a transition to civilian rule, and he has been reluctant to hold popular elections. After the coup, he said that elections might be held in early 2016, but later announced they would be would be pushed back to August or September 2016. The NCPO also created a Constitution Drafting Committee (CDC) to draw up a new constitution. While the process is ongoing, preliminary version grants immunity to individuals involved in the coup and allows the prime minister to be selected, rather than popularly elected, if he or she receives two-thirds approval of the house. In April 2015, Prayuth lifted martial law. Soon afterward, however, he invoked Article 44 of the interim constitution, granting his government the authority to curb "acts deemed harmful to national peace and stability." Human rights groups immediately condemned the move as being yet another indication of Thailand's "deepening descent into dictatorship." In response to the 2014 coup, the United States immediately suspended $4.7 million in foreign assistance to Thailand, cancelled a series of military exercises and Thai military officers' visits, and urged a quick return to civilian rule and early elections. "There is no justification for this coup ... I urge the restoration of civilian government immediately, a return to democracy, and respect for human rights and fundamental freedoms, such as press freedoms," Secretary of State John Kerry said in a statement. "While we value our long friendship with the Thai people, this act will have negative implications for the U.S.-Thai relationship, especially for our relationship with the Thai military. We are reviewing our military and other assistance and engagements, consistent with U.S. law" The Administration did have some latitude in determining how much assistance to Thailand to suspend. Aid that could continue because of "notwithstanding" clauses was generally humanitarian in nature—for instance, emergency food aid, international disaster assistance, and migration and refugee aid. Military assistance programs, however, were suspended. Immediately following the coup, the United States cut off $3.5 million in Foreign Military Financing (FMF) and $85,000 in International Military Education and Training (IMET) funds. (In recent years, Thailand has received approximately $1.3 million in IMET annually. ) However, the United States still participated in the Cobra Gold military exercise in February 2015. The exercise—which is one of the largest in the Asia Pacific—involved 13,000 troops from 24 Asian-Pacific countries. However, fewer U.S. troops participated than in previous years—3,600 in 2015 as compared to 4,300 in 2014. According to the Administration, U.S. participation will remain limited in 2016, as well. Several years ago, many observers saw the U.S. response to the 2006 coup as having been relatively mild. Funding for development assistance, and for military financing and training programs, was cut off. Yet U.S. assistance for a range of other programs—including law enforcement training, counterterrorism and nonproliferation efforts, global health programs, and the Peace Corps—remained in place. The Kingdom of Thailand, a constitutional monarchy with a parliamentary form of government, is distinct from its neighbors in one important aspect: it is the only county in Southeast Asia that Europeans never colonized (it was, however, briefly occupied by Japan during World War II). Thailand also avoided the wave of communist revolutions that produced communist governments in Cambodia, Laos, and Vietnam in the 1960s and 1970s. Thailand followed a troubled path to democracy, becoming a constitutional monarchy in 1932, but ruled primarily by military dictatorships until the early 1990s. During that period, a military and bureaucratic elite controlled Thai politics, an elite that did not allow civilian democratic institutions to develop. There were brief periods of democracy in the 1970s and 1980s, but these ended with reassertions of military rule. After Thai soldiers killed at least 50 street protestors in May 1992, a wave of demonstrations broke out, demanding an end to the military's control of the government. Eventually, bowing to both domestic and international pressures, the military ceded control, and allowed elections to take place four months later. The 2006 coup was the first in 15 years. Thailand's government is composed of an executive branch (with the prime minister as head of the government and the king as chief of state), a bicameral National Assembly, and a judicial branch of three court systems. In the years immediately preceding Thaksin's 2001 election, the Democrat Party dominated Thai politics by instituting a series of reforms that enhanced transparency, decentralizing power from the urban centers, tackling corruption, and introducing a broad range of constitutional rights. Thaksin's 2001-2006 tenure as Prime Minister was marked by an unprecedented centralization of power in the Prime Minister's office, as well as the implementation of populist economic policies such as the public subsidy of health care. Some of these developments, analysts note, set the context for the military's 2006 decision to oust Thaksin. Current political turmoil in Thailand underscores a growing divide between the rural, mostly poor population and the urban middle class, largely based in Bangkok. By stoking Thai nationalism and providing inexpensive health care and other support to rural communities, Thaksin galvanized a populist movement, leading to emphatic electoral victories for his Thai Rak Thai Party. Even after the party was banned, following the coup against Thaksin in 2006, its successor parties, the People's Power Party and the Puea Thai Party, continued to win national elections. This success threatened the traditional model of governance and the "old guard," a combination of elite bureaucrats, the Thai military, and the royal family. Thaksin's rise and fall—and the role he continues to play in Thai politics—did much to expose and exacerbate the country's regional and class-based rifts. The confrontation is not as simple as a conflict between mostly poor, rural Thaksin supporters and the urban elite, although those disparities remain significant and motivate many of the participants. The fight also involves regional rivalries. Most of Thaksin's supporters hail from the country's northeast and resent the control emanating from the richer governing class in Bangkok. Political divisions also are exploited by politicians motivated by their own self-interest. Many Puea Thai politicians aligned themselves with Thaksin to win votes but come from the same privileged—and often corrupt—club of powerbrokers as members of the opposition party. When demonstrations have occurred, they have usually been between two main groups: the "yellow shirts" (with sub-groups such as the People's Alliance for Democracy and the People's Democratic Reform Committee) and the "red shirts" (sometimes known as the United Front for Democracy Against Dictatorship).The yellow shirts are a mix of the military, royalists, the bureaucracy, and largely urban and middle class citizens. The red shirts mostly are Thaksin loyalists who supported his populist policies that benefited the poor, rural regions of Thailand. A fundamental divide between the two groups centers on the electoral process, with the yellow shirts arguing that ethical imperatives trump the polls, while the red shirts believe that governance should be determined entirely by the popular vote. During the last several years, both sides have held massive public protests to air their grievances, and at times the demonstrations have turned violent. The worst violence in modern Thai history occurred in the spring of 2010 when the Democratic Party was in power. Anti-government protestors—at that time, the Red Shirts—occupied parts of Bangkok for nine weeks. The demonstrations, initially peaceful, became increasingly aggressive, as did the security forces' response. Eventually, tit-for-tat violence spiraled into urban warfare. On May 19, 2010, armored vehicles and infantry troops stormed the protestors' encampments. At least 90 people were killed. 2,000 were wounded, and several protest leaders surrendered. Splinter groups emerged within all of the major institutions, including the government, the military, and the police, and rogue elements—from both the security forces and the protestors— may have been responsible for the most egregious violence and damage that occurred during the stand-off. (Yellow shirt protestors organized massive rallies in Bangkok in 2008 and 2013-2014, both times shutting down parts of the city.) The ailing King Bhumiphol Adulyadej has remained largely disengaged from the ongoing political crisis. In the past, the King was an important source of stability, mainly because of his popularity, and when demonstrations became violent, the King often would intercede, preventing further bloodshed. However, many analysts say that the King's failing health has exacerbated political tensions in the country. There is no other arbiter of the King's status—pointing to the weakness of Thailand's other political institutions—and the succession process is unclear. Different political factions are jockeying for power, trying to prepare themselves for potential succession scenarios. However, these scenarios are rarely discussed in public, only adding to the sense of uncertainty. Due to stringent lèse-majesté laws, it is a crime—punishable with a prison term of up to 15 years—to "criticize, insult or threaten" the King, Queen, royal heir apparent, or regent. According to news reports, the use of these legal provisions has soared in recent years, and thousands of websites have been blocked. In 2011, an American was arrested for lèse-majesté, drawing complaints from the U.S. embassy in Bangkok. In many ways, the military-to-military connection has been the strongest pillar of the U.S.-Thai relationship. In November 2012, then-U.S. Defense Secretary Leon E. Panetta and Thai Defense Minister Sukampol Suwannathat signed the 2012 Joint Vision Statement for the Thai-U.S. Defense Alliance. The document celebrated 180 years of cooperation and updated the goals of the alliance, putting a particular emphasis on building regional security partnerships. However, the recent coups threaten military-to-military relations. The United States has a statutory obligation to withhold aid to militaries involved in coups against democratically elected governments and, after the 2014 coup, the United States suspended military assistance and training exercises with Thailand, chilling relations. Prior to that coup, U.S. military funding to Thailand had just recovered to pre-2006 coup levels, and U.S. military leaders touted the alliance as apolitical and praised the Thai armed forces for exhibiting restraint amidst the competing protests and political turmoil. However, the 2014 coup put the Thai army at the center of politics, repudiating years of formal U.S. training about the importance of civilian control of the military. Still, most observers say the strategic value of the alliance remains high. U.S. access to Thailand's military facilities, particularly the strategically located and well-equipped Utapao airbase, is considered vital. Utapao has been suggested as a permanent Southeast Asian Humanitarian Assistance and Disaster Relief (HADR) hub. It can receive large aircraft (including C-17s and C-130s) and is close to a deep seaport; it also has infrastructure capable of handling command and control systems. The U.S. military used Utapao for refueling efforts during operations in both Iraq and Afghanistan in the 2000s, as well as for multinational relief efforts after the 2004 Indian Ocean tsunami and April 2015 Nepal earthquake. Thailand hosts the annual Cobra Gold exercises, the largest multilateral military exercise in Asia. Despite the coup, the 2015 exercises proceeded with U.S. participation—albeit at a lower level - and the United States has said it will also proceed with the 2016 exercises. The U.S.-Thai security relationship has a decades-long history. In 1954, both countries signed the Manila Pact, which created the (now defunct) Southeast Asia Treaty Organization (SEATO). Even now, after SEATO dissolved, Article IV (1) of the Manila Pact—which calls for signatories to "act to meet the common danger" in the event of an attack—remains in force. In 1962, the United States and Thailand also agreed to the Thanat-Rusk communiqué, providing a further basis for the U.S.-Thai security relationship. Thailand still is considered one of the major U.S. security allies in East Asia, along with Japan, South Korea, Australia, the Philippines, and non-treaty partner Singapore. Bilateral ties were strengthened by joint efforts in the Korean War, the Vietnam War, and in both Iraq wars. Thailand sent more than 6,500 troops to serve in the United Nations Command during the Korean War, where the Thai force suffered over 1,250 casualties. A decade later, the United States staged bombing raids and rescue missions over North Vietnam and Laos from Thailand. During the Vietnam War, up to 50,000 U.S. troops were based on Thai soil, and U.S. assistance poured into the country to help Thailand fight its own domestic communist insurgency. Thailand also sent troops to South Vietnam and Laos to aid U.S. efforts. The close security ties continued throughout the Cold War, with Thailand serving as a solid anti-Communist ally in the region. More recently, Thai ports and airfields played a crucial role in maintaining the flow of troops, equipment, and supplies in both the 1991 and 2003 Iraq wars. In 2003, President George W. Bush designated Thailand as a "major non-NATO ally," a distinction which allows Thailand to receive more U.S. foreign aid and military assistance, including credit guarantees for major weapons purchases. The United States has provided funds for the purchase of weapons and equipment by the Thai military through the Foreign Military Financing (FMF) program (see Table 1 , below). As a "major non-NATO ally," Thailand also qualifies for the Excess Defense Articles (EDA) program, which allows for the transfer of used U.S. aircraft, naval ships, and other items. The United States faces stiff competitors in the foreign military sales market in Thailand, particularly because other countries are more willing to engage in barter trade for agricultural products. When the 2014 coup triggered a suspension of FMF funds, the Thais were upgrading their F-16 fighter aircraft fleet and had agreed to purchase UH-72 Lakotas, the first international customer for the helicopters. The United States and Thailand hold numerous joint military exercises. These are, according to many military analysts, invaluable, and foster a strong working relationship between the armed forces of both countries. Before the 2014 coup, Thailand and the United States were conducting over 50 joint military exercises each year, including Cobra Gold. For the February 2015 exercise, over 13,000 military personnel participated. The fully participating nations include Thailand, the United States, Singapore, Japan, South Korea, Indonesia and Malaysia, along with observers from several other Asian nations, including, for the second time, military officials from Burma. China also participated, albeit in a limited capacity. It only took part in non-combat exercises, such as humanitarian-assistance missions. Tens of thousands of Thai military officers, including many of those in top leadership positions throughout the services and in the civilian agencies, have received U.S. training under the International Military Education and Training (IMET) program. Designed to enhance the professionalism of foreign militaries as well as improve defense cooperation with the United States, the program is regarded by many as a relatively low-cost, highly effective means to achieve U.S. national security goals. In 2013, over 100 Thai officers received training in the United States. IMET funding was suspended following both the 2006 and 2014 coups. Intelligence cooperation between the United States and Thailand reportedly increased markedly after the September 11, 2001, attacks, culminating in the establishment of the Counter Terrorism Intelligence Center (known as the CTIC) in 2001. The CTIC, which combines personnel from Thailand's intelligence agency and from specialized branches of the military and armed forces, provides a forum for CIA personnel to work closely with their Thai counterparts, sharing facilities and information daily, according to reports from Thai security officials. Close cooperation in tracking Al Qaeda operatives who passed through Thailand reportedly intensified into active pursuit of suspected terrorists following the 9/11 strikes. The most public result of enhanced coordination was the arrest of suspected Jemaah Islamiyah leader Hambali outside of Bangkok in August 2003. The CIA also maintained at least one black site—where terrorist suspects can be held beyond U.S. jurisdiction—in Thailand. Other intelligence cooperation efforts focus on counter-narcotics. The International Law Enforcement Academy (ILEA) Bangkok was established in 1998. It is open to government officials from all Southeast Asian countries. At the Academy, the officials receive law enforcement and legal training, and are encouraged to cooperate on cross-border issues such as human trafficking and gang suppression. Instruction for the courses is provided largely by the Royal Thai Police, the Thai Office of the Narcotics Control Board, and various U.S. agencies, including the Diplomatic Security Service, the Federal Bureau of Investigation, the Drug Enforcement Agency (DEA), the Department of Homeland Security, and the Internal Revenue Service. The 2008 arrest of Victor Bout, an international arms dealer, in Bangkok was a highlight of U.S. and Thai law enforcement coordination, although the drawn-out extradition process also became an irritant to bilateral relations until his transfer to the United States in 2010. Counter-narcotics cooperation between the United States and Thailand has been extensive and pre-dates the foundation of ILEA-Bangkok. Coordination between the DEA and Thailand's law enforcement agencies, in conjunction with a mutual legal assistance treaty and an extradition treaty, has led to the arrests of numerous international drug traffickers. Specialized programs include the establishment of Task Force 399, in which U.S. Special Forces train Thai units in narcotics interdiction tactics. Thailand is home to Southeast Asia's second-largest economy. One of the region's more developed and open economies, it has for many years been one of the region's key destinations for foreign direct investment. According to the World Bank, Thailand became an upper-middle income economy in 2011. In recent years, the Thai economy has performed strongly, despite political turmoil. However, after the 2014 coup, the economy grew by only 0.7%, the slowest annual rate in three years. The World Bank expects economic growth in 2015 of 3.5%. According to the U.S. Trade Representative (USTR), Thailand is the 25 th -largest market for U.S. goods exports. Two-way trade with Thailand totaled $47.4 billion in 2014 and the overall U.S. trade deficit with Thailand was $15.3 billion. Major exports from the United States include integrated circuits, computer parts, semi-conductors, cotton, aircraft parts, electronics, soybeans, and oil. Major imports to the United States include electronics, jewelry, seafood, clothing, furniture, natural rubber, auto parts, and rice. U.S. companies have substantial investments in Thailand. U.S. foreign direct investment (FDI) in Thailand was $14.4 billion in 2013, led by investments in the manufacturing sector. Thailand also receives substantial investment from other countries, notably Japan, China, and South Korea. The USTR reports that some of the largest barriers to trade in Thailand are high tariff rates in selected industries, particularly in agriculture; a lack of transparency in customs policy where Customs Department officials have "significant discretionary authority;" the use of price controls or import license requirements in some industries; and poor protection of intellectual property rights. (Thailand was on the USTR's Priority Watch List for intellectual property theft in 2013 and 2014. ) However, observers are not only concerned about Thailand's trade barriers. They also are worried about the country's lack of human capital. Thailand's education system is consistently ranked below some other Southeast Asian nations. While Thailand spends a huge percentage of its GDP on education—a higher percentage than Germany does—the results have been disappointing and, according to analysts, this is unlikely to change in the near term, particularly if the country's schools continue to emphasize rote learning and do not attract better teachers. Thailand is not a member of the Trans-Pacific Partnership (TPP) trade negotiations, the Obama Administration's signature economic initiative in Asia. As Prime Minister, Yingluck Shinawatra expressed interest in joining the TPP negotiations in 2012. Yet Thailand has taken no subsequent steps toward joining the talks, and the current military government has made no statements about its position on joining. The United States and Thailand initiated negotiations for a Free Trade Agreement (FTA) in 2004. These talks were suspended following the 2006 military coup, and no new ones have occurred since then. However, Thailand has aggressively pursued FTAs with other countries, singing trade agreements with Bahrain, China, Peru, Australia, Japan, India, and New Zealand. Further deals are possible with South Korea, Chile, and the European Union. Thailand has championed ASEAN regionalism, seeing the ASEAN Free Trade Area (AFTA, among ASEAN countries only) and the planned ASEAN Economic Community (AEC) as vehicles for investment-driven integration which will benefit Thailand's outward-oriented growth strategy. However, debates over economic policy have become increasingly contentious in Thailand, mirroring the growing political divisions in the country. As noted above, Thaksin pursued large-scale populist measures as Prime Minister, including subsidizing low-cost health care and transferring substantial revenues from the central government to states and townships. His sister, Yingluck, also implemented populist policies. While Prime Minister, her government announced a rice-subsidy plan in 2012 that would buy rice from Thai farmers at prices around 50% above market rates and stockpile it before selling it on the open market. Many observers criticized the plan as fiscally unsustainable. The value of Thailand's public debt rose from 41% of GDP in 2011 to 46% in early 2014, and many observers argue that the 2013 economic slowdown was at least partially caused by the fiscal burden of subsidizing rice farmers. Amidst the political turmoil, Yingluck's opponents filed an impeachment charge against her for the policy—the motion was still pending when she was ousted by the Constitutional Court. When Prayuth came to power, the Thai government ended the subsidy. Thailand is important to the region because of its large economy, its working relationships with numerous neighbors, including Burma and China, and, until the coups, its relatively long-standing democratic rule. Its years of political turmoil raise concerns among its neighbors that Thailand appears increasingly unable to take a leadership role in regional initiatives. That, many argue, has negative implications for issues such as ASEAN's diplomacy with China over maritime disputes in the South China Sea, regional efforts to combat human trafficking, and regional economic integration under a planned ASEAN Economic Community (AEC). According to some U.S. analysts, Southeast Asia is a key arena of competition between the United States and China. They worry that China is gaining more leverage in Thailand—particularly given the chill in U.S.-Thai relations. Another concern relates to the Obama Administration's "strategic rebalancing"—or "pivot"—to Asia. Without a strong U.S.-Thai relationship, analysts warn that it will be increasingly difficult to strengthen treaty alliances and regional multilateral organizations such as ASEAN. However, according to other analysts, such concerns are overblown. They argue that the United States and Thailand have strong and enduring ties. Thailand, they add, is averse to becoming overly dependent on China. Historically, Sino-Thai ties have been quite close, particularly when compared to China's relations with most other Southeast Asian states. After the mid-1970s U.S. withdrawal from Vietnam, Thailand pursued a strategic alignment with China in order to contain Vietnamese influence in neighboring Cambodia. Thailand also restored diplomatic ties with Beijing in 1975, long before other Southeast Asian nations did. Over the past decade, Sino-Thai relations have become even stronger. There is a sizeable ethnic Chinese population in Thailand, and they have assimilated relatively easily into Thai society. They have become a strong presence in the country's business and political worlds, and they were some of the largest—and earliest—investors in China following that country's economic opening in 1979. Thailand has no territorial disputes with China in the South China Sea, unlike Vietnam, the Philippines, Malaysia, and Brunei. In 2013 and 2014, Thailand coordinated discussions between ASEAN and China over a potential Code of Conduct in the South China Sea. It was an attempt to restart negotiations after several years of stasis. However, the talks have failed to make substantial progress in the wake of rising tensions between China and the other claimants, and Singapore became their formal coordinator in 2015. Bilateral trade between Thailand and China has boomed under the China-ASEAN Free Trade Agreement, which entered into force in 2010. That same year, China replaced the United States as Thailand's largest trading partner. Thai-China trade grew 42% between 2010 and 2014. Thai-U.S. trade, by comparison, grew only 27% during the same period. In 2014, overall Thai-China trade was 66% larger than Thai-U.S. trade. Thailand also has signed agreements with China on infrastructure development, environmental protection, and strategic cooperation. Sino-Thai military ties have increased, as well. Starting in the 1980s—when both China and Thailand opposed Vietnam's intervention in Cambodia—China began selling Thailand advanced weapons and equipment. Thailand still purchases military hardware from China—most recently submarines—and in 2015 both countries agreed to conduct more joint military exercises. Already, China and Thailand conduct joint patrols. In October 2011, a Burmese minority group operating in a Thai-controlled portion of the Mekong River killed 13 Chinese soldiers. The incident spurred greater Sino-Thai military cooperation, and in December 2011 they began conducting patrols together—eventually including Laotian and Burmese forces, as well—along the Mekong River. Historically, Thailand has had an uneasy, albeit peaceful, relationship with Burma—both in the past when Burma was controlled by the military and currently with the military ceding some control to the country's civilian politicians. The boundary between the two countries stretches 1,120 miles, and on the Burma side ethnic-minority militias—several of which are opposed to the Burmese central government—control most of the territory along the border. In the absence of government control, narcotics, militants, and migrants—including refugees and victims of human trafficking—move across the border with relative impunity. Thailand wants to improve its border protections, and that has become one of the country's main foreign policy priorities. Until the Obama Administration began pursuing an opening with the Burmese military regime in 2011, Bangkok's approach toward Burma was seen as conflicting with U.S. policy. While the United States pursued strict economic and diplomatic sanctions against the regime, Thailand led ASEAN's "constructive engagement" initiative, which favored integration and incentives to coax Burma to reform. A Thai energy company, known by its acronym PTT, also made substantial investments in Burma's natural gas sector, making Thailand one of the largest investors in the country. From Thailand's perspective, engagement served to expand opportunities for Thai business. Thai-Burma trade totaled $7.4 billion in 2013, according to the Bank of Thailand. Previously, when the Burmese government was largely isolated, Thailand had more access to the regime than other nations. After Cyclone Nargis hit in 2008, the Burmese government did not allow international groups to provide humanitarian relief in the country. Yet Thai assistance and aid workers were allowed to enter. In the wake of recent reforms in Burma, Thailand, like much of the region, is assessing whether Burmese reforms are real and sustainable, and is seeking to build relationships in the country and encourage the continuation of those political reforms. In 2013, Thailand invited two Burmese Army officers to observe Cobra Gold military exercises, and some analysts argue that Thailand could take a leadership role in bringing the Burmese military into other regional security initiatives. Some U.S. congressional leaders have criticized Bangkok for its treatment of Burmese refugees, migrant workers, and political dissidents living in Thailand. Backed by reports from human rights groups, some U.S. lawmakers charged Thai security forces with arresting and intimidating Burmese political activists, as well as repatriating Burmese migrants seeking political asylum. In the past, Congress has passed legislation that provides money to refugees who fled Burma, particularly those in Thailand. Thailand's "local" foreign policy with fellow ASEAN members (Indonesia, Malaysia, the Philippines, Singapore, Brunei Darussalam, Vietnam, Laos, Burma, and Cambodia) is complicated. Thailand is considered one of ASEAN's leaders, or at least it was prior to the 2014 coup. It is one of the largest and most economically developed ASEAN countries, and it has promoted ASEAN's significance in global affairs—an attempt, according to analysts, to increase the country's own international clout. Bangkok has developed strong relations with its mainland Southeast Asian neighbors through infrastructure assistance and other aid. In turn, Vietnam, Laos, and Cambodia provide raw materials, low-cost manufacturing, and expanding markets for Thailand. Despite cooperative elements, Bangkok's relations with its neighbors are often characterized by tension and diplomatic spats. Intermittent tension with Cambodia re-ignited in 2008 over competing territorial claims to Preah Vihear, a temple situated along the Thai-Cambodian border. In February 2011, several consecutive days of shelling around the temple left at least 10 people dead, and Cambodia eventually called on the United Nations to intervene. In November 2013, the International Court of Justice ruled that the temple and the area immediately surrounding it were Cambodian territory. Though Thai and Cambodian troops remain in the area, the ruling has been peacefully received. Relations with Malaysia have been complicated by the insurgency in Thailand's majority-Muslim southern provinces, which border Malaysia (see next section). Many Thai Muslims are ethnically Malay and speak Yawi, a Malay dialect, and at times the Malaysian public has grown angry at the perceived violence against Muslims in Thailand. Thailand and Malaysia have cooperated periodically on efforts to hold talks with separatist groups in the South. However, many separatist leaders reside in northern Malaysia—a point of contention between Thai and Malaysian authorities. Thailand has endured a persistent separatist insurgency in its Muslim-majority southern provinces, which include Yala, Narathiwat, Pattani, and—to a lesser extent—Songhkla. Since January 2004, violence involving insurgents and security forces has left around 6,000 people dead and over 11,000 wounded, according to press reports. However, since 2013, levels of violence have declined—a result, according to analysts, of the NCPO's "enhanced counter-insurgency measures," including creating District Protection Units drawn from local volunteers. The groups fighting the government generally are poorly understood, and their motives are difficult to characterize. Many analysts believe that the groups are mostly focused on local autonomy, but even the Thai government has a poor understanding of the various factions active in the south. Many experts characterize the movement as a confluence of different groups: local separatists, Islamic radicals, organized crime, and corrupt police forces. Most regional observers stress that there is has been no convincing evidence of serious Jemaah Islamiyah (JI, a regional Al Qaeda affiliate) involvement in the attacks in the southern provinces, and that the overall long-term goal of the movement in the south remains the creation of an independent state with Islamic governance. Some of the older insurgent organizations, which previously were linked to JI, reportedly have received financial support from foreign Islamic groups, and have leaders who have trained in camps in Libya and Afghanistan. The insurgency has, at times, heightened tensions between Thailand and Malaysia, since many of the insurgents' leaders are thought to cross the border fairly easily. Despite these links, foreign elements do not appear to have engaged significantly in the violence. Thai Muslims have long complained about discrimination and about the fact that their provinces lag behind the rest of Thailand in terms of economic development. Since the 1960s, a separatist insurgency has been active in southern Thailand, although it was thought to have mostly died out in the early 1990s. The dead and injured include suspected separatists killed by security forces, as well as victims of the insurgents, including police and military forces. The overwhelming majority of casualties, however, are civilian: both Buddhist Thais, particularly monks and teachers, and local Muslims. After a series of apparently coordinated attacks by the insurgents in 2004, the central government declared martial law in the region. Since then, a pattern of violence has developed—usually small-scale shootings or bombings carried out by the insurgents, followed by counterattacks from the security forces. The 11-year-old insurgency has become the deadliest conflict in East Asia. Security forces sometimes engage in extra-judicial killings, and the insurgents employ improvised explosive devices (IEDs), drive-by shootings, arson attacks, and, occasionally, beheadings. The region remains under martial law—even after the government invoked Article 44 of the interim constitution in the rest of the country—and security forces are allowed to arrest suspects without warrants and detain them for up to 30 days. Since 2007, a more concentrated counter-insurgency campaign known as "Operation Southern Protection" has led to far more arrests, but many analysts say the mass detentions are fueling local resentment. Human rights groups have continued to criticize the military for its alleged mistreatment of Muslim suspects. Since the 2014 coup, the military has implemented several new counter-insurgency measures, and violence in the south has declined even further. The Thai generals deployed more troops to restive provinces. They created self-defense units—drawn from local civilians—and they installed security cameras and alarm systems around educational facilities which often are targeted by the insurgents. Identifying the groups directing the insurgency has been challenging, but most analysis suggests that there is no one organization with authority over the others. The government's inability to establish an authority with whom to negotiate has limited its ability to resolve the conflict peacefully. In February 2013, Yingluck's government made an effort in this regard, announcing that it would initiate peace talks with the Barisan Revolusi National (BRN), a group whose leaders largely reside outside Thailand. BRN reportedly suspended the talks in August 2013. Had the effort been successful, it is unclear how it would have influenced the actions of groups on the ground. The NCPO recognizes the importance of talks as well and has, at times, signaled its willingness to negotiate with the insurgent groups. Yet, so far, no official talks have been held. International observers, along with some Members of Congress, have criticized Thailand's record on human rights. Alleged abuses include: extra-judicial killings, bloody suppression of civilian demonstrations, and the curtailment of the press and non-governmental groups. Also, the Thai government has a poor record on combating human trafficking, and its security forces have been accused of human rights violations in the southern provinces throughout the country's various administrations. For decades, many observers have been concerned about Thailand's democracy. Previously, they had reason for optimism. In 1997, a new constitution was drafted. It entrenched the country's democratic institutions, created a system of checks and balances, and provided greater human rights protections. However, after the 2006 coup, a new constitution was drafted. According to some, it moved away from the ideals of the 1997 document, raising questions about whether established power centers had truly accepted the democratic system. Those questions have persisted, and the imposition of martial law by the military in 2014 only deepened observers' concerns. Thailand is surrounded by considerably poorer countries, and many economic migrants—particularly from neighboring Burma—illegally cross into Thailand. Once they arrive, they often are exploited. Many become forced laborers in garment factories and in seafood-related industries. Some work as domestic helpers. Others, including children, are victims of sex trafficking, and they become involved in the country's sex-tourism industry. In the south, some insurgent groups even recruit children. According to reports, the children then become foot soldiers, carrying out attacks against Thai government facilities. In 2014, Thailand was downgraded to "Tier 3" status—the lowest ranking—in the State Department's Trafficking in Persons (TIP) report, released in July 2015. The country, the report concluded, "does not fully comply with the minimum standards for the elimination of trafficking." According to the report, while Thailand has improved its trafficking data collection efforts, the country has not substantially improved its law enforcement capabilities, and corruption remains a major problem. Some observers thought that Thailand should have been downgraded earlier. They noted that Thailand had been on the Tier 2 Watch List for four years, and that the country had received two waivers, delaying the downgrade. The United States, they alleged, had not dropped Thailand to Tier 3 status, because U.S. policymakers were worried about angering an ally. Other observers, though, said that Thailand should be given more time. According to them, collecting trafficking data is extremely difficult, especially when there are dramatic regional differences in trafficking patterns, as there are in Thailand. Prior to the 2014 report, Thailand sought to prevent the downgrade. The government submitted a report to the State Department detailing substantial declines in the numbers of trafficked persons in 2013 and increasing budgets for the government's anti-trafficking efforts. Despite the reported improvements, some NGOs said Thailand's report considerably understated trafficking of non-Thai citizens who have traditionally made up a large proportion of Thailand's trafficking victims. In 2013 and 2014, media reports alleged that Thai government and military personnel were involved in trafficking Rohingya migrants, a persecuted Muslim minority group in Burma. A report from the Reuters news service described direct military involvement in sending tens of thousands of Rohingya refugees into trafficking networks. (The report later won a 2013 Pulitzer Prize for international reporting. ) Thailand argues that many cross-border issues, including the plight of the Rohingya in Thailand, involve human smuggling rather than human trafficking. Although there is a distinction (smuggling involves illegal, but voluntary, cross-border movements), undocumented migrants are often vulnerable to trafficking-like exploitation by smugglers. According to the United Nations High Commissioner for Refugees (UNHCR), over half a million "stateless" people from 40 different nationalities currently live in Thailand. Ethnic minorities, who face discrimination in their home countries, often seek refuge in Thailand. The immigration controls are relatively loose, and the Thai authorities have a reputation for being lenient. Recently, North Korean asylum-seekers have been heading to Thailand—in part because of Thailand's relative tolerance, but also because of anti-refugee crackdowns in other countries. A strong network of international humanitarian organizations exists in Thailand to provide assistance to refugees. The Burmese are, by far, the largest refugee group in Thailand. In 2014, UNHCR estimated that around 120,000 Burmese refugees lived in nine camps along the Thai-Burmese border. About 40,000 of these were not registered with the Thai government. Thailand generally has sought to accommodate these refugees. Yet successive Thai governments have become increasingly frustrated with the number of asylum seekers within Thailand's borders. The camps, Thai officials say, were meant to be temporary, not permanent. The United States has tried to lessen some of the pressure on Thailand, and has resettled more than 73,000 Burmese in the United States since 2005. These programs were suspended on September 28, 2006, under Section 508 of the Foreign Operations Appropriations Act ( P.L. 109-102 ) and resumed on February 6, 2008. | Thailand is a long-time military ally and a significant trade and economic partner for the United States. For many years, Thailand was seen as a model democracy in Southeast Asia, although this image, along with U.S.-Thai relations, has been complicated by deep political and economic instability in the wake of two military coups in the past nine years. The first, in 2006, displaced Prime Minister Thaksin Shinawatra, a popular but polarizing figure who is currently living in exile. The second, in 2014, deposed an acting prime minister after Thaksin's sister, Yingluck Shinawatra, was ousted from the premiership by a Constitutional Court decision that many saw as politically motivated. After the 2014 coup, the military installed General Army Commander Prayuth Chan-ocha as Prime Minister. He remains head of the Thai government. The junta is drafting a new constitution, and elections are unlikely before 2017. Thailand's political instability stems primarily from the rivalry between Thaksin's supporters (loosely known as "red shirts") and his opponents ("yellow shirts"—largely urban elites, the military, and those loyal to Thailand's King). Parties loyal to Thaksin have won the last six nationwide elections, including several that took place after the 2006 coup, but a series of prime ministers have been removed, either via coup or court action. Following the 2014 coup, Thailand faces numerous risks to internal stability. Thaksin's supporters, analysts warn, feel increasingly disenfranchised, and they may resort to violence to express their political grievances in the future. Concerns also surround the health of Thailand's widely revered King Bhumiphol Adulyadej and uncertainty about the royal succession process. The royal palace is one of Thailand's most powerful institutions, and in the past, the King has intervened in periods of internal conflict. Thailand's government also must contend with a low-level insurgency in the country's southern, Muslim-majority provinces, where around 6,000 have been killed since 2004. Some analysts see U.S.-Thailand relations at an important crossroad. For decades, bilateral military-to-military cooperation has been robust in terms of security assistance, training, and military exercises. After the 2014 coup, the United States suspended security assistance funds to Thailand, and the rationale for an ongoing military relationship is challenged, given that the Thai military has overthrown several democratically elected governments. Nevertheless, some analysts contend that maintaining the U.S.-Thai relationship is vital, warning that, without it, the United States may lose access to Thailand's strategically located military facilities and that China may become even more influential in the region. Dozens of other U.S. agencies also base their regional headquarters in Thailand, and some officials worry that political tension with Bangkok could threaten those operations as well. U.S. interests may also be affected by Thailand's political instability, which limits Bangkok's ability to pursue an active foreign policy. Thailand has historically been a leader of the regional Association of Southeast Asian Nations (ASEAN), and it maintains relatively close relations with both China and neighboring Myanmar. Some believe that having a U.S. ally focused deeply on domestic instability could limit opportunities to pursue broader regional initiatives. The United States and the international community have raised other concerns about Thailand, mainly having to do with human trafficking, the large refugee population living within the country's borders, and human rights and democracy conditions. This report will be updated periodically. |
The United States currently addresses issues related to global hunger and food security through two primary types of approaches: (1) agricultural development, such as the Obama Administration's Feed the Future initiative; and (2) emergency and humanitarian food aid and assistance, such as the Food for Peace (P.L. 480) program. Foreign assistance, including agricultural development and some emergency food assistance programs, is administered primarily by the U.S. Agency for International Development (USAID), using existing authorities provided in the Foreign Assistance Act of 1961, as amended. Funding is provided through the annual Department of State and Foreign Operations appropriation bill. Funding for bilateral agricultural development and food security-related activities is allocated primarily from USAID's Development Assistance (DA) account, but also from the Economic Support Fund (ESF), and from the Assistance for Europe, Eurasia, and Central Asia (AEECA), Global Health and Child Survival (GHCS), and International Development Assistance (IDA) accounts. In addition, funding for some multilateral efforts, such as the World Bank Global Agriculture and Food Security Program (GAFSP) Trust Fund, is provided through annual appropriations to the Treasury Department. U.S. international food aid programs are administered by USAID and USDA's Foreign Agricultural Service (FAS), as authorized by the 2008 farm bill ( P.L. 110-246 ), and are funded through annual Agriculture appropriation bills. In June 2009, at the G8 Summit in L'Aquila, Italy, President Obama pledged $3.5 billion over three years (FY2010 to FY2012) to a global hunger and food security initiative to address hunger and poverty worldwide. The U.S. commitment is part of a global pledge, by the G20 countries and others, of more than $22 billion. In May 2010, the Department of State officially launched the Administration's global hunger and food security initiative, called Feed the Future (FtF). FtF aims to sustainably reduce hunger and poverty by "addressing the root causes of hunger that limit the potential of millions of people," and by "establishing a lasting foundation for aligning our resources with country-owned processes and sustained, multi-stakeholder partnerships." The two primary objectives of the FtF initiative are (1) to accelerate inclusive agricultural sector growth, and (2) to improve the nutritional status in developing countries, particularly of women and children. The Department of State was the lead agency initially in developing the Feed the Future strategy, while USAID is the primary agency responsible for coordinating its implementation. Feed the Future builds on the five principles for sustainable food security first articulated at L'Aquila and endorsed at the 2009 World Summit on Food Security in Rome: (1) supporting comprehensive strategies; (2) investing in country-owned plans; (3) improving coordination among donors; (4) leveraging effective multilateral institutions; and (5) delivering on sustained and accountable commitments. In order to "increase the effectiveness of [our] investments," FtF focuses activities in 20 developing countries in sub-Saharan Africa, Asia, and Latin America and the Caribbean that have been determined by USAID to have the greatest potential to realize impact based on the Rome Principles ( Table 1 ). Investments are taking place in two phases, depending on the extent that country investment plans have been developed in a given host country. The Feed the Future strategy does not explicitly include food aid funding or programs (such as Food for Peace/P.L. 480), but the strategy guide states "that the United States will maintain its strong commitment to providing emergency and humanitarian food assistance to meet urgent needs and mitigate unexpected disasters." In addition to bilateral engagement, the United States also has committed to provide funding for multilateral efforts to address global food security. In January 2010, the World Bank Board approved the establishment of the Global Agriculture and Food Security Program (GAFSP) Trust Fund in direct response to a request made by the leaders of the G20 in 2009. The primary objective of the GAFSP is to improve the food security and livelihoods of the poor in developing countries through more effective public and private sector investment in the agricultural and rural sectors. On April 22, 2010, the World Bank officially launched GAFSP with contributions from the United States, Canada, Spain, South Korea, and the Bill & Melinda Gates Foundation. Subsequently in 2010, Ireland and Spain made contributions. Financial commitments to the GAFSP Trust Fund as of January 31, 2011, totaled $925.2 million and are allocated to public and private sector funding windows. GAFSP financing is available to International Development Association (IDA)-eligible World Bank member countries. Additional need-based screens, such as undernourishment levels, per capita GDP, a suitable policy environment, and the development of a comprehensive agricultural development strategy, further restrict country eligibility. The GAFSP Trust Fund has awarded a total of $337 million to eight countries, including Bangladesh ($52.5 million); Ethiopia ($54 million); Haiti ($36.75 million); Mongolia ($13.125 million); Niger ($34.6 million); Rwanda ($52.5 million); Sierra Leone ($52.5 million); and Togo ($41 million) For over 55 years, the United States has provided food aid for emergency food relief and to support development projects. Foreign food aid is distributed primarily through five program authorities: the Food for Peace Act (P.L. 480); Section 416(b) of the Agricultural Act of 1949; the Food for Progress Act of 1985; the McGovern-Dole International Food for Education and Child Nutrition Program; and the Local and Regional Procurement Pilot Project. The Food, Conservation, and Energy Act of 2008 ( P.L. 110-246 , the 2008 farm bill) authorizes through FY2012 and amends most U.S. international food aid programs. These programs are primarily funded through the annual Agriculture appropriations bills and are administered either by USAID or by USDA's Foreign Agricultural Service (FAS). The 2008 farm bill also reauthorizes the Bill Emerson Humanitarian Trust (BEHT), a reserve of commodities and cash for use in the Food for Peace programs to meet unanticipated food aid needs. Average annual spending on all international food aid programs over the past decade has been approximately $2.2 billion, with Food for Peace Title II activities comprising the largest portion of the total budget (about 50% to 90% of the total food aid budget annually over the past decade). Also, in recent years, the President's budget request has included up to $300 million annually in International Disaster Assistance for emergency food assistance interventions such as local and regional procurement and cash vouchers as options for delivering food assistance. As mentioned previously, funding for foreign assistance and agricultural development activities, including Feed the Future, is made available through the annual Department of State, Foreign Operations, and Related Programs appropriations bill from several different budget accounts at USAID. For FY2010, the Administration allocated about $1.31 billion to FtF from resources available. FtF allocations in FY2010 included $1.17 billion for agricultural development programs at USAID, $75 million for nutrition-related activities from the Global Health and Child Survival (GHCS) account at USAID, and $67 million allocated to the World Bank GAFSP. Separately, the Title II program within Food for Peace received $1.84 billion and the McGovern-Dole International Food for Education and Child Nutrition Program was allocated $209.5 million. The FY2011 congressional budget justification for the Department of State and Foreign Operations was the first instance in which the Administration requested funds specifically to implement FtF. The Administration's FY2011 budget request included $1.84 billion for FtF-related activities, which was a little over 3% of the total international affairs budget request, and just over 40% more than the estimated FY2010 allocation to similar activities. The FY2011 increase was largely due to a new request in FY2011 of $408 million for the World Bank GAFSP Trust Fund. For FY2011, the Administration also requested an additional $2 billion for humanitarian and emergency assistance related to food security, which included $1.690 billion for Food for Peace Title II emergency and non-emergency food aid, and $861 million for International Disaster Assistance (IDA), of which up to $300 million from the IDA account was designated for emergency food assistance purposes, as was the case in FY2010. On April 14, 2011, Congress passed a continuing resolution (final FY2011 CR; P.L. 112-10 ) that funded federal agencies and programs through the remainder of FY2011. The final FY2011 CR included funding allocations to the major USAID budget accounts, such as Development Assistance (DA), Economic Support Fund (ESF), Assistance to Europe, Eurasia, and Central Asia (AEECA), Global Health and Child Survival (GHCS), and International Disaster Assistance (IDA), but it did not provide specific recommendations about how much funding from these accounts should be allocated toward FtF programming. As a result, it is unclear at this point how the changes in USAID's FY2011 funding level will translate to changes in the level of funding and programming for FtF activities ( Table 2 ). After appropriations bills have been passed and become law, USAID is required to submit a statement known as a Section 653(a) report to Congress to show how USAID plans to allocate the appropriated budget to each USAID mission and how funds will be allocated by country. The Section 653(a) report, which is typically completed a few months after the final appropriations bill is passed, should provide additional insights about FtF funding levels for FY2011. The final FY2011 CR included $2.53 billion for DA, which is essentially no change from FY2010 levels, but is 15% less than the Administration's FY2011 request; $5.96 billion for ESF, which is a 20% decrease from FY2010 and an almost 24% decrease below the Administration's FY2011 request; $697 million for AEECA, which is a 6% decrease from FY2010 and about 30% under the Administration's FY2011 request; and $2.42 billion for GHCS activities administered by USAID, which is an almost 4% reduction from FY2010 levels and the Administration's request ( Table 2 ). The tight federal fiscal situation, the need to find areas for deficit reduction, and the generally less than positive view of foreign assistance by the current House leadership are all in part responsible for the reductions in several of the USAID foreign aid funding accounts. The most dramatic cut made to ESF may be due to Congress's growing desire to reduce funding to "frontline states," such as Iraq and Afghanistan. ESF funds are typically used to promote special U.S. economic, political, or security interests. For instance, following the Camp David accords, most ESF funds went to countries such as Egypt and Jordan to support the Middle East peace process. Since 9/11, ESF has primarily been used to support countries of importance in the war on terrorism. While many activities funded through ESF are essentially identical to those provided under regular humanitarian and development programs (such as those funded through Development Assistance), the objectives, decision criteria, and motivation for project and country selection are based more on the direct political and strategic interests of the United States, and less on the development and humanitarian needs of the recipient country. In addition, the final FY2011 CR includes $1.5 billion for Title II Food for Peace food aid programs, an 18% decrease from FY2010 levels and 11% below the Administration's request; $199.5 million for the McGovern-Dole Food for Education program, an almost 5% decrease from the FY2010 levels and the Administration's request; and $865 million for IDA, a 33% decrease from FY2010 and about 2% above the Administration's request ( Table 3 ). In February 2011, the Administration submitted its FY2012 budget, which requests funding of $1.56 billion for the FtF initiative, about $250 million, or 19%, more than the amount allocated in FY2010 ( Table 3 ). The largest component of FY2012 FtF funding would be the allocation of $922.3 million of Development Assistance (DA) for bilateral agricultural development-related activities, and the request also includes $134.4 million for ESF and $43.5 million for AEECA ( Table 4 ). The FY2012 request for FtF activities further includes $150 million for the Global Health and Child Survival program, to be directed to nutrition activities linked with the FtF initiative, and a U.S. contribution of $308 million to the World Bank GAFSP. Separately, for FY2012, the Administration also requests $1.690 billion for Food for Peace Title II emergency and non-emergency food aid and $300 million of International Disaster Assistance for emergency food security, which could be used for local and regional purchase of food and interventions such as cash vouchers and cash transfer programs to facilitate access to food ( Table 3 ). A breakdown of the Administration's proposed FtF funding allocation for FY2012 by region and activities is given in Figure 1 . In addition to bilateral investments in focus countries, the FtF initiative will also include investments in related and complementary programming in the following areas: regional programs to address food security challenges that require cooperation across national borders; multilateral mechanisms such as the World Bank GAFSP Trust Fund (as described above); strategic partners, such as Brazil, India, and China, in order to promote technical, policy, and scientific cooperation with FtF focus countries; and global research and innovation to improve technology development and dissemination that will continue to drive agricultural productivity around the world. | The United States currently addresses issues related to global hunger and food security through two primary types of approaches: (1) agricultural development and (2) emergency and humanitarian food aid and assistance. Agricultural development activities, such as the Administration's Feed the Future initiative and some emergency food assistance programs, are administered primarily by the U.S. Agency for International Development (USAID) using existing authorities provided in the Foreign Assistance Act of 1961, as amended. Funding is provided through the annual Department of State and Foreign Operations appropriation bill. In addition, funding for some multilateral efforts, such as the World Bank Global Agriculture and Food Security Program (GAFSP) Trust Fund, is provided through annual appropriations to the Treasury Department. U.S. international food aid programs are administered by USAID and USDA's Foreign Agricultural Service (FAS), as authorized by the 2008 farm bill (P.L. 110-246), and are funded through annual Agriculture appropriation bills. For FY2010, the Administration allocated about $1.31 billion to its Feed the Future (FtF) initiative, which included $1.17 billion for bilateral agricultural development programming, $75 million for nutrition-related activities carried out in collaboration with global health initiatives, and $67 million allocated to the World Bank GAFSP. Separately, in FY2010, about $1.84 billion was allocated to Title II activities under the Food for Peace program, $209.5 million for the McGovern-Dole International Food for Education and Child Nutrition Program, and $300 million from the International Disaster Assistance account at USAID for other emergency food assistance activities including safety net programs, cash vouchers, and local and regional procurement. The FY2011 congressional budget justification for the Department of State and Foreign Operations was the first instance in which the Administration requested funds specifically to implement FtF. The Administration's FY2011 budget request included $1.84 billion for FtF-related activities, which was more than a 40% increase in the FY2010 allocation, primarily due to a $408 million request for the World Bank GAFSP Trust Fund. On April 14, 2011, Congress passed a continuing resolution to provide government-wide funding through the end of FY2011 (P.L. 112-10). The FY2011 CR provided allocations only to primary USAID budget accounts, several of which, such as Development Assistance, the Economic Support Fund, and the Global Health and Child Survival accounts at USAID, received decreases in funding relative to FY2010 levels. At the same time, the final FY2011 CR did not include specific allocations from USAID budget accounts for food security-related activities, so the implications of the FY2011 budget-level changes on the funding and programming for the Feed the Future initiative remain uncertain. The final FY2011 CR also included $1.5 billion for Title II Food for Peace food aid programs and $199.5 million for the McGovern-Dole Food for Education program. The Administration's FY2012 request includes $1.56 billion for the FtF initiative, about $250 million, or 19%, more than the amount allocated in FY2010. This includes $1.1 billion in bilateral agricultural development assistance, $150 million for nutrition-related activities, and a U.S. contribution of $308 million to the World Bank GAFSP. Separately, for FY2012, the Administration is also requesting $1.690 billion for Food for Peace Title II emergency and non-emergency food aid, $200.5 million for the McGovern-Dole Food for Education Program, and $300 million of International Disaster Assistance for emergency food security-related activities. |
Many U.S. officials and Members of Congress consider Spain to be an important U.S. ally and one of the closest U.S. partners in Europe. Political developments in Spain, cooperation between the United States and Spain on security issues and counterterrorism, and U.S.-Spain economic ties are possible topics of continuing interest during the 115 th Congress. Members of Congress may have an interest in considering the dimensions and dynamics of current issues in U.S.-Spain or U.S.-European relations, or with regard to NATO, in the course of oversight or legislative activities, or in the context of direct interactions with Spanish legislators and officials. The Congressional Friends of Spain Caucus is a bipartisan group of Members of Congress who seek to enhance U.S.-Spain relations and promote political, economic, and social ties between the two countries. The U.S.-Spain Council brings together U.S. and Spanish leaders to promote economic, educational, and cultural ties. Since the council was founded in 1996, five of the six chairmen have been Members of the U.S. Senate. The government of Spain is led by Prime Minister Pedro Sánchez of the center-left Socialist Workers' Party (PSOE). Sánchez became prime minister in June 2018 after launching a parliamentary vote of no confidence that defeated the previous government led by Mariano Rajoy of the center-right Popular Party (PP). Rajoy's leadership was damaged by the outcome of a scandal in which Spain's High Court convicted senior PP figures on corruption charges in May 2018 and found that the party benefitted from a scheme involving kickbacks for public contracts. The changeover was the first time in Spain's history that a prime minister had been removed by a vote of no confidence and the first time a prime minister took office without winning an election. Prime Minister Sánchez leads a minority government which holds less than one-quarter of the seats in the Congress of Deputies. His government relies on support from left-wing party Podemos and regional nationalist parties from Catalonia and the Basque region to maintain viability and secure the votes needed for passing legislation. Given this fragile political situation, some observers question whether the Sánchez government will last until the end of the four-year parliamentary term. Barring an early election, the next general election is due to occur in July 2020. Rajoy had begun his second term as prime minister in October 2016 at the head of a minority government, following a 10-month political deadlock in which two general elections (held in December 2015 and June 2016) did not produce a majority government. After winning an absolute majority in the 2011 election, the PP came in first place in both the 2015 and 2016 votes but fell far short of a parliamentary majority. The PP won 137 seats in the 2016 election, with 33% of the vote. The Socialists came in second place with 85 seats (23% of the vote). Unidos P odemos ("United We Can"), an electoral alliance of left-wing parties including Podemos , a new anti-establishment party that grew out of Spain's anti-austerity protest movement, won 71 seats (21% of the vote). Another new party, Ciudadanos ("Citizens"), a centrist party that made anti-corruption one of its main campaign themes, won 32 seats (13% of the vote). More broadly, the emergence of P odemos and Ciudadanos as significant political actors indicates a decided shift in a political system long dominated by the PP and PSOE. Between the 2011 and 2016 elections, widespread public discontent was driven by economic conditions and austerity policies, and many observers grew deeply concerned about the social impacts of high unemployment, including youth unemployment that spiked above 50%, as well as cuts to health and education spending (see below). Large public demonstrations and protest movements conveyed an angry backlash against the financial sector and politicians' management of the economy. The public view of the country's politicians has been further soured by a series of corruption allegations, including the scandal involving leading figures in the PP. The global financial crisis and recession of 2008-2009 hit Spain especially hard. The crisis has had a lasting impact on the Spanish economy, and the country's economic challenges have been a central issue over the past decade. Although Spain's economic conditions remain difficult, there have been signs of considerable improvement over the past three to four years. Spain is the world's 14 th -largest economy and the 4 th -largest economy in the Eurozone. Prior to 2008, Spain experienced more than a decade of strong economic growth relying largely on a housing and construction boom and fueled by private sector access to cheap credit. The credit and real estate bubbles collapsed in 2009, however, and the Spanish economy contracted sharply and entered a prolonged recession that lasted until 2014. The government budget deficit jumped from 4.5% of gross domestic product (GDP) in 2008 to 10.5% in 2012, and public debt has increased from about 40% of GDP in 2008 to more than 95% of GDP. Unemployment has increased dramatically since 2008, peaking at 26% in 2013 and remaining at about 15%. Spain became a focal point of the wider Eurozone crisis in 2012, facing heavy market pressure in the form of high borrowing costs and receiving €41 billion (about $48 billion) in emergency loans from its Eurozone partners to stabilize Spanish banks. The PP took office in 2011 with an emphasis on budgetary austerity, while implementing structural reforms to increase competitiveness and labor market flexibility. The Rajoy government remained committed to austerity as necessary to reduce the country's deficit and regain the confidence of financial markets and undertook measures including cutting spending on education and health care, reducing unemployment benefits and pensions, selling state-owned properties, and increasing the value-added tax. Since 2015, the economy has experienced a period of relatively strong recovery, with average annual growth of 3.2% over the period 2015-2017, and 2.7% growth expected for 2018. Analysts assert that Spain's austerity and reform efforts have been relatively effective in that the country's budget deficit has decreased to an expected 2.7% of GDP this year and the country's borrowing costs appear to have stabilized at a manageable level. The PP-led government loosened fiscal policy in the 2018 budget by increasing public pensions and spending on social benefits and public investments, as well as cutting income taxes. The Spanish state consists of 19 provincial territories referred to as "self-governing communities" or "autonomous communities." Two Spanish regions in particular, Catalonia and the Basque region, maintain a distinctive cultural identity, and politics in these regions features the strong presence of nationalist independence movements. The Basque region is in north-central Spain, on the Bay of Biscay near the border with France. The separatist terrorist group Basque Fatherland and Liberty (ETA) waged a violent campaign against the central government starting in the 1960s, killing approximately 800 people. In recent years, ETA was weakened by arrests of key leaders and declared a cease-fire in 2011. All Basque nationalist parties now appear to have renounced violence in favor of pursuing independence through politics. In April 2017, ETA moved to formally disarm, handing over the locations of eight weapons caches to French authorities. Catalonia is in northeast Spain, on the Mediterranean Sea and the border with France, and includes Barcelona, Spain's second-largest city. With a population of approximately 7.45 million, Catalonia has about 15% of Spain's population. It is one of Spain's wealthiest regions, accounting for approximately one-fifth of the country's GDP, generating approximately one-quarter of its exports, and receiving approximately one-quarter of its foreign investment. It is also one of the most indebted regions, with the regional debt-to-GDP ratio tripling since 2009, to 35%. In Catalonia, the independence movement has been additionally fueled by an economic argument that Catalans unfairly support the country's other regions because they pay more in taxes than they receive back in state spending. The Spanish government adamantly disputes this argument, maintaining that Catalonia pays the same percentage of taxes as it contributes to Spain's GDP and receives a share of public spending proportional to its population. On October 1, 2017, the regional government of Catalonia attempted to hold a unilateral referendum on independence. The referendum was the third vote in three years declared by pro-independence leaders as a plebiscite on Catalan independence. In a similar effort in November 2014, with turnout below 40%, about 80% of those who voted (approximately 1.6 million people) answered that they wanted Catalonia to be an independent state. With the referendum nonbinding in nature and no organized campaign against independence, the relatively low turnout suggested that many of those opposed to independence did not participate. Catalan leaders subsequently sought to portray the result of the September 2015 election for the regional Catalan parliament, in which a coalition of separatist parties won a combined majority of seats (72 out of 135) despite receiving less than 50% of the popular vote, as an endorsement of plans to proclaim independence within 18 months. The government of Spain has strongly opposed the organization of independence referendums in Catalonia, condemning them as illegal. Spain's courts have supported this view, ruling such referendums unconstitutional. The Spanish Constitution makes no provision for provincial territories to legally separate from the state. The document states that, "The constitution is based on the indissoluble unity of the Spanish nation, the common and indivisible homeland of all Spaniards; it recognizes and guarantees the right to autonomy of the nationalities and regions of which it is composed, and the solidarity among them all." Spanish authorities assert that the central government cannot therefore agree to allow a legally binding independence referendum (as was the case with the 2014 Scottish independence referendum in the UK, for example), because such an agreement would in itself be illegal and unconstitutional. They argue that under the constitution a decision about Catalonia separating from Spain is a matter for all of the people of Spain—that is, the constitution would need to be changed to allow the possibility of such a procedure. The Spanish government vowed to prevent the October 1, 2017, vote from taking place and to take legal action against its organizers. National police attempted to disrupt the vote and seize ballot boxes, resulting in large public protests and violence between police and protesters. In the end, organizers estimated voter turnout at 42%, with 90% of participants in favor of independence. Analysts again suggested that many of those opposed to independence did not participate in the vote. On October 27, 2017, the Catalan parliament held a vote for independence, with 70 members voting in favor and 10 against, but with 55 abstentions after opposition representatives walked out of the chamber. The Spanish central government (with the support of main opposition parties) subsequently received permission from the Spanish Senate to trigger Article 155 of the Spanish Constitution, dissolving the regional government and assembly of Catalonia on October 28, and taking direct control of the regional police force. Article 155 allows the central government to take direct control of an autonomous region if that region "does not fulfil the obligations imposed upon it by the Constitution or other laws, or acts in a way that is seriously prejudicial to the general interest of Spain." The Spanish government asserts that the independence vote was illegal and outside the jurisdiction of the regional parliament, that it took place despite explicit orders from the courts, and that it violated democratic principles and parliamentary procedures. The head of Catalonia's regional government, Carles Puigdemont, and four other former regional ministers subsequently fled to Brussels in an attempt to appeal to EU leaders and avoid arrest on charges of rebellion and misuse of public funds, offenses that could carry a sentence of up to 30 years in prison. Eight other separatist leaders who stayed in Spain are facing the same charges, including former deputy leader Oriol Junqueras, who remains in pretrial custody. On November 8, 2017, Spain's constitutional court annulled the Catalan parliament's independence declaration. New regional elections held on December 21, 2017 did not appreciably change the dynamics of the regional parliament. Ciudadanos came in first place in the election (36 out of 135 seats), but three pro-independence parties again won a combined majority of seats (70 out of 135), with 48% of the popular vote. In May 2018, after protracted efforts to name a new regional president, the Catalan parliament selected Quim Torra, a strong supporter of Catalan independence. Spain subsequently lifted Article 155. The separatist crisis appears to have entered a period of stalemate. Spain's imposition of Article 155 and prosecution of separatist leaders, as well as related Spanish court rulings, sapped momentum from pro-independence forces but did not definitively resolve the crisis. Pro-independence parties, meanwhile, face internal divisions over strategy and tactics, as well as an increasingly difficult challenge in convincing moderate and anti-independence Catalans to shift their views. Polls show that the Catalan population is about equally divided over the question of independence. While remaining firmly opposed to any moves toward Catalan independence and declining to intervene in the ongoing prosecution of separatist leaders, Prime Minister Sánchez has adopted a relatively less confrontational approach to the separatist issue compared to his predecessor. (Prime Minister Rajoy had refused to enter into any talks with separatist leaders.) Sánchez has proposed a referendum on greater regional autonomy, suggested reviving a commission for resolving disputes between the regional government and the central government, and engaged in dialogue with Torra in an effort to normalize relations. Critics of Sánchez's more conciliatory approach point out that his government relies on parliamentary support from pro-independence Catalan parties. In early October, Torres threatened to withdraw this support from Sánchez's government unless it offered a plan for regional independence. These remarks followed scenes of violent unrest perpetrated by a radical minority of the pro-independence crowd at a protest in Barcelona marking the October 1 anniversary. The U.S. State Department long declined to take a position on the issue of Catalan separatism, characterizing it as an internal matter for Spain to decide. Following the regional parliament's independence vote on October 27, 2017, however, the State Department released a statement that, "Catalonia is an integral part of Spain, and the United States supports the Spanish government's constitutional measures to keep Spain strong and united." Earlier, in the press conference following Prime Minister Rajoy's visit to the White House on September 26, 2017, President Trump spoke out in favor of maintaining a united Spain, stating " ... I bet you if you had accurate numbers and accurate polling, you'd find that they love their country, they love Spain, and they wouldn't leave. So I'm just for united Spain.... I really think the people of Catalonia would stay with Spain. I think it would be foolish not to." European Union (EU) officials and officials from EU member state governments have declined to intervene in support of separatist arguments or calls for negotiations, framing the issue as an internal matter for Spain. EU leaders have indicated that an independent Catalonia would not automatically become an EU member but would need to reapply for membership, with approval requiring unanimous support from all current member states (including Spain). Cooperation between Spain and the United States on counterterrorism issues is strong. In past years, Spain has been a base for Islamist extremists, including some of those involved in the 9/11 attacks. In March 2004, terrorists inspired by Al Qaeda killed 191 people in a series of bombings on the Madrid train system three days before national elections. On August 17, 2017, a terrorist attack in Barcelona killed 14 people and injured more than 100 when a van drove through a crowded pedestrian area. The Islamic State claimed responsibility for the attack, and Spanish authorities subsequently identified a terrorist cell of 12 people, all of whom were either arrested (4), shot by police (6), or killed attempting to make explosives at a house (2). Analysts agree that the cell was inspired by the Islamic State, but authorities were unable to determine that its members had direct links to the Islamic State organization. The members of the Barcelona terrorist cell were all born in Morocco. (About 70% of the approximately 1.18 million Muslims living in Spain have their origins in Morocco.) Spain and Morocco cooperate closely with regard to counterterrorism, including regular intelligence exchanges and joint operations against terrorist organizations and recruiting networks. Moroccan authorities coordinated with their Spanish counterparts in support of the investigations following the Barcelona terrorist attack. Compared to many other Western European countries, a relatively low number of people have traveled from Spain as "foreign fighters" seeking to join the Islamic State or other jihadist groups fighting in Syria and Iraq. Spanish authorities estimate that approximately 150 Spanish nationals or permanent residents (mostly Moroccan nationals) have traveled to the conflict zones in those two countries. In recent years, Spanish police have conducted raids to dismantle jihadist recruiting networks active in Ceuta and Melilla, Spanish enclaves located on the north coast of Africa, as well as in Madrid. From 2015 to 2017, Spanish security forces reportedly conducted 128 police operations against domestic terrorist networks, resulting in the arrest of 242 individuals. In 2015, the Spanish Parliament adopted legislation backed by the PP and PSOE to strengthen counterterrorism laws and police powers in response to the foreign fighter threat. The new legislation made it a criminal offense to receive terrorist training or to participate in an armed conflict abroad; allows for passport seizures, accelerated expulsion orders, and reentry bans of identified extremists; and introduces streamlined search and capture warrants for police to arrest fighters attempting to travel to conflict zones. The government also initiated reforms to the regulation of evidence collection and standards for witness protection, in order to improve the success rate of terrorism-related prosecutions. The United States and Spain have close links in many areas, including extensive cultural ties. The U.S.-Spain political relationship rests on a foundation of cooperation on a number of important diplomatic and security issues. Spain has been a member of NATO since 1982. The Rajoy government (2011-2018) maintained a relatively low profile in international affairs, while continuing the main tenets of past Spanish foreign policy: support for European integration, friendly and cooperative relations with the United States, and strong ties with Central and South America. The PP has traditionally promoted a strongly "Atlanticist" foreign policy that emphasizes close security ties with the United States. The PP-led government of Prime Minister José María Aznar (1996-2004) supported the U.S.-led invasion of Iraq in 2003 and contributed forces to the coalition. During the Socialist-led government of Prime Minister José Luis Rodríguez Zapatero (2004-2011), U.S.-Spain tensions arose over differences in approach to issues including Iraq, the Middle East peace process, and Spain's engagement with Cuba and Venezuela. Prime Minister Sánchez is not expected to make any dramatic changes to Spain's foreign policy. His government has adopted a distinctly pro-EU approach and an outlook emphasizing multilateral foreign policy cooperation through Spain's membership in institutions such as NATO and the United Nations. The PSOE is in favor of maintaining U.S.-Spain defense cooperation and security ties (see below). Spain plays a significant role in U.S. defense strategy with regard to Europe and Africa. Under the terms of a bilateral Agreement on Defense Cooperation, the United States has access to several Spanish military bases, including a naval base at Rota and an airbase at Morón that has been a key transportation link to U.S. forces in the Middle East. An increased U.S. presence at these bases during the last five years reversed a decade-long downsizing of U.S. forces in Spain. In 2011, the United States, Spain, and NATO announced that four U.S. Aegis BMD-capable ships (Arleigh Burke-class destroyers equipped with the Aegis Ballistic Missile Defense system) would be based at Rota as part of the European Phased Adaptive Approach (EPAA) for missile defense in Europe. The ships forward deployed to Rota in 2014 and 2015. The ships' primary mission is to operate in the Mediterranean to help defend Europe against theater-range ballistic missiles that could be launched from counties such as Iran. The ships also have undertaken other missions, including patrolling the Black Sea and launching Tomahawk land attack missiles in April 2017 in retaliation for the Syrian government's use of chemical weapons. Following the 2012 terrorist attack against the U.S. diplomatic facility in Benghazi, Libya, the United States deployed 500 U.S. Marines to Morón in 2013 to serve as a rapid reaction force protecting U.S. interests and personnel in North Africa. The deployment increased to 850 Marines in 2014. In 2015, the Spanish government approved a U.S. request to upgrade the basing agreement, making Morón the permanent task force headquarters for the Special-Purpose Marine Air-Ground Task Force Crisis Response-Africa (SPMAGTF-CR-AF). The arrangement allows a permanent U.S. military presence of up to 2,200 personnel, including 850 SPMAGTF Marines and 500 civilian staff, and up to 26 aircraft. It also allows a surge deployment of an additional 800 task force Marines and 14 aircraft during contingency operations. The SPMAGTF is a rotational expeditionary force incorporating command, ground, aviation, and logistics units, with a primary mission of responding to emergency calls for security assistance at U.S. embassies and other U.S. operations in Africa. The task force may also undertake a variety of other missions, including evacuation of noncombatants, humanitarian assistance and disaster relief, or training and security cooperation activities with partner forces. Spain is an active participant in international security and peacekeeping operations, with more than 3,000 soldiers and guardias civiles (Spain's national police force) deployed in 17 missions as of March 2018. Deployments include more than 600 soldiers to the United Nations peacekeeping mission in Lebanon, 473 to the international coalition ( Inherent Resolve ) countering the Islamic State in Iraq and Syria, and 336 (including a mechanized infantry company) with the multinational battlegroup stationed in Latvia as part of NATO's Enhanced Forward Presence mission. Spain contributes naval forces to the EU anti-piracy mission off the Somali coast ( Atalanta ), the EU ( Sophia ) and NATO ( Sea Guardian ) maritime security missions in the Mediterranean Sea, and the Standing NATO Maritime Group (SNMG/SNMCMG). Spain also participates in NATO's Resolute Support training mission in Afghanistan and EU military training missions in Mali and Somalia, and provides air transport in support of French and EU operations in Mali, Central African Republic, and the Sahel region. Spain has deployed a battery of Patriot missiles to Turkey to guard against possible ballistic missile threats from Syria. From 2002 to 2015, Spain maintained a sizeable deployment as part of the NATO-led International Security Assistance Force (ISAF) in Afghanistan. In the context of U.S. concerns about a long-standing downward trend in European defense spending, analysts note that Spain's defense budget was negatively affected by the country's economic difficulties. Overall defense spending was cut considerably between 2009 and 2014, although Spain has enacted modest annual increases to the defense budget since 2015. According to NATO, Spain's defense expenditures for 2017 were $11.655 billion. At 0.92% of the country's GDP, this figure remains well below the 2% of GDP set by NATO as the minimum defense spending target for its member states. Recent funding increases have been directed largely to the Spanish navy, including plans for the construction of new class of diesel attack submarines and the acquisition of five frigates, patrol vessels, and marine helicopters. A force structure review in 2016 resulted in a reorganization of Spanish army brigades to make the forces more deployable for operations, with an emphasis on mechanized formations and more special operations forces. In 2018 or 2019, the Spanish air force expects to receive the final six of 73 contracted Eurofighter Typhoon combat aircraft. Spain is reportedly considering the acquisition of 45 to 50 F-35As, which would replace its fleet of 85 F-18 aircraft as they are gradually phased out between 2020 and 2025. As the Spanish navy's Harriers near the end of their service life, Spain is also reportedly considering the purchase of 12 to 15 F-35Bs in order to maintain a naval aviation capability. The U.S.-Spain economic relationship is large and mutually beneficial. In 2016 (most recent complete data available), U.S. foreign direct investment (FDI) in Spain was $37.4 billion and Spanish FDI in the United States was $68.2 billion. Spain's FDI in the United States has increased every year since 2002, and the value of Spanish assets invested in the United States has increased nearly five-fold over the past decade. Approximately 1,100 U.S. firms operate subsidiaries and branches in Spain (including, for example, Apple, General Electric, General Motors, Ford, and AT&T). More than 90 Spanish firms operate affiliates in the United States (including, for example, BBVA, OHL, and Banco Santander). In 2016, U.S. affiliates employed more than 181,500 people in Spain and Spanish affiliates accounted for more than 83,000 jobs in the United States. In 2017, U.S. goods exports to Spain totaled more than $11 billion, and U.S. goods imports from Spain totaled about $15.66 billion. U.S. services exports to Spain were $6.8 billion in 2016, and U.S. services imports from Spain were $6.3 billion. In 2013, the U.S. Department of the Treasury announced the signing of a new protocol amending the U.S.-Spain bilateral tax treaty of 1990. Analysts assert that the protocol will modernize the agreement and make it more similar to U.S. treaties with other European countries in terms of avoiding double taxation and preventing tax evasion. Ratification of the protocol is awaiting the advice and consent of the Senate. The author thanks CRS Visual Information Specialist Amber Wilhelm and CRS Information Research Specialist [author name scrubbed] for their work in creating the graphics for this report. | The United States and Spain have extensive cultural ties and a mutually beneficial economic relationship, and the two countries cooperate closely on numerous diplomatic and security issues. Spain has been a member of NATO since 1982 and a member of the European Union (EU) since 1986. Given its role as a close U.S. ally and partner, developments in Spain and its relations with the United States are of continuing interest to the U.S. Congress. Domestic Political and Economic Issues The government of Spain is led by Prime Minister Pedro Sánchez of the center-left Socialist Workers' Party (PSOE). Sánchez became prime minister at the head of a minority government in June 2018, after a parliamentary vote of no confidence against Prime Minister Mariano Rajoy of the center-right Popular Party (PP). Rajoy, who had led the government since 2011, was damaged by a corruption scandal involving senior PP figures. Holding less than a quarter of the seats in parliament, the Sánchez government relies on support from the left-wing party Podemos and several regional parties. Economic conditions, austerity policies, and corruption scandals have fueled public backlash against Spain's political establishment in recent years. This dynamic fractured Spain's two-party system, dominated for more than 30 years by the PP and the PSOE, with the emergence of two new parties, Ciudadanos and Podemos. Over the past several years, Spain's economy has experienced a relatively strong recovery, with growth averaging more than 3% annually, a decreasing government budget deficit, and stabilized financial conditions. The global financial crisis of 2008-2009 plunged Spain into a prolonged recession and has had a lasting impact on the country. Unemployment has decreased to 15% after peaking at 26% in 2013. Catalonia Crisis A crisis over Catalan independence efforts has been the predominant issue in Spain since late 2017. Spain's central government invoked Article 155 of the Spanish Constitution to dissolve the regional assembly and executive and take direct control of the region after the Catalan parliament held an illegal vote for independence in October 2017. The issue remains deadlocked after separatist parties retained a majority of seats in the regional parliament following a new regional election in December 2017. Spain has charged 13 separatist leaders with rebellion and misuse of public funds, offenses that could carry a lengthy prison sentence. Catalonia accounts for about 15% of Spain's population and one-fifth of its economy. Counterterrorism The United States and Spain cooperate closely on counterterrorism issues. Spanish authorities have dismantled numerous recruiting networks over the past several years, many of them based in Ceuta and Melilla, Spanish enclaves on the north coast of Africa. In 2015, the Spanish Parliament adopted new legislation to strengthen counterterrorism laws and police powers in response to the foreign fighter threat. U.S.-Spain Defense Relations Spain plays an important role in U.S. defense strategy for Europe and Africa. Four U.S. destroyers equipped with the Aegis Ballistic Missile Defense system are based at Rota naval base, and Morón air base is the headquarters for a rapid reaction force of U.S. Marines that protects U.S. interests and personnel in North Africa. Spanish armed forces participate in numerous international peacekeeping and security operations, including the United Nations peacekeeping mission in Lebanon, the international coalition countering the Islamic State in Iraq and Syria, NATO's Enhanced Forward Presence mission in Latvia, EU and NATO maritime security missions, and EU operations in the Sahel region. Spain's defense spending was cut during the economic crisis but has been increasing since 2015. With the acquisition of new Eurofighter combat aircraft nearly complete, additional spending is focused largely on planned naval acquisitions. U.S.-Spain Economic Relations Investment flows between the United States and Spain totaled more than $105 billion in 2016, and Spanish foreign direct investment in the United States has increased every year since 2002. Annual U.S.-Spain trade in goods and services totals nearly $40 billion. Approximately 1,100 U.S. firms operate subsidiaries and branches in Spain. Affiliates of Spanish companies account for approximately 83,000 jobs in the United States. |
O ver the last decade there has been a growing U.S. trade deficit in fresh and processed fruits and vegetables. Although U.S. fruit and vegetable exports totaled more than $6 billion in 2015, U.S. imports were nearly $18 billion, resulting in a gap between imports and exports of more than $11 billion for the year ( Figure 1 ). This trade deficit has widened over time, as growth in imports has outpaced export growth. As a result, the United States has gone from being a net exporter of fruits and vegetables in the 1970s to having a net trade balance in the mid-1990s to being a net importer today. Figure 1. U.S. Fruit and Vegetable Trade (Excluding Nuts), 1990-2015Source: Compiled by CRS from data in the U.S. International Trade Commission's Trade DataWeb database (version 2.8.4). Includes fresh and processed products; excludes nuts. A number of factors are shaping current competitive market conditions worldwide and global trade in fruits and vegetables. In the buildup to the 2008 farm bill (Food, Conservation, and Energy Act of 2008, P.L. 110-246 ), the trade situation contributed to demands by the U.S. produce sector that Congress consider expanding support for domestic fruit and vegetable growers in farm bill legislation. Historically, specialty crops had not benefitted from the federal farm support programs traditionally included in the farm bill, compared to the long-standing support provided to the main program commodities (such as grains, oilseeds, cotton, sugar, and milk). The 2008 farm bill, and later the 2014 farm bill (Agricultural Act of 2014, P.L. 113-79 ), provided additional support for programs supporting fruit and vegetable production, as well as programs addressing existing trade barriers and marketing of U.S. specialty crops. This report presents recent trends in U.S. fruit and vegetable trade, and highlights some of the factors contributing to these trends. This summary excludes trade data for tree nuts and processed tree nut products. Although not presented here, U.S. exports and imports of tree nuts and processed tree nut products (excluding peanuts) have shown continued increases and, generally, a growing U.S. trade surplus. The U.S. trade deficit in fresh and processed fruits and vegetables totaled more than $11 billion in 2015, following a decade of steady gains in U.S. imports, with more variable gains in U.S. exports ( Table 1 , Figure 1 ). In the early 1990s, U.S. imports and exports of fresh and processed fruits and vegetables were more or less in balance, with some years showing the United States as a net exporter. This situation reversed in the mid-1990s. Despite rising U.S. exports of fruits and vegetables, growth in U.S. imports has outpaced export growth. Since the 1990s, imports have grown by an average of about 5% each year, whereas exports grew an average rate of about 1% during the same period, measured in terms of trade value ( Table 1 ). The gap between imports and exports has grown from $0.5 billion in 1990 to more than $11 billion in 2015. The gap in trade reached an estimated high of $11.4 billion in 2015, given continued import gains accompanied by stagnated or decreasing exports. This deficit cannot be solely explained by imports of bananas ( Table 1 ), which are generally not grown in the United States. Table 1 breaks down U.S. trade into three major product categories: (1) fresh fruit, including dried, frozen, or otherwise preserved, (2) fresh vegetables, including dried, frozen, or otherwise preserved, and (3) processed fruit and vegetable products. Since the mid-1990s, the value of U.S. fruit and vegetable exports has nearly doubled, with the largest gains in exports of fresh fruits and processed products. For fresh fruits, export gains were greatest for strawberries/berries, peaches/pears, apples, grapes, and other miscellaneous fresh fruit. For fresh vegetables, export gains were greatest for lettuce, spinach, tomatoes, potatoes, and legumes/beans. For processed products, export gains were for processed potato products, certain preserved vegetables, fruit juices and juice mixtures, and other processed fruit and vegetable products. Gains in imports, however, have exceeded those for exports, as the total value of U.S. fruit and vegetable imports has more than tripled since the 1990s. Increased imports were greatest for fresh citrus, strawberries/berries, tropical fruits (excluding bananas), grapes, peaches/pears, plums/apricots, and apples. Imports of fresh vegetables and processed products were higher across most categories. Imports of preserved mushrooms and processed tomatoes declined over the period. Together, roughly one-half of this trade deficit for fruits and vegetables was composed of bananas and fresh tomatoes and other vegetables, including bell peppers. Given that the value of U.S. banana imports has remained largely unchanged, imports of fresh tomatoes and peppers, among other fresh and frozen vegetables, have accounted for the widening gap in U.S. trade. Other products with a large and increasing net trade value include other tropical fruits, grapes, asparagus, cucumbers, canned fruit, fruit juices and juice mixtures, olives, and miscellaneous fresh fruits and preserved vegetables. Table 2 breaks down U.S. fruit and vegetable imports from the leading supplying countries in 2015. In descending order (by the share of total import value in 2015), these include Mexico (44%), Canada (12%), Chile (8%), the European Union (7%), China (6%), Peru (5%), and Costa Rica (3%). Other leading import suppliers were Guatemala, Thailand, Brazil, Argentina, Turkey, the Philippines, and Ecuador. All other importing countries accounted for about 5% of trade. The major imported products were tomatoes, peppers, bananas, other tropical fruits, potatoes, onions, garlic, cucumbers, melon, citrus, grapes, tree fruit, fruit juices, and various fresh and processed products. A number of factors are shaping current competitive market and trade conditions worldwide, and may be contributing to trends in U.S. fruit and vegetable trade: a relatively open U.S. import regime and lower average import tariffs in the United States, with products from most leading suppliers entering the U.S. duty-free or at preferential duty rates; increased competition from low-cost or subsidized production of fruit and vegetable products; continued non-tariff trade barriers to U.S. exports in some countries, including restrictive import and inspection requirements, technical product standards, and sanitary and phytosanitary (SPS) requirements; opportunities for counter-seasonal supplies , driven, in part, by increased domestic and year-round demand for fruits and vegetables; and other market factors , such as exchange rate fluctuations and structural changes in the U.S. food industry, as well as increased U.S. overseas investment and diversification in market sourcing by U.S. companies. Lower tariffs on U.S. fruit and vegetable imports combined with relatively higher tariffs on U.S. exports into other countries, in part, may explain why U.S. export growth has not kept pace with import growth. The U.S. Department of Agriculture (USDA) reports that the global average tariff for fruits and vegetables is more than 50% of the import value. In the United States, however, about 60% of U.S. tariffs on fruits and vegetables are less than 5%. This compares to Japan and the European Union (EU), where more than 60% of import tariffs range from 5%-25%; additionally, nearly 20% of tariffs exceed 25%. Import tariffs in some developing countries are often higher, with more than 80% of tariffs ranging from more than 25% to over 100%. Countries with relatively high tariffs on fruit and vegetable imports include China, Egypt, India, Korea, and Thailand. Most of the leading import suppliers of fruits and vegetables to the United States are granted trade preferences under an existing free trade agreement (Canada and Mexico, Australia, Chile, Peru, and several Central American and some Middle Eastern nations), pending or negotiated free trade agreements, or other types of preferential arrangements (Argentina, Brazil, Ecuador, Thailand). Such trade preferences allow imports to the United States to enter duty-free or at reduced rates, and may be contributing to rapid import growth. In some cases, duty-free or reduced tariffs provide an added advantage to supplying countries that may already benefit from lower-cost fruit and vegetable production compared to that in the United States. Many of the countries that have entered into trade preference programs with the United States supply products such as bananas and other tropical fruits that are grown in limited supplies in the United States. Many also provide fruits and vegetables counter-seasonally (off-season) to production in the United States. However, there is concern that an increasing share of imports are now directly competing with domestically produced commodities throughout the year. USDA reports significant gains in intraregional trade between the United States, Canada, and Mexico following the adoption of the North American Free Trade Agreement (NAFTA) in 1994. Cooperation on phytosanitary issues and tariff elimination has heightened integration in North America's fruit and vegetable markets, resulting in both higher U.S. imports (and exports) of fruits and vegetables. In particular, U.S. imports of tomatoes and fresh peppers from Mexico have risen sharply. Imports from Canada have also increased but from a smaller base. Mexico and Canada now account for about one-half of all U.S. produce imports ( Table 2 ). Rising consumer demand has also influenced imports, given the year-round availability of a wider diversity of consumer choices, including new products, varieties, and colors and hothouse-grown produce. Since the U.S.-Chile FTA entered into force in 2004, Chilean imports—particularly imports of fresh fruits and fruit juices—have continued to increase ( Table 2 ). Most imports from Chile, however, continue to be supplied during the U.S. off-season. Imports under the U.S.-Dominican Republic-Central American (DR-CAFTA) FTA, which entered into force in July 2006, were expected to be limited since many of these countries already had duty-free access to the United States under previous trading arrangements, such as the Generalized System of Preferences (GSP) and the Caribbean Basin Economic Recovery Act. Imports under DR-CAFTA have increased, particularly imports of tropical fruits and vegetables but also other fresh fruits. Previously, some U.S. produce growers had complained that some FTAs were allowing for greater access to the United States without creating equal U.S. access to foreign markets, and they further claimed that with each FTA the U.S. produce sectors had been negatively impacted through higher imports, lower prices, and a growing trade deficit. More recent statements by industry representatives, however, acknowledge the need to continue "leveling the playing field" of specialty crop exports and imports while also recognizing gains from opening up markets for U.S. exports in global markets in China and elsewhere. Industry representatives as well as the Agricultural Technical Advisory Committee (ATAC) for Trade in Fruits and Vegetables, a USTR advisory group, have stated their general support for the Trans-Pacific Partnership (TPP) Agreement, an FTA involving the United States and several other countries. An investigation by the U.S. International Trade Commission (USITC) reports that TPP would benefit the U.S. produce sectors through reduced phytosanitary barriers to trade and improved market access. Among the leading U.S. fruit and vegetable import suppliers, China and most European countries do not benefit from preferential import treatment under current U.S. trade laws. However, fruit and vegetable imports from these countries are growing, partly because of their lower costs of producing, packing, and/or processing fruits and vegetables, compared to producers in the United States. Among many developing countries, lower costs are generally associated with lower overall production and input costs, particularly for labor. Among EU countries, lower costs largely are a function of farm subsidies and payments along with other forms of government support for fruit and vegetable production, as part of the Common Agricultural Policy. For example, in China, average farm-level costs are low because the majority of farm production is labor-intensive on small-scale, low-technology operations, using little or no mechanized inputs. Generally, labor is abundant and costs are low. Marketing costs for produce also are low, given only basic packing and packaging techniques, and lack of uniform product sizes and grading standards. At modernized facilities, certain capital and production technology costs are higher, but per-unit labor costs and overall input costs still remain much lower than in the United States. Given such differences, available cost data show that average per-unit production costs in China for tomatoes, peppers, and citrus are roughly one-tenth those in the United States. China remains the world's largest producer and exporter of many types of fruits and fruit juices. By comparison, U.S. production costs are relatively high and generally increasing due to rising costs for energy, transportation, labor, and other farm inputs. In the United States, farm labor accounts for 42% of the variable production expenses for U.S. fruit and vegetable farms (although labor's share may vary depending on the commodity). Most fruits and vegetables are fragile and perishable and must be hand-picked, which limits opportunities for mechanized harvesting. In addition, historically, many U.S. farmworkers have been largely unauthorized, and increased enforcement of immigration laws is resulting in labor shortages in some production areas, especially for harvesting tree fruits and specialty row crops. As a result, immigrant guest worker programs have been a growing priority for U.S. produce growers. Higher production costs in the United States might also be due to a generally more stringent regulatory regime—e.g., workers' compensation requirements; air, water quality, and land use regulations; and pesticide application and registration. Studies have shown that such regulations can be costly to producers, particularly in California, where a large share of the nation's fruits and vegetables are grown. Farm costs in the EU also are relatively high. However, fruit and vegetable producers in most European countries directly benefit from support programs that effectively offset their production costs and allow them to become competitive on world markets. The EU's fruit and vegetable subsidies vary by commodity, but often include direct farm payments, compensation for further processing, co-financing of operational funds for producer organizations, export subsidies, promotional aid, and other types of support and financial aid. Commodities that benefit under such programs include tomatoes, cauliflowers, stonefruit, olives, grapes, citrus, eggplants, apples and pears, among others. The total value of support notified to the World Trade Organization (WTO) for EU's fruit and vegetable sector (including olive oil) is estimated at about $39 million (€30.8 million) for the 2012/2013 marketing year. The EU wine sectors received another $809 million (€646.8 million) in support. This support includes direct product-specific support, which is considered to be "production distorting" by the WTO and is subject to reduction commitments. Comparable expenditures for the U.S. fruit and vegetable sectors were negligible. Other nonproduct-specific support and other indirect support is not included in these estimates. In the United States, fruit and vegetable producers do not directly benefit from traditional federal farm support programs that might help offset their production costs. However, they may benefit indirectly from certain government research and farm assistance programs that are generally not considered "production distorting." The European Commission has been implementing reforms to the current subsidy program for fruits and vegetables that could increase the sector's market orientation. Even with reforms, the EU's program would continue to provide government-funded income support and risk protection not similarly afforded to U.S. producers. Most developing countries do not directly support their fruit and vegetable production. However, some have government-funded programs that help farmers obtain specific varieties, adopt better farming practices, provide research and agricultural extension services, promote exports, and provide market information. In some countries, preferential policies and support exist at the local government level, and may include production subsidies or income guarantees, or assistance with start-up costs. In particular, there has been rising concern about unfair competition and support within China's agricultural sectors. Although not involving fruit and vegetable production, the Office of the United States Trade Representative (USTR) has filed a complaint on behalf of U.S. farmers alleging that China is not meeting its WTO commitments for rice, wheat, and corn. Previous USITC investigations have highlighted the increased competitive market and trade pressures on U.S. fruit producers from lower-cost foreign fruit and vegetable producers (such as those in China, Thailand, Chile, Argentina, and South Africa) as well as from countries with subsidized fruit and vegetable production (such as in the EU, including Spain). Import injury investigations initiated by the United States further highlight concerns that some countries might be supplying imports at prices below fair market value. Since the 1990s, dumping petitions filed by the U.S. fruit and vegetable sectors have included charges against imports of fresh tomatoes (Canada, Mexico), frozen raspberries (Chile), apple juice concentrate (China), frozen orange juice (Brazil), lemon juice (Argentina, Mexico), fresh garlic (China), preserved mushrooms (China, Chile, India, Indonesia), canned pineapple (Thailand), table grapes (Chile, Mexico), and tart cherry juice (Germany, former Yugoslavia). Many of these petitions were decided in favor of U.S. domestic producers and resulted in higher tariffs being assessed on U.S. imported products from some of these countries. In addition to tariff-related barriers to trade, market access of agricultural products may be restricted by non-tariff trade barriers, which may limit both U.S. exports to and imports from other countries. Non-tariff trade barriers vary widely by importing country and commodity, and may include, but are not limited to, import and inspection requirements, safety and product standards, and requirements regarding inputs, production, processing, and mitigation. Generally, individual country requirements are provided for under WTO agreements that allow governments to act on trade matters in order to protect human, animal, or plant life or health, provided they do not discriminate or use restrictions as disguised protectionism. There are two specific WTO agreements dealing with food safety and animal and plant health and safety, and with product standards in general: (1) the Agreement on Sanitary and Phytosanitary (SPS) Measures, and (2) the Agreement on Technical Barriers to Trade (TBT). The SPS Agreement is designed to protect animals and plants from diseases and pests, and to protect humans from animal- and plant-borne diseases and pests, and food-borne risks. The TBT Agreement covers technical regulations, voluntary standards, and procedures relating to health, sanitary, animal welfare, and environmental regulations. Actual SPS/TBT requirements span across several broad categories and types, but tend to vary widely depending on the commodity and the importing country (as shown in the box on page 11 ). Among the more common SPS/TBT examples for produce imports and exports are restrictions due to pest or disease concerns, and requirements specifying certain post-harvest treatment and fumigation. Other requirements that reportedly have inhibited U.S. fruit and vegetable exports to some countries are phytosanitary requirements, food safety protocols, and marketing standards. A summary of the current U.S. concerns regarding SPS and TBT issues across all agricultural commodities and U.S. trading partners is provided in annual reports compiled by USTR. Other background information is available in CRS Report R43450, Sanitary and Phytosanitary (SPS) and Related Non-Tariff Barriers to Agricultural Trade . A summary of some of the reported SPS/TBT barriers to U.S. produce exports follows: disease transmission —e.g., fire blight, brown rot, canker, potato wart, fungus, among others, and other unspecified diseases; pest transmission —e.g., coddling moth, golden nematode, fruit flies, moths, among others, and other unspecified quarantine pests; chemical and pesticide residues —e.g., methyl bromide, hydrogen gas; also Maximum Residual Levels (MRLs) for certain pesticides; treatment and mitigation requirements —e.g., chemical and other treatment options, including fumigation and quarantine; restrictive import and administrative procedures— e.g., specific inspection requirements for import; other administrative requirements —e.g., protocols, risk assessments, waivers, licenses, import tolerances, packaging requirements; import bans on products from specific producing areas —e.g., because of specific pest or disease concerns particular to a region; import bans on production inputs —e.g., nursery stock, seeds; product and/or processing specifications —e.g., restrictions on the use of antimicrobials, sulfur dioxide, sorbic acid, potassium sorbate, biotech and genetic materials, wax coating, etc.; and health risks— depending on product and perceived risk. Non-tariff barriers to trade remain a key concern to U.S. produce growers. For example, under the U.S.-Korea FTA, despite tariff liberalization and increases in tariff-rate quotas for many fruits and vegetables, phytosanitary barriers have restricted U.S. exports to Korea of most key fresh fruits, including apples, pears, peaches, and citrus. Also, an ongoing dispute has limited exports of U.S. fresh potatoes to Mexico, which have currently only been shipped within a 26-kilometer zone inside the U.S.-Mexico border. Similar restrictions and other technical barriers also have limited U.S. fruit and vegetable exports with other key U.S. trading partners, including Argentina, Australia, Brazil, Canada, China, EU, India, Israel, Japan, Korea, Mexico, New Zealand, South Africa, Taiwan, and Venezuela. Aside from governmental requirements, retailers in some countries have developed required standards and practices and require certification as a prerequisite for doing business. For example, EU's retail-based GLOBALGAP (formerly known as EUREPGAP) for fruits and vegetables specifies a list of requirements regarding traceability; recordkeeping; varieties and rootstocks; site history and management; soil and substrate management; fertilizer usage; irrigation; crop protection; harvesting; post-harvest treatments; waste and pollution management; recycling and reuse; worker health, safety, and welfare; environmental issues; complaint form; and internal audits. However, many U.S. trading partners point to U.S. phytosanitary and other technical requirements as possible barriers restricting imports of these same commodities from other countries. In the United States, USDA's Animal and Plant Health Inspection Service regulates fresh produce imports through phytosanitary certificates, importation rules, and inspections. U.S. imports of some fresh fruits and vegetables are also subject to federal marketing orders that require written permits for imported fresh produce or create mandatory grade, size, quality, and maturity requirements that apply to domestic and imported products. As consumer demand for fruits and vegetables has grown, the United States has become a growing market for off-season fruit and vegetable imports. Most counter-seasonal trade occurs between the Northern and Southern Hemisphere countries, which often tend to have opposite production cycles. Improvements in transportation and refrigeration also have made it easier to ship fresh horticultural products. Counter-seasonal U.S. imports of fruits and vegetables are supplied by Chile, Argentina, Australia, and South Africa, but also to some extent Mexico and some Central American countries. Counter-seasonal imports from these countries are said to complement U.S. production of fresh grapes, citrus, tree fruits, and berries. However, technological and production improvements are further influencing this trend. In particular, the development of early- and late-maturing varieties has expanded U.S. production seasons, allowing producers to grow many types of fruits and vegetables throughout the year. As the U.S. production season has expanded, the winter window for some imports has narrowed. As a result, imports of some fruits and vegetables are directly competing with U.S. production. These include fresh tomatoes, peppers, potatoes, onions, cucumbers, melon, citrus, grapes, apples, and other tree fruits. Imports of processed fruit and vegetable products, such as fruit juices and various processed fruits and vegetables, directly compete with U.S. processed products year-round. Imports of counter-seasonal fruits and vegetables are generally considered to have a positive impact on U.S. consumer demand by ensuring year-round supply and by introducing new products and varieties, which often stimulate additional demand. Other perceived market benefits include lowering costs (given a wider supply network), improving eating quality, assuring food safety, conducting promotions, and reducing product losses. For example, imports of fresh tomatoes may have contributed to increased overall demand by providing for the introduction of new domestic varieties, including hothouse-grown tomatoes, that are valued by consumers for their taste, perceived higher and consistent quality, and wider year-round availability; similarly, imports of peppers, cucumbers, and sweet onions have contributed to increased demand through the introduction of new colors, mini-varieties, and other highly regarded product qualities. This expansion in consumer choice has contributed to overall higher demand for fruits and vegetables. Between 1980 and 2010, per capita consumption of all fresh and processed fruits and vegetables increased from roughly 600 pounds to a high of more than 710 pounds in the late 1990s, and dropping back to about 650 pounds in 2010. Gains in consumption, in turn, necessitate the need for year-round supplies, resulting in higher counter-cyclical import demand. During the period from 1980 to 2005, imports as a share of total domestic consumption nearly doubled from about 27% to nearly one-half for all fresh fruits, and more than tripled from 8% to about 25% for all fresh vegetables ( Table 3 ). These averages mask even greater import gains for some commodities. Imports of grapes, asparagus, and garlic, for example, accounted for roughly 10% of consumption in 1980 and altogether now account for at least 50%. More recent USDA estimates show continued growth in imports as a share of all fruit and vegetable consumption in the United States. There also is concern from some that the availability of imports may be lowering prices for fruits and vegetables because of increasing overall supplies. However, producer prices paid for fresh fruits and vegetables have remained strong and have generally tracked overall increases in food prices, although price changes may vary for individual commodities. Among other market factors widely known to contribute to shifts in global agricultural trade are exchange rate fluctuations and structural changes in the U.S. food industry, including increased U.S. overseas investment and diversification in market sourcing by U.S. companies. Generally, as the dollar depreciates against foreign currencies, U.S. exports become more competitive and relatively less expensive than commodities produced domestically in the importing country, indicating a subsequent increase in price competitiveness for U.S. exports or a relative increase in import prices. Conversely, as the U.S. exchange rate appreciates (stronger dollar), U.S. exports may become less competitive or relatively more costly. Information from USDA's Agricultural Exchange Rate Data Set indicates that as the U.S. dollar has steadily depreciated each year since 2002, U.S. agricultural products, including fruit and vegetable exports, have likely become more price competitive. However, the extent to which this will actually result in reduced prices on imported products in a foreign country will ultimately depend on how much an exporter or importer is willing to pass on to customers. Monetary policies within a country, such as China's fixed exchange rate, may also affect its export potential by influencing relative price differences between countries. Further appreciation of the Chinese exchange rate could make imports more affordable, thus raising U.S. agricultural exports. Other factors reportedly influencing produce trade are evolving business practices in how produce is marketed and sold. A USDA study highlights some of these factors for the produce industry. They include increased consolidation and concentration in the retail and shipping sectors, and the emergence of new industry trade practices including increased use of fee-based services, additional packaging and certification requirements, increased use of contract and marketing agreements with buyers, and development of emerging technologies and improved transportation. The extent to which these factors may be influencing the individual produce sectors varies by commodity and also by marketing channel (e.g., retail versus food service sectors). Structural changes in the U.S. food industry are further influenced by other economic and market changes that are occurring, including increased diversification in supply sourcing and increased foreign investment and global integration by U.S. agribusiness firms. A growing share of U.S. fruit and vegetable trade (both imports and exports) is carried out by U.S. and foreign multinational companies or enterprises. These companies may produce the products they trade, while some may only further process products and some companies only trade the products of other firms. Among the reasons why companies choose to extend their businesses globally are to build a global supply base to ensure continued, year-round supplies to meet demand, but also to source lower-cost production in countries with relatively lower input and technology costs, particularly for labor. These trends may have been facilitated by the cross-national economic and financial integration that has followed bilateral and multilateral agreements among countries. The increasing importance of multinational companies and their role in international trade complicates an analysis of global trade statistics. This includes cases where a U.S. company has subsidiaries located overseas, where products are produced and processed, but marketed under the company's own branded labels; in other cases, a U.S. company may import foreign processed products made from U.S.-exported raw material abroad only to be re-imported to the United States as finished products. For example, a recent USITC import investigation highlights how U.S.-based Dole Food Company owns and operates fruit canneries in Thailand that rely largely on imported fruit from the United States to produce canned peach, pear, and mixed fruit products, which are repackaged into plastic jars and cups in Thailand, and then re-exported back to the United States in the form of retail-ready products. Thailand's competitive advantages in producing canned fruit are based primarily on relatively inexpensive labor and technological investments provided by Dole Food Company, which accounts for the majority of Thailand's peach and pear canning industry through its subsidiary Dole Thailand Ltd. Thailand is currently a leading global exporter of canned peaches, pears, and fruit mixtures, despite its insignificant domestic production of fresh peaches and pears. Many U.S. companies are implementing business strategies that source complementary fruit and vegetable products globally, which some argue may compete with domestically produced product. An import injury investigation brought by U.S. mushroom processors highlights competition concerns by some domestic producers about competition from imports of transnational production by U.S.-based multinational companies. Among the marketers of preserved mushrooms participating in the case was General Mills, Inc., which imports a range of food products produced and processed by its subsidiaries overseas (in Indonesia and India among other countries), including preserved mushrooms that are marketed under its Green Giant brand. Among the reasons General Mills officials cite for establishing overseas operations are year-round product availability and lower labor costs. Some companies do not own and operate foreign operations, but instead enter into licensing arrangements with other foreign companies who produce, pack, or process products, which are marketed under the company's own branded labels and either sold in the United States or in other foreign markets. Examples of such firms were described in another USITC import investigation into the global sourcing strategies among the major global suppliers of fresh oranges and lemons. Reasons cited by some U.S. produce companies for implementing global business strategies include the desire to source complementary fruit and vegetable products globally to meet year-round demand, reduce processing costs, and build an international customer network and brand recognition. Starting in 2005, the Specialty Crop Farm Bill Alliance began promoting recommendations for the 2008 farm bill, initially through the efforts of the United Fresh Produce Association and a number of specialty crop organizations nationwide. The alliance's goal has continued to work toward enhancing the competitiveness of U.S. fruits, vegetables, tree nuts, and other specialty crops by promoting specific programs and provisions as part of the periodic omnibus farm bill, including the most recent 2014 farm bill. In the buildup to the 2008 farm bill (Food, Conservation, and Energy Act of 2008, P.L. 110-246 ), concerns over the trade situation for fruits and vegetables, among other production issues, contributed to demands by the U.S. produce growers that Congress consider expanding support for domestic fruit and vegetable growers in farm bill legislation. Historically, fruit and vegetable crops have not benefitted from the federal farm support programs traditionally included in the farm bill, compared to the long-standing support provided to the main program commodities (such as grains, oilseeds, cotton, sugar, and milk). The 2008 farm bill contained a horticultural title that included new and expanded provisions for specialty crops and organic production. These programs and provisions were reauthorized and in some cases expanded as part of the 2014 farm bill (Agricultural Act of 2014, P.L. 113-79 ). Among the farm bill's key trade-related provisions are those that specifically address SPS/TBT issues in the specialty crops sectors, as well as those that generally address export market promotion and barriers to U.S. trade: Market Access Program (MAP). Reauthorized MAP funding to encourage domestic exports, and included an amendment to cover organic products. MAP funds cost sharing of foreign market promotion activities. Technical Assistance for Specialty Crops (TASC). Reauthorized TASC program to address SPS and technical barriers to U.S. exports, and required an annual congressional report describing factors that affect specialty crops exports. Eligible projects include seminars and workshops, study tours, field surveys, pest and disease research, and pre-clearance programs. Both the 2008 and 2014 farm bills also provided for a range of other programs and support that generally support the specialty crop sectors but may also enhance exports and trade, including expanded plant pest and disease management and detection; increased collection of market data and information; and increased specialty crop food safety and related research issues, among other provisions. Often, farm bill legislation might also amend marketing orders governing the grades and standards for some commodities and requiring imports to meet similar standards. Information on these and other farm bill provisions directed to the specialty crop sectors is in CRS Report R42771, Fruits, Vegetables, and Other Specialty Crops: Selected Farm Bill and Federal Programs . | Over the last decade, there has been a growing U.S. trade deficit in fresh and processed fruits and vegetables. Although U.S. fruit and vegetable exports totaled $6.3 billion in 2015, U.S. imports of fruits and vegetables were $17.6 billion, resulting in a gap between imports and exports of $11.4 billion (excludes nuts and processed nut products). This trade deficit has generally widened over time as growth in imports has outpaced export growth. As a result, the United States has gone from being a net exporter of fresh and processed fruits and vegetables in the early 1970s to being a net importer of fruits and vegetables today. A number of factors shaping current competitive market conditions worldwide, and global trade in fruits and vegetables in particular, partially explain the rising fruit and vegetable trade deficit. These include: a relatively open domestic import regime and lower average import tariffs in the United States, with products from most leading suppliers entering the U.S. duty-free or at preferential duty rates; increased competition from low-cost or government-subsidized production; continued non-tariff trade barriers to U.S. exports in some countries, such as import and inspection requirements, technical product standards, and sanitary and phytosanitary (SPS) requirements; opportunities for counter-seasonal supplies, driven in part by increased domestic and year-round demand for fruits and vegetables; and other market factors, such as exchange rate fluctuations and structural changes in the U.S. food industry, as well as increased U.S. overseas investment and diversification in market sourcing by U.S. companies. In the buildup to the 2008 farm bill (Food, Conservation, and Energy Act of 2008, P.L. 110-246), the trade situation contributed to demands by the U.S. produce sector that Congress consider expanding support for domestic fruit and vegetable growers in farm bill legislation. Historically, fruit and vegetable crops have not benefitted from the federal farm support programs traditionally included in the farm bill, compared to the long-standing support provided to the main program commodities (such as grains, oilseeds, cotton, sugar, and milk). The 2008 farm bill provided additional support for specialty crop programs, as well as organic programs. The farm bill also reauthorized two programs intended to address existing trade barriers and marketing of U.S. specialty crops, including (1) USDA's Market Access Program (MAP) to promote domestic agricultural exports, including specialty crops and organic agriculture; and (2) Technical Assistance for Specialty Crops (TASC) to address sanitary and phytosanitary (SPS) and technical barriers to U.S. exports. The 2014 farm bill (Agricultural Act of 2014, P.L. 113-79) reauthorized and expanded many of the provisions benefitting specialty crop growers. |
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